Commodity Futures Trading Commission sues Kentucky to block state actions against CFTC registered contract markets

The Commodity Futures Trading Commission has filed a lawsuit against Kentucky to stop the state from using state law to shut down CFTC-registered contract markets. The agency argues that Kentucky’s actions against designated contract markets conflict with Congress’ federal preemption framework and the CFTC’s exclusive jurisdiction over federally regulated event contracts, which Chairman Michael S. Selig described as prediction markets. The case follows Kentucky’s civil enforcement actions in state court against CFTC-regulated designated contract markets, where the state is seeking large monetary penalties. It also follows Kentucky’s creation of a special transaction fee on CFTC-regulated designated contract markets that, according to the CFTC, is intended to push those platforms to cease operating in the state. The CFTC said it has also initiated legal proceedings against Minnesota, Illinois and Rhode Island, and has filed amicus briefs in the U.S. Courts of Appeals for the Sixth and Ninth Circuits and the Supreme Judicial Court of Massachusetts.