Case 2:25-cv-00978-APG-BNW Document 42 Filed 08/04/25 Page 11 of 26
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traded on a DCM. 7 U.S.C. § 2(a)(1)(A). Put simply, if the CFTC is hands on, Congress wants the states to be hands off. See Kalshi v. Hendrick I , 2025 WL 1073495, at *6 (“In sum, if Kalshi were offering its contracts without CFTC designation, then the defendants could regulate it. But because Kalshi is a CFTC-designated DCM, it is subject to the CFTC’s exclusive jurisdiction and state law is field preempted.”). 4 Statutory Purpose. The text of the CEA, as amended in 1974, reflects Congress’s intent to bring the expanding commodity futures market under a uniform set of federal regulations to “avoid unnecessary, overlapping and duplicative regulation.” FTC v. Ken Roberts Co. , 276 F.3d 583, 588 (D.C. Cir. 2001). In particular, Congress sought to avoid overlap with the Securities and Exchange Commission (“SEC”) and was concerned that the states might “step in to regulate the futures markets themselves” and introduce “conflicting regulatory demands.” Am. Agric. Movement , 977 F.2d at 1156. Congress addressed these concerns by putting “all exchanges and all persons in the industry under the same set of rules and regulations for the protection of all concerned.” H.R. Rep. No. 93-975, at 79 (1974) . Legislative History. If the text and purpose were not clear enough, the legislative history of the CEA crystallizes congressional intent to occupy the field of CFTC-regulated derivatives. The Conference Report preceding the enactment of the 1974 amendments confirms the purpose of the exclusive jurisdiction provision: “Under the exclusive grant of jurisdiction to the [CFTC], the 4 In April 2025, the United States District Court for the District of New Jersey agreed with this Court that “the exclusive jurisdiction language reflects an intent to occupy the field” as applied to Kalshi’s event contracts. Kalshi v. Flaherty , 2025 WL 1218313, at *5. The United States District Court for the District of Maryland recently disagreed. Mem. Op., KalshiEX LLC v. Martin , No. 25-cv-1283-ABA (D. Md. Aug. 1, 2025). That decision has already been appealed to the Fourth Circuit, see id. ECF No. 72, and it conflicts with contemporaneous authority from across the country from shortly after the 1974 amendments to the CEA finding that Congress intended to preempt state regulation. See Hofmayer v. Dean Witter & Co. , 459 F. Supp. 733, 737 (N.D. Cal. 1978) (“In the light of Congress’ plainly stated intent to have the Commodity Exchange Act, as amended, preempt the field of regulation of commodity futures trading, any claim under federal or state securities statutes is barred.”); Taylor v. Bear Stearns & Co. , 572 F. Supp. 667, 673 (N.D. Ga. 1983) (noting “the primary concern of Congress was preemption of federal and state regulatory schemes”); Jones v. B.C. Christopher & Co. , 466 F. Supp. 213, 220 (D. Kan. 1979) (“It is now established, however, that the SEC and other federal agencies are ‘stripped’ of authority to regulate commodities transactions . . . and that state regulatory agencies are likewise preempted by the ‘exclusive jurisdiction’ of the CFTC.”) (citations omitted); see also Int’l Trading Ltd. v. Bell , 262 Ark. 244, 250–51 (1977) (finding CEA’s language “express[es] a clear intention to vest exclusive jurisdiction of the regulation of commodity options in the [CFTC] and to supersede the jurisdiction of all state and federal agencies”).
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