Case 1:25-cv-01283-ABA Document 29 Filed 05/19/25 Page 12 of 17
40.11(a) and “shall issue an order approving or disapproving” the contract. 17 C.F.R. § 40.11(c). The CFTC has not interpreted Section 40.11(a) as a wholesale elimination of its discretion regarding contracts that relate to a 40.11(a) category. It has instead always understood 40.11(c) to preserve its discretion. The CFTC’s 2011 Release adopting Section 40.11 explains: “[R]egistered entities may always certify products pursuant to the procedures in § 40.2. If the Commission determines during its review of a product that the submission may violate the prohibitions in § 40.11(a)(1)–(2), the Commission may request that the registered entity suspend the trading or clearing of the contract pending the completion of a 90-day extended review.” Adopting Release, 76 Fed. Reg. 44,786 (July 27, 2011) (emphasis added); accord Voting Copy of Proposed Amendments to the Special Rule (May 10, 2024), at 14 n.36. The CFTC therefore did not, as Defendants allege (at 21), eliminate its own discretion to evaluate contracts’ compliance with the public interest. Indeed, reading the provision as a “blanket prohibition” would run afoul of the CEA’s text. The Special Rule allows the CFTC to prohibit contracts involving gaming if—but only if—the CFTC “determine[s]” that these contracts are “contrary to the public interest.” 7 U.S.C. § 7a-2(c)(5)(C)(i)(V). Neither Section 40.11 nor its implementing rule contains any finding purporting to conclude that all contracts involving gaming are categorically contrary to the public interest. Section 40.11(c) thus preserves the CFTC’s ability to determine that gaming contracts comport with the public interest. Defendants’ reliance on Section 40.11 undermines rather than supports their argument. Defendants concede that the CFTC in Section 40.11 has regulated event contracts involving gaming. While Defendants misinterpret this regulation, the regulation unquestionably shows that the CFTC understands itself to possess jurisdiction over these contracts. The concession that the CFTC has jurisdiction over this field shows that concurrent state regulation is preempted. Where “the CFTC has jurisdiction, its power is exclusive.” Chicago Mercantile Exch. , 883 F.2d at 548.
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