1. By the Commodity Exchange Act, the United States has not so
occupied and preempted the field of regulation of boards of trade
designated "contract markets" as to deprive the states of authority
to regulate trading in futures, except to the extent that the state
regulations may conflict with the federal regulations. Pp.
331 U.S. 250-255.
2. Until a state has adopted applicable rules on the subject, it
cannot be known whether the state regulations will conflict with
the federal regulations, and any claim of supersedure is premature.
Pp.
331 U. S.
255-256
156 F.2d 33, reversed.
A district court dismissed complaints seeking to enjoin
proceedings before the Illinois Commerce Commission in which the
Chicago Board of Trade had been joined as a defendant. The Circuit
Court of Appeals reversed. 156 F.2d 33. This Court granted
certiorari. 329 U.S. 701.
Reversed, p.
331 U. S. 256.
Page 331 U. S. 248
MR. JUSTICE DOUGLAS delivered the opinion of the Court.
These are companion cases to
Rice v. Santa Fe Elevator
Corp. and
Illinois Commerce Commission v. Santa Fe
Elevator Corp., ante, p.
331 U. S. 218.
Respondent in these cases, the Chicago Board of Trade, was joined
as a defendant in the proceeding brought by Rice before the
Illinois Commerce Commission. As we have noted in our opinion in
the companion cases, the Rice complaint charged the defendant
warehousemen with maintaining excessive, unreasonable and
discriminatory rates and practices, with operating inadequate and
unsafe facilities and services, and with failure to comply with
other requirements of Illinois law. The Board of Trade, organized
under a special Act of the Illinois legislature, Private Laws 1859,
p. 13, operates a commercial grain exchange and has adopted rules
and regulations governing transactions on the exchange. The
complaint of Rice charges (1) that the rules and regulations of the
Board are unreasonable and unsatisfactory in that, among other
things,
Page 331 U. S. 249
they favor warehousemen and sellers of grain and discriminate
against grain buyers, and (2) that the Board has from time to time
adopted rules and regulations, relating to the warehousing of grain
in public warehouses and the custody of grain in private warehouses
without securing the prior approval of the Illinois Commission.
Under Illinois law, it is alleged, such rules may not become
operative without approval by the Commission, and the Commission,
in turn, has authority to adopt and promulgate rules of its own.
Ill.Rev.Stat. 1945, ch. 114, § 194b. [
Footnote 1] Relief asked on this phase of the proceeding
was a declaration that the Board's rules, which did not have the
prior approval of the Commission, were void, and an order that the
Board adopt and submit rules which were fair, equitable, adequate,
and specific.
The Board moved to dismiss the proceeding before the Commission
on the ground that the Commodity Exchange Act, 49 Stat. 1491, as
amended, 7 U.S.C. § 1
et seq., and the regulations
thereunder superseded the provisions of Illinois law which Rice
sought to invoke. That motion was denied. Thereupon, these suits
were instituted in the District Court to enjoin the proceedings
before the Illinois Commerce Commission. The District Court
dismissed the complaints. The Circuit Court of Appeals reversed.
156 F.2d 33. The cases are here on certiorari.
The Chicago Board of Trade is "the greatest grain market in the
world."
Board of Trade of City of
Chicago v. Olsen, 262 U.S.
Page 331 U. S. 250
1,
262 U. S. 33. Its
activities have been regulated by Congress by the Future Trading
Act, 42 Stat. 187, by the Grain Futures Act, 42 Stat. 998, and by
the Commodity Exchange Act.
See H.R.Rep. No. 421, 74th
Cong., 1st Sess. The Board of Trade claims a status under the
Commodity Exchange Act which, it is contended, precludes the
Illinois Commission from entertaining the Rice complaint.
The Commodity Exchange Act provides comprehensive regulation of
trading in futures on commodity exchanges, which are designated as
"contract markets" by the Secretary of Agriculture. The Secretary
is authorized to designate any board of trade as a contract market
on its compliance with prescribed terms and conditions. § 5. The
Chicago Board of Trade has been so designated. The Act contemplates
that each contract market will adopt rules governing transactions
in futures contracts. Approval of a board of trade as a contract
market may be made only when
"the governing board thereof provides for the prevention of
manipulation of prices and the cornering of any commodity by the
dealers or operators upon such board."
§ 5(d). The Act contains provisions which prohibit certain types
of trading practices (
see, for example, §§ 4b, 4c, 4h) and
other provisions (as, for example, those dealing with excessive
speculation,
see § 4a) which limit or control buying and
selling on contract markets. But we are not particularly concerned
with those phases of the federal regulatory scheme. So far as the
problem of supersedure is concerned, this Act is unlike the one
considered in the companion cases, as we shall see. Moreover, the
subject matter of the complaint filed by Rice with the Illinois
Commission against the Board of Trade relates only to the
warehousing of grain. On that matter, the Act has only two specific
provisions.
It provides in the first place that receipts issued under the
United States Warehouse Act, 39 Stat. 486, as amended, 7 U.S.C. §
241
et seq, shall be accepted without
Page 331 U. S. 251
discrimination in satisfaction of futures contracts made on or
subject to the rules of the contract market, even though the
warehouseman is not also licensed under state law or enjoys
different privileges than those accorded by state law, provided,
inter alia, that
"the warehouse in which the commodity is stored meets such
reasonable requirements as may be imposed by such contract market
on other warehouses as to location, accessibility, and suitability
for warehousing and delivery purposes."
§ 5a(7). Moreover, each contract market has some control over
warehouses in which or out of which any commodity is deliverable on
any contract for future delivery made on or subject to the rules of
the contract market. Thus, the contract market must require the
warehouse operators "to make such reports, keep such records, and
permit such warehouse visitation" as the Secretary may prescribe. §
5a(3). All rules and regulations of a contract market, and all
changes and proposed changes, must be filed with the Secretary. §
5a(1).
Enough of the Act has been summarized to show that it imposes on
contract markets, under the supervision of the Secretary, (1)
duties of preventing or controlling certain trading practices and
of supervising transactions in futures contracts, and (2) some
responsibility for standardizing deliverable warehouse receipts and
assuring their integrity. The failure or refusal of a board of
trade to comply with the provisions of the Act or any of the rules
and regulations of the Secretary is cause for suspension or
revocation of the authority of the board to act as a contract
market. § 5b.
And see § 6a. Criminal penalties are
provided for certain violations of the Act or of rules or
regulations of the Secretary by a board of trade or any of its
directors, officers, agents or employees. §§ 6b, 9. The Secretary
has the power to "make such investigations as he may deem necessary
to ascertain the facts regarding the operations of boards of trade.
. . ." § 8.
Page 331 U. S. 252
And the Secretary is given broad rulemaking powers. § 8a(5).
The Secretary has promulgated numerous rules and regulations
covering a variety of subjects pertaining to contract markets and
their activities. [
Footnote 2]
The following are relevant here, since they relate to the
warehousing of grain: (1) a requirement that each contract market
file information concerning warehouses in which or out of which
commodities are deliverable in satisfaction of futures contracts
made on the contract market, § 1.43, and (2) a provision that each
contract market shall require operators of warehouses whose
receipts are deliverable in satisfaction of futures contracts made
on or subject to the rules of the contract market (a) to keep
specified records, (b) to furnish information concerning stocks of
commodities in warehouses, (c) to permit visitation of the premises
and inspection of the books and records by duly authorized
representatives of the Federal Government. § 1.44.
In pursuance of the latter regulation of the Secretary, the
Board of Trade enacted the rules and regulations which Rice
challenged in the proceedings before the Illinois Commission. One
rule provides that deliveries shall be made by delivery of
warehouse receipts issued by warehouses which have been declared
"regular" by the Board.Rule 281. The Board's regulations relating
to warehousing of grain set forth the procedure and standards by
which warehouses may be made "regular." [
Footnote 3]
Page 331 U. S. 253
It is apparent that the federal scheme of regulation of futures
trading extends to the whole futures contract -- to its
satisfaction, as well as to its execution. It is also apparent that
the Act provides some control over (1) warehouse receipts which are
acceptable in satisfaction of sales and purchases on the contract
market, and (2) the qualifications of the warehouses whose receipts
will be accepted for such deliveries. But there is not contained in
the Commodity Exchange Act, as there is in the United States
Warehouse Act,
see Rice v. Santa Fe Elevator Corp., supra,
a declaration by Congress that the system which it has adopted for
the regulation of trading on contract markets is exclusive of state
regulation. Here, Congress has gone no further than to write into
the Act prohibitions and controls, and to give the force of law
both to them and to rules and regulations of the Secretary made
within the scope of his statutory authority. With exceptions which
we will note, state regulations which conflict with the
requirements of the Act or with the rules and regulations of the
Secretary would be superseded under the familiar rule.
Congress treated the rules and regulations of the Board of Trade
differently from those of the Secretary. It did not undertake to
put behind them civil or criminal sanctions. [
Footnote 4] It merely furnished standards (or
authorized the
Page 331 U. S. 254
Secretary to do so) to which the rules and regulations of the
Board were to conform. And, while there is provision in some
instances for disapproval of the Board's rules by the Secretary of
Agriculture (
see § 4c), there is no provision for his
approval or disapproval of the rules challenged in the Illinois
proceeding. Insofar as those rules are concerned, all that the Act
and the regulations of the Secretary do is to define the area in
which the Board may provide standards for warehouses whose receipts
are acceptable in satisfaction of futures contracts. By the terms
of § 5a(7), the requirements fixed by the Board must be
"reasonable," and they must relate to "location, accessibility, and
suitability for warehousing and delivery purposes." If the Board
transcends those bounds, it violates the Act.
See § 6b.
But within that area it has considerable discretion. [
Footnote 5]
Hence, it seems to us that no action of the Illinois Commission
within the zone where the Board has freedom to act would contravene
the federal scheme of regulation. [
Footnote 6] It would be quite a different matter if the
Illinois Commission adopted rules for the Board which either
violated
Page 331 U. S. 255
the standards of the Act or collided with rules of the
Secretary. But such collision is not necessary, and we cannot
assume that the Illinois Commission will take any action which in
any way impairs the federal regulatory scheme.
There is other intrinsic evidence that Congress did not preclude
state regulation which supplements or bolsters the federal scheme.
Sections 4b and 4c of the Act make unlawful a variety of fraudulent
and deceptive practices on contract markets. And § 4c provides
that
"nothing in this section or section 4b of the title shall be
construed to impair any State law applicable to any transaction
enumerated or described in such sections."
These fraudulent practices, or many of them, have long been the
occasion for the exercise by the States of their historic police
powers. Federal regulation in those fields would therefore almost
certainly conflict with state laws. Thus, the provision in § 4c
serves the function of preventing supersedure and preserving state
control in two areas where state and federal law overlap. Where
Congress used such care to preserve specific state authority, even
when it duplicated federal regulation, it is a fair inference not
only that supersedure was to take its natural course where rights
not saved to the States were involved,
First Iowa
Hydro-Electric Coop. v. Federal Power Commission, 328 U.
S. 152,
328 U. S. 175,
but also that nonconflicting state authority was left undisturbed.
Moreover, the provision in § 12 of the Act that the Secretary "may
cooperate with any department or agency of the Government, any
State . . . or political subdivision thereof" supports the
inference that Congress did not design a regulatory system which
excluded state regulation not in conflict with the federal
requirements.
See Townsend v. Yeomans, 301 U.
S. 441,
301 U. S. 454;
Union Brokerage Co. v. Jensen, 322 U.
S. 202,
322 U. S.
209.
Respondents' claim of supersedure is therefore premature. Until
it is known what rules the Illinois Commission will approve or
adopt, it cannot be known whether
Page 331 U. S. 256
there will be any conflict with the federal law. Any claim of
supersedure can be preserved in the state proceedings. And the
question of supersedure can be determined in light of the impact of
a specific order of the state agency on the Federal Act or the
regulations of the Secretary thereunder. Only if that procedure is
followed can there be preserved intact the whole state domain
which, in actuality, functions harmoniously with the federal
system. For even action which seems pregnant with possibilities of
conflict may, as consummated, be wholly barren of it.
Reversed.
* Together with No. 473,
Illinois Commerce Commission et al.
v. Board of Trade of the City of Chicago, also on certiorari
to the same Court.
[
Footnote 1]
That section provides:
"No rule or regulation of any board of trade or grain exchange
which relates to the warehousing of grain in any public grain
warehouse, or which relates to the custody of grain in any private
warehouse, or the use or negotiation of custodian's receipts for
such grain, shall be or become operative until such rule or
regulation is approved by the Illinois Commerce Commission, and the
Illinois Commerce Commission may adopt and promulgate reasonable
rules and regulations consistent with the provisions of this Act
for the purpose of making this Act effective."
[
Footnote 2]
The rules and regulations are to be found in 17 C.F.R., Part
I.
[
Footnote 3]
These regulations provide,
inter alia, that the
warehouses must be "conveniently approachable by vessels of
ordinary draft," have "customary shipping facilities," and charge
rates not exceeding a specified maximum (Reg. 1620); must file a
bond satisfactory to the Board (Reg. 1621); must have proprietors
or managers in "unquestioned good financial standing and credit"
(Reg. 1624); must be "connected by railroad tracks with one or more
of the eastern railway lines" (Reg. 1625), and must be "provided
with modern improvements and appliances for the convenient and
expeditious receiving, handling, and shipping of grain in bulk."
(Reg. 1626).
Any "regular" warehouse may be declared "irregular" by the Board
at any time for violation of the laws of Illinois or the rules and
regulations of the board (Reg. 1623), or because of any important
change in the conditions of any warehouse or disregard or evasion
of the requirements governing regular warehouses (Reg. 1629).
[
Footnote 4]
We therefore have no attempt here to endow private groups with
lawmaking functions.
Cf. Schechter Poultry Corp. v. United
States, 295 U. S. 495;
United States v. Socony-Vacuum Oil Co., 310 U.
S. 150,
310 U. S.
225-227;
Parker v. Brown, 317 U.
S. 341,
317 U. S.
350-352.
[
Footnote 5]
In the present proceeding, the question of the validity of the
existing rules and regulations of the Board of Trade under the
Commodity Exchange Act is not in issue, and we intimate no opinion
upon it.
[
Footnote 6]
It is suggested that the regulations of the Board of Trade or
those which the Illinois Commerce Commission may impose on it are
automatically invalid insofar as they relate to warehouses. For in
Rice v. Santa Fe Elevator Corp., supra, we have held that
the United States Warehouse Act excludes all state regulation, no
matter how complementary, of those subjects touched by the federal
regulatory scheme. But the situation here is quite different. In
the first place, we are dealing with a measure of regulation over
warehouse receipts, not federal warehousemen, and the regulations
which the Board of Trade is authorized to formulate do not carry
civil or criminal sanctions. In the second place, Congress, by
granting the Board of Trade freedom to regulate within this narrow
field, has, by that very act, negatived any inference that the
Federal Government has preempted it by requirements of its own.