Indiana Law Review The Pre-emption Doctrine and the Commodity Futures Trading Commission Act: In Favor of State Law In 1974, President Ford signed into law the Commodity Futures Trading Commission Act of 19741 (CFTC Act), which amended the Commodity Exchange Act2 by providing in part that the newly formed Commodity Futures Trading Commission (CFTC) shall have exclusive jurisdiction with respect to accounts, agreements . . . and transactions involving contracts of sale of a com- modity for future delivery, traded or executed on a contract market . . . ; And provided further, That, except as herein- above provided, nothing contained in this section shall (i) supersede or limit the jurisdiction at any time conferred on the Securities and Exchange Commission or other regulatory authorities under the laws of the United States or of any State, or (ii) restrict the Securities and Exchange Commis- sion and such other authorities from carrying out their duties and responsibilities in accordance with such laws.8 Thereafter, in 1975, an Indiana securities law amendment included commodity futures contracts in its definition of a security,4 thereby requiring registration of commodity futures and commodity futures brokers with the Indiana Securities Commission.6 Because section 201(b) of the CFTC Act refers only to "trans- actions" involving commodity futures, and because the Act contains no other provision for the registration of a commodity futures broker-dealer with the CFTC, the question arises as to whether the CFTC has totally pre-empted the SEC and state authorities from the field of commodity futures, or whether the states can enforce 'Pub. L. No. 93-463, 88 Stat. 1389 (1974) (amending 7 U.S.C. §§ 1-22 (1970 & Supp. Ill 1973)). 2 7 U.S.C. §§ 1-22 (1970 & Supp. Ill 1973) (amended 1974). For a discussion of the changes made in the Commodity Exchange Act, see Johnson, The Changing Face of Commodities Regulation, 20 Prac. Law., Dec. 1974, at 27; Johnson, The Commodity Futures Trading Commission Act: Preemption as Public Policy, 29 Vand. L. Rev. 1 (1976); Rainbolt, What the New Commodity Futures Trading Commission Means to You, Commodities, Feb. 1975, at 23-26; Note, The Role of the Commodity Futures Trading Commission Under the Commodity Futures Trading Commission Act of 1974, 73 Mich. L. Rev. 710 (1975). 7 U.S.C. § 2 (1976). '"'Security' means any . . . commodity futures contract; option, put, call, privilege or other right to purchase or sell a commodity futures contract; margin ac- counts for the purchase of commodities or commodity futures contracts . . . ." Ind. Code § 23-2-l-l(k) (Supp. 1977). 6Jd § 23-2-1-8. 467 468 INDIANA LAW REVIEW [Vol. 11:467 their own laws regarding registration of commodity futures and commodity futures brokers. I. FORMULATION OF A PRE-EMPTION DOCTRINE The problem of pre-emption has long been a perplexing one;6 and as many areas such as education (segregation), welfare, and the shar- ing of federal revenues acquire a national rather than local dimen- sion, the question of where to draw the line between federal and state authority continues to be a problem. The primary source of the pre-emption doctrine is found in the supremacy clause of the United States Constitution, 7 with the purpose of pre-emption being either to effectuate a congressional occupation of a particular field, even where the federal regulatory scheme does not occupy the entire field, or to nullify state regulation in conflict with federal legislation. The Supreme Court has yet to develop a uniform approach to pre- emption;8 although many rules have been promulgated for determin- ing whether there should be pre-emption, the formulas are vague and lend themselves to a wide range of interpretation and discre- tion. For example, in Kelly v. Washington, 9 the Supreme Court determined that the "exercise by the State of its police power, which would be valid if not superseded by federal action, is super- seded only where the repugnance or conflict is so 'direct and positive' that the two acts cannot 'be reconciled or consistently stand together.' " According to the Supreme Court's decision in Hines v. Davidowitz, 10 pre-emption occurs when a state statute in- terferes with the "accomplishment and execution of the full pur- poses and objectives of [an Act of] Congress." 11 More specifically, "Preemption occurs when a state statute obstructs the "accomplishment and execution of the full purposes and objectives of an Act of Congress." More specifically, either a congressional design to "occupy the field" or a con- flict between federal and state statutes is needed to place a statute in an un- constitutionally obstructive position. Note, The Preemption Doctrine: Shifting Perspectives on Federalism and the Burger Court, 75 COLUM. L. Rev. 623, 624 (1975). For further discussion of the pre-emption doc- trine, see Freeman, Dynamic Federalism and the Concept of Preemption, 21 De Paul L. Rev. 630 (1972); Note, Pre-emption as a Preferential Ground: A New Canon of Con- struction, 12 Stan. L. Rev. 208 (1959). 'U.S. Const, art. VI, cl. 2, provides: This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitu- tion or Laws of any State to the Contrary notwithstanding. "See Note, The Preemption Doctrine: Shifting Perspectives on Federalism and the Burger Court, 75 COLUM. L. Rev. 623, 624 (1975). 9302 U.S. 1, 10 (1937). ,0312 U.S. 52 (1941). "Id. at 67. 1978] COMMODITY FUTURES 469 either a congressional intent to "pre-empt the field" or a conflict between federal and state statutes 12 is needed before a state statute must defer to federal law under the pre-emption doctrine. A congressional intent to occupy the field supersedes the opera- tion of state law on federally regulated subject matter regardless of whether the state regulation impairs the actual operation of the federal law. Thus, a finding of congressional occupation must be preceded by a showing that it is "the clear and manifest purpose of Congress" that an area be exclusively federally regulated. 13 How- ever, the Supreme Court has not relied exclusively upon expressions of congressional purpose or specific intent in determining the scope of pre-emption based on grounds of federal occupation of the field. 14 Furthermore, the Court may take into consideration factors out- side the language of the federal legislation in determining whether pre-emption exists. For example, the nature of the subject matter being regulated may reveal a need for nationwide uniformity15 that would preclude the separate states from entering the field. Con- sideration of these factors parallels those factors taken into account in the early cases under the commerce clause.16 Those cases cate- gorized certain subject matter as national in character and thus pre- emptive, regardless of congressional action; other subject matters are characterized as inherently local in nature and thus subject to regulation by the individual states. However, this approach does not present a definite rule for determining pre-emption, because subject matter has not been treated in a uniform manner by the courts and hence is not considered determinative of pre-emption independent of congressional intent.17 "Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 141 (1963). ,3Jd at 146. "In Rice v. Santa Fe Elevator Corp., 331 U.S. 218 (1947), the Court stated that pre-emption is favored if the scheme of federal regulation is "so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it," or if State policy would produce a result inconsistent with the objective of the federal statute. Id. at 230 (emphasis added). ,5 See, e.g., Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132 (1963). "See, e.g., Cooley v. Board of Wardens, 53 U.S. (12 How.) 298 (1851). "In both Florida Lime & Avocado Growers v. Paul, 373 U.S. 132 (1963), and Head v. New Mexico Bd. of Examiners, 374 U.S. 424 (1963), the Court characterized the sub- ject matter as local, then went on to determine whether Congress intended to occupy the fields at issue. This is a curious result because if the Court has characterized a cer- tain subject matter as local for commerce clause purposes, Congress may nevertheless enter the field; however, for pre-emption purposes, if Congress has acted in the field, albeit short of complete occupation, the Court must disregard Congress' determination that the subject matter is national in character in order to find pre-emption. See 75 Colum. L. Rev. 623, 625 n.18 (1975). 470 INDIANA LAW REVIEW [Vol. 11:467 When using conflict between federal and state statutes as grounds for pre-emption,18 the Court first analyzes the statutes in question, then determines whether a conflict actually exists.19 The clearest cases arising on grounds of conflict occur when state law mandates action forbidden by federal law, or vice-versa. During the 1930's, the Supreme Court shifted the burden of establishing pre-emption onto Congress rather than engaging in its own assessment as to whether pre-emption had occurred.20 Under that approach, absent an actual conflict between federal and state law, pre-emption could occur only if congressional intent to occupy the field was "definitely and clearly" shown.21 Although it appeared that the Court favored a specific expression of intent, the Court never articulated the elements that would satisfy the burden of proving pre-emption. Moreover, if congressional language was not specific, the Court itself proceeded to ascertain the purposes of the legislation. If the purposes necessarily implied federal supremacy, the inconsistent state law was struck down.22 In Rice v. Santa Fe Elevator Corp., 23 the Court attempted to sharpen this intent standard. In an earlier decision, Cloverleaf But- ter Co. v. Patterson, 2* the Court invalidated a state regulation overlapping a federally regulated field but also occupying an aspect untouched by the congressional scheme.25 In Rice, the Court stated three instances in which the doctrine of pre-emption should be in- 18 It should be noted that occupation of the field and conflicting statutes are not easily separated as grounds for pre-emption. In addition, the Court does not always point out precisely which ground it is using before proceeding with its determination as to whether pre-emption exists. 19Perez v. Campbell, 402 U.S. 637, 644 (1971). 20 Prior to 1930, the Court invoked the doctrine of pre-emption in any case where there was mere presence of congressional regulation in a particular field. See, e.g., Charleston & W. Carolina Ry. Co. v. Varnville Furniture Co., 237 U.S. 597 (1915). The view was that the very exercise of federal power inherently excluded concurrent yet compatible regulation by the states. Whether Congress or the Supreme Court should determine if pre-emption has oc- curred has in itself been a source of conflict. The Court resolves conflicts as to the allocation of power in the federal system pursuant to the "necessary and proper" clause, U.S. Const, art. I, § 8, cl. 18, thereby making it doubtful that Congress should be able to conclusively pre-empt state law in any area. The framers of the Constitution intended the Supreme Court to determine where the line should be drawn when state and federal laws are in conflict. THE FEDERALIST No. 39. (J. Madison). 21Mintz v. Baldwin, 289 U.S. 346, 350 (1933). "Nash v. Florida Indus. Comm'n, 389 U.S. 235 (1967); David v. Elmira Sav. Bank, 161 U.S. 275 (1896). "331 U.S. 218 (1947). "315 U.S. 148 (1942). Z6The contested Alabama statute authorized confiscation and destruction or sale of packing stock butter that did not conform to state standards, Ala. Code tit. 2, § 495 (1940), but the federal regulatory scheme had no parallel provision. 1978] COMMODITY FUTURES 471 voked. First, the scheme of federal regulation may be "so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it."26 This determination requires an in- vestigation of congressional intent, and deference should be given to this intent because Congress is better equipped than the judiciary to make fact-finding inquiries. Second, the act of Congress "may touch a field in which the federal interest is so dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject."27 This is a matter of constitutional law, and does not defer to statutory interpretation. Finally, "the object sought to be obtained by the federal law and the character of obliga- tions imposed by it"28 may be such that pre-emption is required. Thus, Rice requires the courts to weigh the federal and state in- terests at stake and decide which should control, but the decision must be tempered by the extent to which Congress has manifested an intention to control the field. Congressional intent in itself is an inadequate source for deciding pre-emption questions, because as a rule Congress does not consider the impact of its legislation with respect to state law.29 The Rice approach has expanded the judiciary's role in pre-emption cases and has resulted in increased findings of the existence of pre-emption, a trend seemingly related to the concurrent decline in states' rights and interests.80 Even before its decision in Rice, the Court indicated that it would lower the intent requirement and engage in a presumption in favor of federal interests rather than state interests. In Hines v. Davidowitz, 31 the Court for the first time applied pre-emption to M331 U.S. at 230. "Id. 29/d ^During the course of legislative debate, congressmen often make statements concerning their own intent, but such statements often merely reflect their failure to anticipate the impact federal law will have on state law. For example, in Pennsylvania v. Nelson, 350 U.S. 497, 504 (1956), the Court found that Congress clearly intended to occupy the field of sedition, even though Congressman Howard Smith had flatly denied in debate that Congress ever intended to deprive the states of their concurrent jurisdiction. Note, Pre-emption as a Preferential Ground: A New Canon of Construc- tion, 12 Stan. L. Rev. 208, 208 n.4 (1959). "•Between 1868 and 1920, the Court decided 195 cases involving the exercise of police power by the states. In 93% of those cases the power was upheld, while the re- maining 7% declared such power to be unconstitutional. From 1921 to 1927, state ac- tion was upheld in 72% of the 53 cases considered. Between 1930 and 1941, the Hughes Court only upheld state law in 60% of the cases considered, while the Vinson Court decided 49% of its cases in favor of state power. The Stone Court upheld 41% of the cases in favor of state law, and the Warren Court decided only 32% of the cases in support of the states. R. Roettinger, The Supreme Court and State Police Power: A Study in Federalism 18, 195-206 (1957). "312 U.S. 52 (1941). The issue was whether the Alien Registration Act of 1940, which required aliens to register with the federal government and carry identification 472 INDIANA LAW REVIEW [Vol. 11:467 legislation that was not dependent on the commerce clause. Justice Black established a presumption in favor of the federal law's pre- emptive capability because the statute belonged to "that class of laws which concern the exterior relation of this whole nation with other nations" 32 and was "so intimately blended and intertwined with the responsibilities of the national government" as to present on its face a complete scheme of regulation in the field, precluding the states from participation in the field.33 The decision amounted to a capability of finding pre-emption even where clear congressional intent to occupy the field or actual conflict of state and federal laws was lacking, so long as the nature of the federal regulation called for exclusive operation. Subsequent cases in the area of foreign affairs also brushed over the intent requirement and pre-empted state regulation on the strength of a presumption in favor of federal interests.34 The Court's assumption of pre-emptive authority, coupled with the relaxed in- tent standard, permitted pre-emption in areas formerly unreachable without a clear congressional intent;35 with this propensity to find pre-emption came an impairment of the balance between federal and state interests. Although the Court seems to have become firmly entrenched in its attitude toward pre-emption, the recent case of Goldstein v. California 36 may indicate a changing attitude in favor of state in- terests. In Goldstein, the Court upheld a California statute making record piracy a criminal offense37 and rejected the argument that even though federal copyright law is silent on the matter of protec- tion afforded recordings, concurrent state legislation could not stand. 38 Basing its decision on commerce clause cases that distin- cards, pre-empted a Pennsylvania statute with a similar registration procedure but more extensive criminal sanctions. The federal act only imposed criminal sanctions upon failure to register, while the Pennsylvania act did so upon the alien's failure to have the registration card in his possession. The 1940 federal act was repealed and replaced by the Act of June 27, 1952, 8 U.S.C. §§ 1301-1306 (1976). 32312 U.S. at 66 (citing Henderson v. Mayor of New York, 92 U.S. 259, 273 (1875)). 33312 U.S. at 66. "See Graham v. Richardson, 403 U.S. 365 (1971); Zschernig v. Miller, 389 U.S. 429 (1968); Kolovrat v. Oregon, 366 U.S. 187 (1961); United States v. Pink, 315 U.S. 203 (1942). 35See, e.g., Hamm v. City of Rock Hill, 379 U.S. 306 (1964) (civil rights); Farmers Educ. & Coop. Union v. WDAY, Inc., 360 U.S. 525 (1959) (communications); Penn- sylvania v. Nelson, 350 U.S. 497 (1956) (civil liberties). 36412 U.S. 546 (1973). 37Cal. Penal Code § 653h (West 1970) (amended 1975 & 1977). 39The United States Constitution grants to Congress the power to protect the "Writings" of "Authors." 412 U.S. at 561 (quoting U.S. CONST, art. I, § 8, cl. 8). Although the term "Writings" has not been strictly construed, the above-mentioned enabling provision of the Constitution "does not require that Congress act in regard to 1978] COMMODITY FUTURES 473 guished between local and national subject matter,39 the Court ruled that federal law should govern when the exercise of a similar power by the states would be "absolutely and totally contradictory and repugnant."40 The test for determining repugnancy is a flexible one: Federal law will be pre-emptive if and only if the matter is "necessarily national in import" and a conflict would "necessarily" arise if state law were allowed to stand.41 The broad interpretation the Court gave to "necessarily na- tional" in Goldstein can be appreciated only after considering that sound recordings are a subject matter that is not purely local in character. The Court thus deferred to state interests that could be considered to have national impact and ignored a possible federal in- terest in uniform copyright laws. In so doing, the Court has essen- tially allowed state law to stand in the absence of federal action, leaving the door open for Congress to later act in that field.42 Goldstein is also significant in light of two previous cases involv- ing the extent to which federally unpatentable articles may be pro- tected by state unfair competition laws. In Sears, Roebuck & Co. v. Stiffel Co. iS and Compco Corp. v. Day-Brite Lighting, Inc., u the Supreme Court unanimously determined that federal patent law pre- empted any state unfair competition law protecting articles eligible, but unqualified, for a federal patent. The Court interpreted the all categories which meet the constitutional definition. Rather, whether any specific category of 'Writings' is to be brought within the purview of the federal statutory scheme is left to the discretion of Congress." 412 U.S. at 562. The Register of Copyrights, who is charged with administration of the federal copyright statute, ruled in 1959 that "claims to exclusive rights in mechanical recordings ... or in the perfor- mances they reproduce" were not entitled to protection under the then-applicable copyright statute, 17 U.S.C. § 4 (1970). 24 Fed. Reg. 4958 (1959), cited in Goldstein v. California, 412 U.S. at 568. But cf. 37 C.F.R. §§ 202.8(b), .15a (1977) (implements registration of copyright claims in sound recordings pursuant to the 1971 amendments to and the 1976 revision of the Copyright Act). Petitioners in Goldstein had been involved in "unauthorized duplication of recor- dings of performances by major musical artists." 412 U.S. at 549. They argued that the state statute they had violated established a copyright of unlimited duration, thereby conflicting with the above-mentioned clause of the United States Constitution. They also asserted that "the state statute interfered with implementation of federal policies inherent in federal copyright statutes." 412 U.S. at 551. 39Cooley v. Board of Wardens, 53 U.S. (12 How.) 299, 319 (1851); Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 195 (1824). 40412 U.S. at 553 (quoting THE FEDERALIST No. 32 (A. Hamilton) at 241 (B. Wright ed. 1961)). "412 U.S. at 554. 42After Goldstein was filed, legislation that extended federal copyright protection to sound recordings became effective. Pub. L. No. 92-140, § 1(a), (b), 85 Stat. 391 (1971) (subsequently codified at 17 U.S.C. §§ 1(f), 5(n) (Supp. I 1971)). "376 U.S. 225 (1964). "376 U.S. 234 (1964). 474 INDIANA LAW REVIEW [Vol. 11:467 copyright and patent statutes as requiring (rather than permitting) national uniformity. 45 However, in Goldstein, the Court used an in- terstate commerce rationale46 rather than a copyright basis with which to break precedent, thereby distinguishing Sears and Compco, in determining that states are entitled to give protection to copy- right claims not qualifying for federal protection. 47 The commerce clause cases allowed pre-emption only where the subject matter was necessarily national in import. 48 By using these cases as the basis for decision in Goldstein, the Court set up a pre-emption requirement analogous to that of specific intent. Although Goldstein only hinted at a return to the specific con- gressional intent standard, the subsequent decision in New York State Department of Social Services v. Dublino* 9 made that require- ment more explicit: If Congress is authorized to act in a field, it should manifest its intention clearly. It will not be presumed that a federal statute was intended to supersede the exercise of the power of the state unless there is a clear manifestation of intention to do so. The exercise of federal supremacy is not lightly to be presumed.50 In Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Ware, 51 the Court considered an issue not dealt with in Dublino — whether the state and federal laws were in conflict.52 The issue on appeal in fi Id. at 231 & n.7. "Just as a State cannot encroach upon the federal patent laws directly, it cannot, under some other law, such as that forbidding unfair competition, give protection of a kind that clashes with the objectives of the federal patent laws." Id. at 231. "Cooley v. Board of Wardens, 53 U.S. (12 How.) 299 (1851); Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1 (1824). "The Court relied on Cooley and Gibbons, both of which distinguished between matters local and national in character, and determined that exclusive federal power existed only if a matter was necessarily national in import. "412 U.S. at 554, 568. "413 U.S. 405 (1973). so/d at 413 (quoting Schwartz v. Texas, 344 U.S. 199, 202-03 (1952)). 51414 U.S. 117 (1973). "Because the Court remanded the case on the issue of whether there was a con- flict between the two laws, it was never decided if the New York Work Rules' ter- mination penalty conflicted with the requirements of the Social Security Act. Those Work Rules require employable welfare recipients to pick up their checks in person, to certify the unavailability of employment, and to report for public works employment, job interviews, and any employment obtained therefrom. Failure to meet these re- quirements results in termination of welfare payments. N.Y. Soc. Serv. Law § 131(4) (McKinney Supp. 1974). Under the Work Incentive Program (WIN) of the Social Security Act, 42 U.S.C. §§ 630-644 (1976), the certification requirements are less strict, the termination penalty is omitted, and there are extensive procedural safeguards. Cf. 42 U.S.C. § 602(a)(8), (19) 1978] COMMODITY FUTURES 475 Ware centered around a conflict between a California law requiring its courts to disregard certain arbitration clauses in controversies concerning due but unpaid wages, 68 and a New York Stock Exchange Rule54 requiring arbitration of controversies arising out of employ- ment termination. In upholding the state law, the Court noted that since the congressional purpose in allowing the exchanges to regulate themselves was "to insure fair dealing and to protect in- vestors,"65 the exchanges' rules should pre-empt conflicting state law "only to the extent necessary to protect the achievement of the aims of the Securities Exchange Act."66 Because the federal arbitration rule did nothing to further the objectives of the Securities Exchange Act57 and because the state law did not obstruct the objectives of the federal securities law, 58 the alleged conflict was held to be in- significant. Hence, the Court allowed the state law to stand, although it admittedly conflicted with federal law. These recent decisions demonstrate the Court's renewed in- terest in favoring state law, even where it possibly conflicts with federal law. However, the Court has also indicated that it will not presume in favor of state law in every case.59 Because of the Court's (1976) (federal criteria for state programs providing aid to needy families with children). However, the Court intimated as to its treatment of the conflict problem, stating: "Where coordinate state and federal efforts exist within a complementary ad- ministrative framework, and in the pursuit of common purposes, the case for federal pre-emption becomes a less persuasive one. 413 U.S. at 421. "The state court utilized this statute in declaring an employment contract provi- sion requiring arbitration of termination disputes to be ineffective. Ware v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 24 Cal. App. 3d 35, 45, 100 Cal. Rptr. 791, 798 (1972) (citing Cal. Lab. Code § 229 (West 1971)), aff'd, 414 U.S. 117 (1973). The con- troversy initially arose over the employer's assertion that the petitioner-employee had forfeited his rights under an employment contract to the benefits of a noncontributory profit-sharing plan when he voluntarily left his job in favor of other competitive employment. The state court relied on a restraint-of-trade statute in declaring the forfeiture provision of the employment contract void. 24 Cal. App. 3d at 43-44, 100 Cal. Rptr. at 796-97 (citing Cal. Bus. & Prof. Code § 16600 (West 1964)). mNew York Stock Exchange, Constitution and Rules, Rule 345 (a) (1) (CCH 1973). "414 U.S. at 130. "Id. at 127 (quoting Silver v. New York Stock Exchange, 373 U.S. 341, 361 (1963)). "Id. at 134-36 (citing the Securities Exchange Act of 1934, 15 U.S.C. §§ 78a-78kk (1976)). "414 U.S. at 139-40. 5 »In Burbank v. Lockheed Air Terminal, Inc., 411 U.S. 624 (1973), the Court found a federal aviation regulation to be pre-emptive of Burbank's curfew on late night flights. The Court reasoned that if local "airspace management" were preempted by the Federal Aviation Act of 1958, as amended by the Noise Control Act of 1972, then by definition local noise pollution regulation had also been preemp- 476 INDIANA LAW REVIEW [Vol. 11:467 past reluctance to confine its pre-emption decisions within strict guidelines, it would be unreasonable to formulate a general rule con- cerning future pre-emption cases, especially in light of the trend in- dicated by Goldstein, Dublino, and Ware. However, these recent cases do suggest that where Congress has failed to articulate a specific intent to pre-empt or where a conflict between state and federal law either has not yet arisen or is insignificant, state law will be allowed to stand. II. Application of the Doctrine to the Commodity Futures Trading Commission Act The best indicator that pre-emption will be favored is a clear ex- pression of congressional intent that the federal legislation is to supersede any state legislation in the field. An examination of the legislative history of the Commodity Futures Trading Commission Act, however, leaves unanswered many questions concerning con- gressional intent. In 1973, the House Committee on Agriculture began a series of hearings to consider possible improvements to the Commodity Ex- change Act. At that time, the chairman of the Chicago Board of Trade60 expressed a desire that the commodity regulatory agency have exclusive jurisdiction over futures trading.61 After hearing testimony both for and against exclusive jurisdiction,62 the House in- troduced H.R. 13113,63 a bill intended to clarify any jurisdictional ted. "Airspace management" was defined as the complete and ultimate regulation of flights and of the use of navigable airspace. Comment, City of Burbank v. Lockheed Air Terminal, Inc.: Federal Preemption of Air- craft Noise Regulation and the Future of Proprietary Restrictions, 4 N.Y.U. Rev. L. & Soc. Change 99, 104 (1974). Despite the lack of any express language for pre-emption in the 1972 Act, Justice Douglas found that "the pervasive nature of the scheme of federal regulation of aircraft noise . . . leads us to conclude that there is pre-emption." 411 U.S. at 633. 80The Chicago Board of Trade is one of 12 organized commodity exchanges. The others include Chicago Mercantile Exchange; Mid-America Commodity Exchange (Chicago); Kansas City Board of Trade; Minneapolis Grain Exchange; New York Cocoa Exchange; New York Coffee and Sugar Exchange; Commodity Exchange, Inc. (New York); New York Cotton Exchange and Associates; New York Mercantile Exchange; Pacific Commodity Exchange (San Francisco); West Coast Commodity Exchange (Los Angeles). MReview of Commodity Exchange Act and Discussion of Possible Changes: Hear- ings Before the House Comm. on Agriculture, 93d Cong., 1st Sess. 128 (1973). Futures markets offer trading in cocoa, coffee, copper, foreign currency, and other areas; however, Congress only included specific farm items in the definition of "commodity." 7 U.S.C. § 2 (1976). ^Commodity Futures Trading Commission Act of 1974: Hearings on H.R. 11955 Before the House Comm. on Agriculture, 93d Cong., 2d Sess. (1974). 63H.R. 13113, 93d Cong., 2d Sess., 120 Cong. Rec. 10752 (1974). 1978] COMMODITY FUTURES 477 questions that had previously arisen.64 However, the bill only ag- gravated the situation; it contained a "saving" clause protecting the jurisdiction of the SEC and other federal agencies: Provided, that the [CFTC] shall have exclusive jurisdiction of transactions dealing in, resulting in, or relating to contracts of sale of a commodity for future delivery, traded or ex- ecuted on a domestic board of trade or contract market or on any other board of trade, exchange, or market: And pro- vided further, That nothing herein contained shall supersede or limit the jurisdiction at any time conferred on the Secur- ities Exchange Commission [sic] or other regulatory author- ities under the laws of the United States or restrict the Securities and Exchange Commission and such other author- ities from carrying out their duties and responsibilities in ac- cordance with the laws of the United States.65 In a subsequent report, the House Committee sought to recon- cile this jurisdictional language by stating that the retention of jurisdiction by other agencies was limited to areas other than futures trading on a contract market.66 The issue was not reconciled, however, until the Senate Committee proposed that the language "except as hereinabove provided"67 be inserted between the clause giving the CFTC exclusive jurisdiction and the clause retaining some jurisdiction for other regulatory agencies.68 As indicated in the report prepared by the Senate Committee on Agriculture and Forestry, the Senate version of H.R. 13113 was intended to clarify the House's professed intent that the CFTC be vested with ex- clusive jurisdiction. 69 In addition, the Senate Committee added language that extended the CFTC's exclusive jurisdiction to "ac- MCommodity Futures Trading Commission Act: Hearings on H.R. 13113 Before the Senate Comm. on Agriculture & Forestry, 93d Cong., 2d Sess. (1974). When commodity futures expanded into a billion-dollar industry in the early 1970's, the Commodity Exchange Commission and the Secretary of Agriculture, federal watchdogs of the industry, found themselves unable to regulate a number of nonfood items that had been introduced for trading into the predominantly agricultural futures markets. Trading scandals arose, and efforts to centralize supervision of the various futures markets into one agency culminated in the CFTC Act. 65/d at 140-41. 66H.R. Rep. No. 93-975, 93d Cong., 2d Sess. 37 (1974). 97 7 U.S.C. § 2 (1976). 68 S. Rep. No. 93-1131, 93d Cong., 2d Sess. 54, reprinted in [1974] U.S. CODE Cong. & Ad. News 5843, 5870. See note 3 supra and accompanying text. "S. Rep. No. 93-1131, 93d Cong., 2d Sess. 6, reprinted in [1974] U.S. Code Cong. & Ad. News 5843, 5848. 478 INDIANA LAW REVIEW [Vol. 11:467 counts" and "agreements,"70 as well as "transactions" for future delivery on a contract market.71 Thus, the Senate Committee's intent was to explicitly define the scope of the CFTC's exclusive jurisdiction and to insure the CFTC's actual and exclusive jurisdiction in those areas. However, when the Committee took its "clarified" version of H.R. 13113 to the floor for debate, Committee Chairman Herman Talmadge delivered a prepared statement that only confused the matter: In establishing this Commission, it is the committee's in- tent to give it exclusive jurisdiction over those areas delin- eated in the act. This will assure that the affected entities — exchanges, traders, customers, et cetera — will not be subject to conflicting agency rulings. However, it is not the intent of the committee to exempt persons in the futures trading in- dustry from existing laws or regulations such as the anti- trust laws, nor for the Commodity Futures Trading Commis- sion to usurp powers of other regulatory bodies such as those of the Federal Reserve in the area of banking or the Securities and Exchange Commission in the field of securities. 72 On its face, this statement did not reflect the language of the Senate bill but instead conflicted with the contents of H.R. 13113. When the House and Senate versions went to conference com- mittee, the Senate version prevailed except in one respect — the con- ference report struck section 402(d) from the Senate version,73 which formerly provided: "Nothing in [section 4c] or section 4b shall be construed to impair any state law applicable to any transaction enumerated or described in such sections."74 With that exception, the Senate version of H.R. 13113 was signed into law on October 24, 1974. 75 In light of the confusing legislative history of the CFTC Act, it is necessary to determine whether the end result reflects Congress' voiced intent to pre-empt any state law dealing with subject matter coming under the CFTC's jurisdiction. Under section 2(a) of the Act, 78 agencies other than the CFTC are expressly excluded from regulating in the field of commodity futures; but because such an ef- nl± 77d at 54, reprinted in [1974] U.S. Code Cong. & Ad. News 5843, 5870. 72 120 Cong. Rec. 30459 (1974) (remarks of Sen. Talmadge). "H.R. Rep. NO. 93-1383, 93d Cong., 2d Sess., reprinted in [1974] U.S. Code Cong. & Ad. News 5894. U I