The ongoing dispute over which agency has jurisdiction to prosecute a trader at the center of the Amaranth Advisors hedge-fund collapse is now before the U.S. Court of Appeals for the D.C. Circuit.

Former Amaranth trader Brian Hunter has appealed a final FERC decision levying a $30 million fine partially on the contention that FERC lacks jurisdiction to enforce compliance with rules governing the acts at issue. The CFTC has intervened in the appeal on Hunter’s behalf.

The underlying acts are Hunter’s alleged attempts in 2006 to manipulate the natural gas futures market on the New York Mercantile Exchange. Both agencies have asserted that Hunter dumped large quantities of these contracts onto the market during the final 30 minutes of trading, in an effort to suppress the closing price and thereby benefit Amaranth’s much larger opposing swaps positions.

Both FERC and the CFTC initiated enforcement actions against Hunter in 2007, with the CFTC filing an action under the Commodities Exchange Act in the U.S. District Court for the Southern District of New York, and FERC filing an administrative action the following day under the Energy Policy Act of 2005. Hunter filed his own action for declaratory relief from FERC’s administrative action, based on lack of jurisdiction, in the U.S. District Court for the District of Columbia. That case was dismissed.

A FERC administrative law judge determined in 2010 that Hunter had violated FERC’s anti-manipulation rules. FERC affirmed this decision in April 2012. Hunter is now appealing the April 2012 decision.

The CFTC argues in its intervenor’s brief that it has exclusive jurisdiction over on-exchange futures trading, which includes Hunter’s trading activity in natural gas futures on the NYMEX, and that FERC’s jurisdiction is confined to the physical natural gas markets. FERC has contended that the new anti-manipulation provision of the Energy Policy Act confers upon it jurisdiction over activities that otherwise would be outside its jurisdiction so long as those activities affect transactions within its jurisdiction; Hunter’s manipulation of the natural-gas futures market affected the physical natural gas markets and therefore falls within FERC’s purview.

FERC has not briefed its position in this appeal yet. A final decision may come later this year. Absent a ruling that helps delineate mutually exclusive jurisdictions of the respective agencies, market participants may be subject to the perils of overlapping regulatory jurisdictions, such as inconsistent rulemaking and enforcement.

Hunter v. Federal Energy Regulatory Commission, United States Court of Appeals for the District of Columbia Circuit, Case No. 11-1477.