CFTC Sues Louisiana Over State Court Order Against Event Contracts

The Commodity Futures Trading Commission has sued Louisiana to stop the state from barring event contracts offered by exchanges, clearing houses and brokers it regulates. The trigger, according to the CFTC's release dated November 13, is a state court order obtained on Thursday that it says halted the operations of more than 30 companies connected to CFTC-regulated derivatives trading. The CFTC says those firms received no notice and no chance to be heard before the order took effect.

Chairman Michael S. Selig called the state's action "naked lawfare and a cynical political stunt," and said the Commission's suit aims "to maintain the status quo while the federal courts decide this issue." Louisiana is the 12th state the CFTC has sued over what it describes as exclusive federal jurisdiction under the Commodity Exchange Act. The agency also says it has filed amicus briefs in four federal appeals courts and one state supreme court.

The dispute turns on whether federal law pre-empts state bans on these contracts. That is a contested legal question, and the states on the other side are not heard in this release. A Gambling Insider headline describes the Louisiana order as a temporary restraining order, but I have not seen the order itself, so its exact scope rests on the CFTC's description. Louisiana can contest both the suit and the order's validity.

The immediate cost lands on the firms named in the order and on Louisiana users who rely on them. Whether a state can shut a federally regulated venue through a short-notice order is the procedural point the CFTC is pressing, and it may matter as much as pre-emption itself. A federal court ruling, the order's text and Louisiana's filings would each change how much weight this account deserves. Until then, the open question is whether these platforms stay operational in Louisiana while the courts decide.