Commodity Exchange Act

SEC Commissioner Hester Peirce noted that the order does not govern decentralized finance, explaining that automated permissionless smart contracts mediating peer-to-peer trading do not present the foundational intermediary risks that securities regulations were designed to address.

The Commodities Futures and Trading Commission's Market Participants Division also issued a broad no-action letter protecting providers of passive software from registration requirements under the Commodities Exchange Act.

The letter confirms that division staff will not recommend enforcement action against non-custodial software developers or their personnel for failing to register as brokers or associated persons.

To qualify for these safe harbor, software providers must remain strictly passive.

building on recent tailored offering proposals and initiatives across issuance, custody, and transfer agent modernization.

CFTC Chair Mike Selig confirmed his agency is prepared to issue market structure rules under the Commodities Exchange Act.

pledging to establish clear standards for spot digital commodities.

The statements come after the Clarity Act failed to clear a Senate vote.

This is complicated stuff, right? And you could, you can read a case in completely different ways, even though you're reading the exact same document and the exact same arguments.

Yeah, I mean, like at the absolute high level and being very, very brief about it, the Third Circuit decision that went two to one in favour of Kalshi essentially held that sports bets, sports trades, you know, what jargon are we using now, qualify as what we call what the Commodity Exchange Act calls swaps.

That's like a sort of these derivatives contract, you know, event contracts or whatever.

The Third Circuit held that sports bets kind of qualify as swaps under the CEA because they are traded on a Commodity Futures Trading Commission licensed exchange like Kalshi.

So the Third Circuit basically said, yeah, we see... you know, we can believe that sports trading qualifies as sort of a financial, you know, instrument because there are economic consequences involved, blah, blah, blah.

This has been like a huge argument in all of the court cases, right? Like, does sports...

Does the Commodity Exchange Act allow for sports to be categorised with the rest of federal financial contracts and that sort of stuff? The Ninth Circuit basically directly contradicted that opinion.

I think the Ninth Circuit basically said that... an interesting point was that, you know, adopting that reading where you say that sports, you know, the CEA does allow for sports trading at a federal level would have essentially sort of seemed to give the CFTC regulatory authority over all sports betting nationwide, which is directly sort of, well, the argument is that it's directly contradictory to, we've already mentioned PASPA, right? That the repeal of PASPA gave states, explicitly gave states the authority to regulate sports betting and gaming and do, you know, roll out their own, roll out their own regulatory regimes and legalization that's in the power of states.

On August 28th, they affirmed a federal court's decision to dissolve a preliminary injunction that had previously shielded Kalshi.

And the core of Kalshi's defense here relied heavily on the Federal Commodity Exchange Act.

Right.

Break that down.

So Kalshi essentially argued that because they operate in exchange for quote unquote event contracts where users are taking positions on the outcomes of future events, they are trading federally regulated financial derivatives, not operating a sports book.

Ah.

Therefore, they argue, the Federal Commodity Exchange Act should entirely preempt or basically override Nevada's state gambling laws.

Right.