Case 2:25-cv-00978-APG-BNW Document 42 Filed 08/04/25 Page 15 of 26
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desist order cannot be squared with Congress’s intent to shield regulated exchanges from being governed by a patchwork of potentially conflicting legal regimes. The NGCB’s order seeks to subject a CFTC-regulated DCM to the state’s licensure scheme—precisely the type of regulation Congress intended to preclude. The inconsistency becomes even more apparent when considering that, if the NGCB is allowed to proceed, each of the other forty-nine states and the District of Columbia could likewise attempt to impose their own laws on CDNA. Subjecting DCMs to state regulation would create “an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Hines , 312 U.S. at 67. These state laws are therefore preempted. Second , subjecting CDNA to Nevada’s sports wagering laws would frustrate Congress’s purpose of establishing uniformity of enforcement for DCMs. Preemption also arises where there is “a conflict in the method of enforcement.” Arizona , 567 U.S. at 406. A state law creates an “obstacle” to a federal regulatory framework when Congress adopts a particular method of enforcement to achieve its objectives, and state law imposes a different approach that disrupts “the careful balance struck by Congress.” Knox v. Brnovich , 907 F.3d 1167, 1175 (9th Cir. 2018) (citation and internal quotations omitted). This is especially true when Congress reserves “prosecutorial power” and “discretion” to federal authorities—a state law allowing prosecutions for the same conduct “conflicts with the federal scheme.” Valle del Sol Inc. v. Whiting , 732 F.3d 1006, 1027 (9th Cir. 2013). Otherwise, as the Supreme Court cautioned, a state could initiate charges “even in circumstances where federal officials in charge of the comprehensive scheme determine that prosecution would frustrate federal policies.” Arizona , 567 U.S. at 402. That is precisely the danger presented by the NGCB’s actions. Once CDNA received CFTC designation as a contract market, it was permitted under federal law to list event contracts by certifying that those contracts comply with federal requirements. The CFTC—and no other body—has the authority to review that certification on the basis that the contracts are “contrary to the public interest,” 7 U.S.C. § 7a-2(c)(5)(C)(i). If the CFTC determines that CDNA has violated federal law, it may act. See CFTC Division of Enforcement, Enforcement Manual (2020), at § 3.3. Congress provided the CFTC with a range of enforcement tools and vested the agency with discretion to determine how best to deploy them.
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