CFTC Sues Louisiana to Challenge State Limits on Event Contracts

The Commodity Futures Trading Commission (CFTC) sued Louisiana on Friday, Nov. 13, asking a federal court to stop the state from barring CFTC-regulated firms from offering event contracts, escalating a dispute over authority to oversee prediction markets.

The CFTC's complaint challenges Louisiana's prohibition on event contracts offered by designated contract markets, futures commission merchants and derivatives clearing organizations — three types of federally regulated market firms named in the case.

Louisiana obtained a state court order Thursday, Nov. 12, that shut down operations of more than 30 companies in the state connected to trading CFTC-regulated derivatives products. The CFTC said the defendants received no notice or opportunity to be heard before the order was issued.

CFTC Chairman Michael S. Selig said event contracts had traded openly in Louisiana for years in compliance with the Commodity Exchange Act and CFTC regulations. He said the commission's lawsuit seeks to preserve the status quo while federal courts decide the jurisdiction question.

Louisiana is the 12th state the CFTC has sued as it defends its authority over derivatives markets under the Commodity Exchange Act. The agency has also filed friend-of-the-court briefs in four federal appeals courts and one state supreme court.