Paradigm Files Ninth Circuit Amicus Brief to Oppose State Encroachment on Federal Regulation

This month, Paradigm filed amicus briefs in KalshiEX LLC v. Hendrick and Crypto.com v. Hendrick, two Ninth Circuit cases regarding Nevada’s efforts to treat federally regulated swaps as gambling. This isn’t a close call. As we explained in our Third Circuit (New Jersey) and Fourth Circuit (Maryland) briefs, Congress decided decades ago that the CFTC, not fifty different states, sets the rules for these markets. Nevada’s position ignores that history, and the Ninth Circuit should not be similarly tempted by the Silver State’s false gloss on history.

For more than a century, states have periodically tried to label novel financial instruments as “gambling.” Congress has repeatedly rejected that approach. Beginning with the Commodity Exchange Act and culminating in the creation of the CFTC in 1974, Congress established a uniform federal framework for derivatives markets, making clear that this framework preempts conflicting state law. That choice reflected a simple reality: national markets require national rules.

The contracts at issue here fall squarely within the CFTC’s exclusive jurisdiction. They are traded on federally regulated exchanges, subject to comprehensive federal oversight, and designed to allow market participants to hedge and manage risk. Nevada’s attempt to regulate these products under state gaming laws would resurrect exactly the kind of fragmented, inconsistent regulation Congress deliberately eliminated decades ago.

The Ninth Circuit should follow the clear statutory text and historical record. Federal law governs these markets, full stop. Allowing states to override that judgment would undermine regulatory certainty, stifle innovation, and unravel a system Congress carefully constructed. The court should reverse and reaffirm that the CFTC – not state gaming regulators – sets the rules for these federally regulated derivatives markets.