Case 2:25-cv-00978-APG-BNW Document 42 Filed 08/04/25 Page 6 of 26
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Derivatives transactions on registered exchanges are subject to a comprehensive regulatory scheme, starting with their designation by the CFTC. To offer derivatives for public trading, an exchange must seek and receive the CFTC’s designation as a contract market. 7 U.S.C. §§ 2(e), 7(a); 17 C.F.R. § 38.3(a). Entities seeking to achieve this designation must provide detailed information demonstrating the exchange’s capacity to abide by, among other requirements, the CFTC’s “Core Principles” for DCMs. Those principles include providing the public “impartial access” to opportunities to transact on the DCM. 17 C.F.R. §§ 38.3(a)(2), 38.151(b). DCMs must also create and maintain a “system capable of detecting and investigating potential trade practice violations,” id. § 38.156, monitor for “manipulation,” id. § 38.251, and “have the ability to comprehensively and accurately reconstruct all trading” on their exchange, id. § 38.256. The CEA and CFTC regulations also provide for an extensive framework for listing, review, and approval of contracts for trading on DCMs. DCMs may list contracts on their exchanges without pre-approval from the CFTC by filing a “written certification” affirming compliance with applicable CFTC requirements at the time of listing. 7 U.S.C. § 7a-2(c)(1); see also 17 C.F.R. § 40.2(a). Within ten days, the CFTC may initiate review of any contract under its purview. See 7 U.S.C. § 7a-2(c)(2); 17 C.F.R. § 40.11(c). If the CFTC does not take action within the ten-day period, the contract becomes “effective.” See 7 U.S.C. § 7a-2(c)(2). B. CDNA is a Designated Contract Market Offering Self-Certified Sports Event Contracts for Trading. The CFTC first certified CDNA’s predecessor as a DCM in 2004. Compl. ¶ 64. 1 In 2010, the CFTC recertified its registration. Id. ; CFTC Filings, supra note 1 . For two decades, the entity now known as CDNA has operated continuously as a CFTC-regulated DCM and has been fully regulated as a derivatives exchange under federal law. Compl. ¶ 64; CFTC Filings, supra note 1 . On January 30, 2025, pursuant to the CEA and CFTC regulations, CDNA certified and announced its intention to list a new category of event contracts: “Industry Event - Live
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1 The CFTC’s orders approving CDNA’s designation as a DCM are publicly available on the CFTC’s Industry Filings page. See Industry Filings, North American Derivatives Exchange, Inc. , CFTC, https://www.cftc.gov/IndustryOversight/IndustryFilings/TradingOrganizations/34536 (hereinafter “CFTC Filings”).
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