## Facts

- Congress created the Commodity Futures Trading Commission (CFTC) through the Commodity Futures Trading Commission Act of 1974, with an effective date of April 21, 1975, transferring major regulatory authority over commodity futures to the new agency.
- The CFTC’s commissioners were appointed and confirmed shortly before the effective date, leaving little time to process exchange applications before the new regime began.
- Congress authorized the CFTC to grant provisional “contract market” designations for the first 90 days after April 21, 1975.
- The CFTC issued a regulation governing provisional designation, requiring applicants to show they were actually operating as a “board of trade” as of April 15, 1975.
- American Board of Trade, Inc. (ABT) applied for provisional designation on April 18, 1975.
- On April 19, 1975, the CFTC denied ABT’s provisional application because it could not determine that ABT was a board of trade; the CFTC cited concerns including ABT’s lack of an exchange floor, unusual business practices, and apparent near-total control by Arthur Economou and his wife.
- ABT submitted additional information on May 7, 1975, but the CFTC found it still did not resolve the agency’s concerns.
- The CFTC requested an on-site inspection around May 20, 1975, to evaluate ABT’s operations; ABT resisted that request.
- On May 22, 1975, the CFTC again denied ABT’s request for provisional designation, adding concern that a board of trade should have transaction prices formed through competitive trading; the CFTC’s chairman stated an on-site inspection was needed to determine whether ABT was a board of trade.
- The CFTC’s provisional-designation authority expired on July 18, 1975, but ABT’s request continued as an application for permanent designation while the agency processed multiple exchange applications and many registrations for market participants.
- ABT filed suit in the Southern District of New York seeking to compel designation as a contract market and seeking injunctive and monetary relief; ABT moved for a preliminary injunction.
- At the preliminary-injunction hearing, ABT called CFTC officials as witnesses but did not call Economou; ABT later submitted an Economou affidavit that the court declined to consider because defendants had no opportunity for cross-examination.

## Issues

1. Whether ABT met the federal standard for a preliminary injunction requiring the court to order (or effectively force) the CFTC to designate ABT as a contract market and to restrain the agency’s actions toward ABT.
2. Whether ABT showed a likelihood of success that the CFTC acted unlawfully or arbitrarily in applying its provisional-designation regulation and denying ABT’s application based on doubts about ABT’s status as a board of trade and the competitiveness of its pricing.
3. Whether the court should intervene at the preliminary stage given the statutory scheme assigning contract-market designation decisions to the CFTC, with administrative procedures and later judicial review.

## Decision

- The court denied ABT’s motion for a preliminary injunction.
- The court held ABT failed to carry its burden of showing probable success on the merits and irreparable harm warranting extraordinary relief.
- The court declined to consider Economou’s post-hearing affidavit because ABT had the opportunity to present him at the hearing and defendants were entitled to cross-examine him.
- The court treated ABT’s request to compel contract-market designation as an attempt to bypass the agency process assigned by Congress, and it refused to order designation by preliminary injunction.
- The court found the record did not justify judicial interference with the CFTC’s handling of ABT’s application under the newly effective statutory and regulatory framework.

## Legal Principles

- A preliminary injunction is an extraordinary remedy; the movant must show likely success and irreparable injury, or serious questions going to the merits plus a balance of hardships strongly favoring the movant.
- The moving party bears the burden of producing competent evidence; when a key witness is available for testimony, a court may reject a later affidavit offered without an opportunity for cross-examination.
- Courts are reluctant to interfere with an agency’s licensing and supervisory functions, especially where Congress has assigned the initial decision to the agency and provided administrative procedures and a route for judicial review.
- A district court generally will not compel an agency to grant a designation or license by interim order absent a clear statutory entitlement and a strong factual showing.

## Conclusion

The court denied preliminary relief because ABT did not make the evidentiary showing required for an injunction and because forcing contract-market designation would improperly displace the CFTC’s primary role in evaluating whether ABT qualified as a board of trade under the governing statute and regulations, with review to occur through the channels Congress provided rather than through immediate district-court compulsion.


American Board of Trade, Inc. v. Bagley, 402 F. Supp. 974 (1975)