Ninth Circuit Narrows CFTC Authority, Blocks Oversight of Leveraged Precious-Metals Trades in Monex Case

CFTC LOSES NINTH CIRCUIT ROUND IN MONEX FRAUD FIGHT

The Ninth Circuit just handed the CFTC a sharp defeat in its long-running campaign against Monex, ruling that the agency cannot use its new anti-fraud power to police leveraged precious-metals sales that never touch futures or swaps. The decision blocks a 2017 enforcement action, protects a California bullion dealer from CFTC oversight, and sends a clear signal that Congress did not hand the agency unlimited authority over every leveraged transaction.

The case began in 2017 when the CFTC accused Monex of running a $290 million fraud through its “Atlas” program, which let retail customers buy gold and silver on 150-to-1 margin. The agency said Monex duped investors into holding losing positions while it skimmed commissions and interest. Monex fired back that the trades were simple financed sales of physical metal, not “retail commodity transactions” under the Dodd-Frank amendment that expanded the CFTC’s power. The district court agreed with Monex and tossed the suit; the CFTC appealed.

Writing for a unanimous three-judge panel, Judge John Owens held that the statute’s carve-out for actual delivery of a “commodity” applies when metal changes hands within 28 days—even if the buyer immediately pledges it back as collateral. Because Monex’s customers received warehouse receipts and could take physical possession, the court ruled the transactions fell outside the CFTC’s expanded reach. The decision leaves the agency with only its traditional futures-and-swaps jurisdiction, not a roving license to police every financed commodity sale.

In plain terms, the Ninth Circuit told the CFTC it cannot stretch the words “actual delivery” to cover deals where metal merely moves from one vault to another while ownership stays with the broker. That reading reins in the agency’s post-Dodd-Frank ambitions and keeps retail bullion dealers subject mainly to state fraud laws and the FTC rather than federal commodities rules.

The ruling narrows the CFTC’s footprint in crypto-adjacent markets where tokens or coins are sold on margin. Exchanges and DeFi protocols that structure metal-or crypto-backed loans to include on-chain “delivery” within 28 days now have a Ninth Circuit roadmap for avoiding CFTC registration. Stablecoin issuers who pledge reserves as collateral may also cite the case to argue their arrangements are simple secured lending, not derivatives. Traders gain breathing room, but they lose the backstop of CFTC customer protections if those platforms later implode.

Monex walks away intact; the CFTC walks away with homework on how to draft future statutes if it wants broader reach.