Comment Text:
Comment of Noel Le, Founder, MindCast AI LLC, on RIN 3038-AF65 (Prediction Markets).
Title: Defining "Gaming" Under the Commodity Exchange Act — A Rule 40.11 Framework for the Commodity Futures Trading Commission to Stabilize Jurisdiction, Federal Preemption, and Private Liability in Prediction Markets.
Question addressed: ANPRM Question 19 — the scope and public interest implications of the "gaming" activity under CEA section 5c(c)(5)(C) and 17 C.F.R. § 40.11, including subparts 19.a through 19.f (91 Fed. Reg. 12516, 12521).
The comment proposes that the Commission convert the Advance Notice to a Notice of Proposed Rulemaking focused on Rule 40.11 and amend that rule to:
(i) adopt a textual definition of "gaming" distinguishing contracts performing a recognized economic function — risk transfer, hedging, and price discovery — from contracts whose demand reflects consumption rather than risk transfer;
(ii) revive a modified economic purpose test as a public interest screen;
(iii) require affirmative Commission approval under 17 C.F.R. § 40.3, rather than passive non-disapproval under § 40.2(a)(2), for event contracts implicating any of the five activities enumerated in CEA section 5c(c)(5)(C); and
(iv) include an express non-displacement clause clarifying that Rule 40.11's gaming prohibition operates as an independent federal prohibition not preempted by parallel state-law gambling classifications.
The comment argues that the Commission's current posture — amicus filings asserting exclusive jurisdiction and preemption in the Ninth Circuit, Third Circuit, and District of Arizona paired with an open definitional rulemaking — creates a deference vulnerability under Motor Vehicle Manufacturers Association v. State Farm Mutual Automobile Insurance Co., SEC v. Chenery Corp., Encino Motorcars, LLC v. Navarro, and Loper Bright Enterprises v. Raimondo.
Completing the Rule 40.11 rulemaking preserves the federal preemption architecture the Commission and the Department of Justice are defending, closes the private §25(b) enforcement gap the Third Circuit majority left open in KalshiEX LLC v. Flaherty, and supplies the reasoned deliberative record reviewing courts will require under Loper Bright independent statutory analysis.
Keywords: RIN 3038-AF65; 91 FR 12516; Prediction Markets; Rule 40.11; 17 CFR 40.11; CEA section 5c(c)(5)(C); 7 U.S.C. 7a-2; gaming; event contracts; designated contract market; swap; public interest; economic purpose test; Rule 40.3; self-certification; non-displacement; federal preemption; exclusive jurisdiction; private right of action; 7 U.S.C. 25(b); Loper Bright; State Farm; Chenery; Encino Motorcars; Flaherty; Kaiserman; KalshiEX; Washington v. KalshiEX; United States and CFTC v. Arizona; Ninth Circuit; Third Circuit; administrative law; certiorari posture.
Full comment in attached PDF: MindCast_Comment_RIN_3038-AF65_FINAL.pdf.
