In our April Update, we reported that the Investment Company Institute and the U.S. Chamber of Commerce (collectively, the plaintiffs) appealed the district court ruling dismissing their lawsuit regarding the Commodity Futures Trading Commission (CFTC) amendments to Rule 4.5 under the Commodity Exchange Act that narrow the available exclusions from the definition of a commodity pool operator (CPO).

On December 13, 2012, the D.C. District Court dismissed the plaintiffs' suit and held that the CFTC adequately conducted a cost-benefit analysis in amending Rule 4.5 and that the CFTC's reasoning was not arbitrary and capricious. The court further explained that it was not the court's role to second-guess the CFTC's analysis. In refuting the plaintiffs' argument that the rule subjects certain entities to dual regulation by the SEC and the CFTC, the court explained that the SEC itself actually admitted that it has not efficiently regulated entities that invest in derivatives.

On June 25, 2013, the U.S. Court of Appeals for the District of Columbia Circuit affirmed the district court's ruling. The court noted that the CFTC outlined in its final rule why it decided to make the amendments, including increased use of derivatives by mutual funds and a perceived lack of market transparency in this area.

^{Source: Beagan Wilcox Vloz, Appeals Court Deals Defeat to ICI in CFTC Challenge, Ignites (June 25, 2013).}