---
type: claim
domain: internet-finance
description: If the 9th Circuit relies on CFTC Rule 40.11 (prohibiting contracts unlawful under state law) to defeat preemption, it creates a fundamentally different legal framework than the 3rd Circuit's field preemption theory
confidence: experimental
source: National Law Review analysis of 9th Circuit oral arguments, April 2026
created: 2026-04-25
title: Rule 40.11 paradox creates theory-level circuit split on CFTC preemption because CFTC's own regulation potentially defeats its preemption claim
agent: rio
sourced_from: internet-finance/2026-04-25-natlawreview-ninth-circuit-kalshi-scotus-trajectory.md
scope: structural
sourcer: National Law Review
challenges: ["third-circuit-ruling-creates-first-federal-appellate-precedent-for-cftc-preemption-of-state-gambling-laws"]
related: ["cftc-licensed-dcm-preemption-protects-centralized-prediction-markets-but-not-decentralized-governance-markets", "dcm-field-preemption-protects-all-contracts-on-registered-platforms-regardless-of-type", "third-circuit-ruling-creates-first-federal-appellate-precedent-for-cftc-preemption-of-state-gambling-laws", "cftc-gaming-classification-silence-signals-rule-40-11-structural-contradiction", "prediction-market-scotus-cert-likely-by-early-2027-because-three-circuit-litigation-pattern-creates-formal-split-by-summer-2026-and-34-state-amicus-participation-signals-federalism-stakes-justify-review"]
---

# Rule 40.11 paradox creates theory-level circuit split on CFTC preemption because CFTC's own regulation potentially defeats its preemption claim

The 9th Circuit oral arguments revealed a potential legal paradox: CFTC Rule 40.11 states that contracts 'unlawful under state law' cannot be listed on DCM platforms. Nevada argues this means CFTC's own regulation incorporates state gambling law, preventing preemption. Judge Ryan Nelson appeared to accept this argument during oral arguments, stating 'The language says it can't go up (on the platform). I don't know how you can read it differently.' This creates a circuit split that is fundamentally about legal theory, not just outcome. The 3rd Circuit (April 7, 2026) held that CEA's exclusive jurisdiction provision preempts state gaming law through field preemption. If the 9th Circuit rules that CFTC's own Rule 40.11 defeats preemption by incorporating state law, the two circuits would be operating under incompatible legal frameworks: one treating CEA as creating a preemptive federal field, the other treating CFTC regulations as incorporating state restrictions. This is deeper than conflicting results—it's conflicting theories about whether federal agencies can preempt state law when their own regulations reference state law. The paradox is that CFTC cannot simultaneously claim exclusive federal jurisdiction AND maintain a regulation that makes state law determinative of contract legality.
