CFTC sues Louisiana over shutdown of 30-plus derivatives firms

Louisiana obtained a state court order on Thursday, November 12, shutting down the operation of more than 30 companies connected to trading CFTC-regulated derivatives products. One day later, the Commodity Futures Trading Commission filed a lawsuit against Louisiana, according to the CFTC’s November 13 press release.

The filing places a direct jurisdictional dispute in front of the courts: Louisiana used a state-court order to block companies operating in a market the CFTC says falls under its exclusive federal authority. The commission’s lawsuit seeks to prevent Louisiana from blocking CFTC-regulated exchanges from offering event contracts.

The CFTC’s challenge seeks to preserve their ability to offer event contracts while federal courts decide the jurisdictional question. The commission’s announcement does not provide a deadline for that decision or identify the companies affected.

The scale of the state-level fight is broader than Louisiana. The CFTC said Louisiana is the 12th state it has sued to defend its exclusive jurisdiction over derivatives markets. On a simple count, Louisiana represents 1 of 12 such state cases, or about 8.3%; the other 11 cases are identified only as earlier lawsuits in the announcement.

The commission also said it has submitted amicus briefs in four federal Courts of Appeal and one state Supreme Court. Those filings put the same federal-versus-state question before five appellate venues, although the CFTC’s announcement does not give their case names, dates or current status.

Louisiana’s stated basis, as described by the CFTC, was an “emergency” lawsuit seeking to shut down the prediction-market industry. The announcement does not specify what emergency Louisiana alleged, the legal basis for the state order or the names of the more than 30 companies.

Michael S. Selig, chairman of the Commodity Futures Trading Commission, defended the affected market’s federal footing. The state’s eleventh-hour ’emergency’ lawsuit seeking to shut down the entire prediction market industry is naked lawfare and a cynical political stunt. The Commission’s lawsuit seeks to maintain the status quo while the federal courts decide this issue in an orderly manner.”

The consequence is immediate for companies covered by Thursday’s order: Louisiana’s shutdown remains the state action the CFTC is contesting, while the commission is asking the courts to keep federally regulated event-contract trading from being blocked at the state level. The result will determine how far state authorities can reach into markets the CFTC claims as its own.

EDIT NOTE: The quoted passage was already verbatim from the fact sheet’s confirmed quote by Michael S. Selig (S1). No change was required. The defect described an incomplete version of the quote (truncated at “shut down the en”); the article already contained the full, correct verbatim quote. No edit was made.