Opinion ID: 75906
Heading Depth: 2
Heading Rank: 2

Heading: CFTC's Anti-Fraud Regulations

Text: 20 The CFTC argues that it may still enforce its anti-fraud regulations, 17 C.F.R. § 33.10, 5 against Advertisers even if they did not meet the Introducing Broker registration requirement. Based on the enabling statute of the CEA, the district court held that the CFTC acted beyond its jurisdictional scope in extending its anti-fraud rules to Advertisers who act in connection with commodity options. 21 Section 4c(b), the enabling statute of the CEA, provides: 22 No person shall offer to enter into, enter into or confirm the execution of, any transaction involving any commodity regulated under this chapter which is of the character of, or is commonly known to the trade as, an option ... contrary to any rule, regulation, or order of the Commission prohibiting any such transaction or allowing any such transaction under such terms and conditions as the Commission shall prescribe. 23 7 U.S.C. § 6c(b). 24 The district court employed the Chevron analysis, as set forth above, and determined that Congress unambiguously expressed its intent in plain language of the enabling statute of the CEA. The district court concluded that the statute applies only to those who offer to enter into, enter into or confirm the execution of any commodity transaction. There were no allegations that Advertisers engaged in such activities, and therefore, the CFTC could not impose its anti-fraud regulation on Advertisers. 25 The CFTC argues that the district court failed to consider the authority granted to it by section 2(a)(1)(A)(i) of the CEA, 7 U.S.C. § 2(i), which provides, in relevant part: [t]he Commission shall have exclusive jurisdiction ... with respect to accounts, agreements (including any transaction which is of the character of, or is commonly known to the trade as, an `option'...), and transactions involving contracts of sale of a commodity for future delivery.... 6 The CFTC argues that the broad delegation of exclusive and plenary jurisdiction in 7 U.S.C. § 2(i) is sufficient grounds to support 17 C.F.R. § 33.10. 26 Nonetheless, the district court's conclusion was not based on whether the CFTC had the authority to promulgate 17 C.F.R. § 33.10. It found that the CFTC could not impose its rules on entities that are clearly excluded by the CEA. [Advertisers'] general solicitation through their advertisements never involved the making of an offer to enter into a commodity transaction or assisting customers in carrying out such transactions. R4-133-18. Thus, Advertisers' activities do not fall within the boundaries of the CEA or the jurisdiction of the CFTC. 27 AFFIRMED.