                     FOR PUBLICATION

   UNITED STATES COURT OF APPEALS
        FOR THE NINTH CIRCUIT


 U.S. COMMODITY FUTURES TRADING                     No. 18-55815
 COMMISSION,
                Plaintiff-Appellant,                  D.C. No.
                                                   8:17-cv-01868-
                      v.                             JVS-DFM

 MONEX CREDIT COMPANY; MONEX
 DEPOSIT COMPANY; NEWPORT                             OPINION
 SERVICES CORPORATION; MICHAEL
 CARABINI; LOUIS CARABINI,
              Defendants-Appellees.

         Appeal from the United States District Court
            for the Central District of California
          James V. Selna, District Judge, Presiding

            Argued and Submitted March 13, 2019
                 San Francisco, California

                        Filed July 25, 2019

    Before: Eugene E. Siler, * A. Wallace Tashima, and
         M. Margaret McKeown, Circuit Judges.

                      Opinion by Judge Siler

    *
      The Honorable Eugene E. Siler, United States Circuit Judge for the
U.S. Court of Appeals for the Sixth Circuit, sitting by designation.
2   U.S. COMMODITY FUTURES TRADING COMM’N V. MONEX

                          SUMMARY **


         Commodity Future Trading Commission

    The panel reversed the district court’s dismissal of the
Commodity Future Trading Commission’s enforcement
action against Monex Credit Company for alleged fraud in
precious metals sales.

    The CTFC regulates commodity futures markets under
the Commodity Exchange Act (“CEA”). The Dodd-Frank
Wall Street Reform and Consumer Protection Act of 2010
amended the CEA and extended the CEA to commodity
transactions offered on a leveraged or margined basis as if
they were futures trades. Congress carved out an exception:
the CEA does not apply to leveraged retail commodity sales
that result in “actual delivery” within 28 days.

    Monex sells precious metals to investors. Through
Monex’s Atlas Program, investors can purchase
commodities on margin, which is also known as leverage.
The CFTC alleged that Atlas was an illegal and unregistered
leveraged retail commodity transaction market.

    The panel held that the actual delivery exception was an
affirmative defense on which the commodities trader bore
the burden of proof. The panel held that actual delivery
required at least some meaningful degree of possession or
control by the customer. The panel further held that it was
possible for this exception to be satisfied when the
commodity sat in a third-party depository, but not when, as

    **
       This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
   U.S. COMMODITY FUTURES TRADING COMM’N V. MONEX             3

here, metals were in the broker’s chosen depository, never
exchanged hands, and subject to the broker’s exclusive
control, and customers had no substantial, non-contingent
interests. The panel concluded that because this affirmative
defense did not, on the face of the complaint, bar the CFTC
from relief on Counts I, II, and IV, the district court erred in
dismissing those claims.

    In Count III, the CFTC alleged that Monex violated CEA
§ 6(c)(1), 7 U.S.C. § 9(1), and 17 C.F.R. § 180.1, by
fraudulently deceiving its customers, but there was no
allegation that Monex manipulated the market. The panel
concluded that § 6(c)(1)’s language was unambiguous, and
held that the CFTC could sue for fraudulently deceptive
activity, regardless of whether it was also manipulative. The
panel also held that when someone violated § 6(c)(1), the
CFTC could bring an enforcement action.

    The panel held that at this point, the CFTC’s well-
pleaded complaint must be accepted as true. Because the
CFTC’s claims were plausible, the panel remanded for
further proceedings.


                         COUNSEL

Robert A. Schwartz (argued), Deputy General Counsel;
Anne W. Stukes, Assistant General Counsel; Daniel J.
Davis, General Counsel; U.S. Commodity Futures Trading
Commission, Washington, D.C.; for Plaintiff-Appellant.

Neil A. Goteiner (argued), Elizabeth A. Dorsi, and C.
Brandon Wisoff, Farella Braun & Martel LLP, San
Francisco, California, for Defendants-Appellees.
4   U.S. COMMODITY FUTURES TRADING COMM’N V. MONEX

                         OPINION

SILER, Circuit Judge:

    A two-letter conjunction and a two-word phrase decide
this case. At stake are hundreds of millions of dollars.
Congress, acting shortly after the economy began to stabilize
from the financial crisis that began a decade earlier, passed
the Dodd-Frank Wall Street Reform and Consumer
Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010),
which amended the Commodity Exchange Act (CEA) to
expand the Commodity Future Trading Commission’s
(CFTC) enforcement authority. This case is about the extent
of those powers.

    Monex Credit Company, one of the defendants and
appellees, argues that the CFTC went too far when it filed
this $290 million lawsuit for alleged fraud in precious metals
sales. According to Monex, Dodd-Frank extended the
CFTC’s power only to fraud-based manipulation claims, so
stand-alone fraud claims—without allegations of
manipulation—fail as a matter of law.

    Not only that, Monex argues, but Dodd-Frank also
immunizes Monex from the CFTC’s claims that it ran an
unregistered, off-exchange trading platform. The CEA’s
registration provisions do not apply to retail commodities
dealers who “actual[ly] deliver[]” the commodities to
customers within twenty-eight days.         See 7 U.S.C.
§ 2(c)(2)(D)(ii)(III)(aa). Monex insists that it falls within
this exception.

   On both fronts, the district court agreed with Monex and
dismissed the CFTC’s complaint for failure to state a claim
under Civil Rule 12(b)(6). We REVERSE and REMAND.
   U.S. COMMODITY FUTURES TRADING COMM’N V. MONEX          5

                       Background

    The facts come from the CFTC’s complaint, which, at
this stage, we must accept as true. See Syed v. M-I, LLC,
853 F.3d 492, 499 (9th Cir. 2017).

               Monex and the Atlas Program

    California-based Monex has been a major player in the
precious metal markets for decades. It sells gold, silver,
platinum, and palladium to investors who have a variety of
buying options, but here we focus on what Monex calls its
“Atlas Program.” Through Atlas, investors can purchase
commodities on “margin.” Also known as “leverage,” the
concept is simple: A customer buys precious metals by
paying only a portion of the full price. The remaining
amount is financed through Monex.

    Once a customer opens an account, she may take open
positions in precious metals. But the trading occurs “off
exchange”—that is, it does not happen on a regulated
exchange or board of trade. Instead, Monex controls the
platform, acts as the counterparty to every transaction, and
sets the price for every trade.

    Since mid-2011, Monex has made more than 140,000
trades for more than 12,000 Atlas accounts, each of which
requires margin of 22–25% of the account’s total value. A
customer who deposits $25,000 in Atlas as margin can open
positions valued at $100,000; she owes the additional
$75,000 to Monex. Over time, the account’s value
changes—it goes up and down—as markets do. The
difference between the account’s total value and the amount
the customer still owes to Monex is the account’s “equity.”
And if that difference falls below a certain threshold, Monex
can issue a “margin call”—it can require customers to
6   U.S. COMMODITY FUTURES TRADING COMM’N V. MONEX

immediately deposit more money into the accounts to
increase the equity. Monex can do so at any time, and it can
change margin requirements whenever it wants.

    Monex also retains sole discretion to liquidate trading
positions without notice to the customer if equity drops too
low, and it controls the price for every trade. Price spreads—
the difference between the bid price and ask price—are 3%
and generate much of the program’s revenue. Commissions
and fees make up the rest, and that money comes directly out
of customer accounts’ equity. Over the last eight years,
Monex has made margin calls in more than 3,000 Atlas
accounts and has force-liquidated at least 1,850.

   Atlas investors can make either “short” or “long” trades.
Short trades bet on metal prices going down, and long up.
Monex allows investors to place “stop” or “limit” orders to
manage their trading positions. About a quarter of trading
positions in leveraged Atlas accounts open and close within
two weeks.

    Customers must sign the Atlas account agreement,
which gives Monex control over the metals. Monex does not
hand over any metals, and customers never possess or
control any physical commodity. Instead, Monex stores the
metals in depositories with which Monex has contractual
relationships. Monex retains exclusive authority to direct
the depository on how to handle the metals; investors and the
depositories have no contractual relationship with each
other. Customers can get their hands on the metals only by
making full payment, requesting specific delivery of metals,
and having the metals shipped to themselves, a pick-up
location, or an agent.

   This structure applies to both long and short positions.
For a long position, Monex retains the right to close out the
   U.S. COMMODITY FUTURES TRADING COMM’N V. MONEX           7

position at any time in its sole discretion and at a price
Monex chooses. Metal remains in the depository, but
Monex claims to transfer ownership of the metals to the
customer. The same is true for short positions, except that
instead of transferring ownership, Monex loans the customer
metals that the customer immediately sells back to Monex.
According to the CFTC, Monex simply makes a “book
entry” when customers make trades—nothing more.

      The Commodity Exchange Act and Dodd-Frank

    The CFTC regulates commodity futures markets under
the CEA. See 7 U.S.C. §§ 1 et seq. Part of the CEA’s
purpose is “to protect all market participants from fraudulent
or other abusive sales practices and misuses of customer
assets.” Id. § 5(b). The CEA requires that futures be traded
on regulated exchanges. Id. § 6(a)(1). Brokers must register
with the CFTC. Id. § 6d(a)(1). The CEA further protects
against conflicts of interest and market abuse. Id. §§ 6d(c),
7(d). And the statute prohibits fraud. Id. § 6b(a)(2).

    Originally, the CEA did not apply to retail commodity
transactions because they were not futures contracts. See
CFTC v. Zelener, 373 F.3d 861 (7th Cir. 2004). As Zelener
recognized, the CEA applied only to futures contracts, even
though other types of sales—such as leveraged retail
commodity sales—can have similar economic effects. Id. at
866–67.

    This changed in 2010 when Congress, acting in the wake
of financial turmoil, passed Dodd-Frank—part of which
amended the CEA. See Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010, Pub. L. No. 111-203, 124
Stat. 1376 (2010).      Congress extended the CEA to
commodity transactions offered “on a leveraged or margined
basis, or financed by the offeror” “as if” they were futures
8   U.S. COMMODITY FUTURES TRADING COMM’N V. MONEX

trades. See 7 U.S.C. § 2(c)(2)(D)(iii). But Congress carved
out an exception: The CEA would not apply to leveraged
retail commodity sales that resulted “in actual delivery
within 28 days.” Id. § 2(c)(2)(D)(ii)(III)(aa).

    Congress also amended the CEA by prohibiting the use
of “any manipulative or deceptive device or contrivance” in
market transactions. CEA § 6(c)(1). This language mirrored
§ 10(b) of the Securities and Exchange Act, and, as did
§ 10(b), authorized the governing agency to promulgate
rules implementing the statute and bring civil enforcement
actions. See 7 U.S.C. §§ 9(1), 13a-1(a); 15 U.S.C. § 78j(b).

        Monex’s Alleged Scheme and This Lawsuit

    The CFTC contends that Atlas is a scheme that has
violated the CEA since at least July 2011. Monex tells its
customers that leveraged precious metals trading is “a safe,
secure and profitable way for retail customers to invest”
when, in fact, the program requires that many customers lose
money. What’s more, the CFTC alleges, Atlas is designed
so that when customers lose, Monex gains: Because Monex
is the counterparty for each Atlas transaction, Monex
benefits from large price spreads at the customer’s expense.
Sales representatives, too, have an incentive to push the
program: Monex pays salespeople with “commissions and
bonuses tied directly to the number of Atlas accounts they
open” and the number of transactions completed; account
performance is not a factor in compensation. So Monex
engages in “high-pressure sales tactics,” cajoling potential
customers into buying leveraged precious metals while it
“misrepresent[s] the likelihood of profit” and
“systematically downplay[s] the risks” to ensure customers
invest in Atlas, inevitably leading to customer losses.
   U.S. COMMODITY FUTURES TRADING COMM’N V. MONEX            9

    The complaint alleges deep and broad losses to about
90% of all leveraged Atlas accounts—totaling some
$290 million. In some cases, individual losses were
extreme: some customers lost hundreds of thousands of
dollars, and many others suffered five-figure losses. New
investors never learned about those losses because Monex
never told them. Instead, Monex promised that precious
metals are safe and “will always have value,” so a customer
cannot lose her investment.

    The CFTC filed this lawsuit seeking an injunction and
restitution against Monex Deposit Company, Monex Credit
Company, Newport Services Corporation, Louis Carabini,
and Michael Carabini (Monex). The CFTC contends that
Atlas is an illegal and unregistered leveraged retail
commodity transaction market. The CFTC filed four counts,
alleging violations of:

       (1) CEA § 4(a), 7 U.S.C. § 6(a), for engaging
           in off-exchange transactions;

       (2) CEA § 4b(a)(2)(A) and (C), 7 U.S.C.
           § 6b(a)(2)(A) and (C), for fraud;

       (3) CEA § 6(c)(1), 7 U.S.C. § 9(1), 17 CFR
           § 180.1(a)(1)–(3), for fraud; and

       (4) CEA § 4d, 7 U.S.C. § 6d(a)(1), for failing
           to register.

     The CFTC filed this lawsuit in the Northern District of
Illinois in September 2017. The same day, the CFTC moved
for a preliminary injunction. A month later, Monex filed a
motion to dismiss for failure to state a claim under Civil Rule
12(b)(6). The Illinois district court transferred the case to
the Central District of California three weeks later.
10 U.S. COMMODITY FUTURES TRADING COMM’N V. MONEX

   The District Court Dismisses the CFTC’s Complaint

   The district court granted Monex’s motion to dismiss,
denied as moot the motion for preliminary injunction, and
gave the CFTC thirty days to amend its complaint as to
Count III, the CEA § 6(c)(1) fraud claim. The CFTC
declined the invitation to amend and asked the court to enter
judgment, which it did.

    The district court determined that Counts I, II, and IV
failed because Monex fit within the actual delivery
exception. 7 U.S.C. § 2(c)(2)(D)(ii)(III)(aa). The district
court dismissed Count III because § 6 allows the CFTC to
bring only fraud-based manipulation claims—not stand-
alone fraud cases. In short, the district court held that “any
manipulative or deceptive device” in § 6(c)(1) requires
manipulative and fraudulent behavior. And because the
CFTC alleged only fraud—and not manipulation—Count III
failed as a matter of law. This appeal followed.

                    Standard of Review

    In reviewing a Civil Rule 12(b)(6) dismissal, we give no
deference to the district court. Soltysik v. Padilla, 910 F.3d
438, 444 (9th Cir. 2018). This de novo review consists of
two steps. First, we identify all the factual allegations in the
complaint and accept them as true; legal conclusions are set
aside. Ashcroft v. Iqbal, 556 U.S. 662, 678–79 (2009).
Second, reading all the allegations in the light most favorable
to the non-moving party, we ask whether the facts state a
claim for relief. Id.; see Fed. R. Civ. P. 8(a). To survive, the
claim must be plausible. Iqbal, 556 U.S. at 678. That is, it
must rise “above the speculative level.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555–56 (2007). Claims move
beyond speculation when the allegations “allow[] the court
to draw the reasonable inference that the defendant is liable
   U.S. COMMODITY FUTURES TRADING COMM’N V. MONEX 11

for the misconduct alleged.” Iqbal, 556 U.S. at 678. This is
a “context-specific task that requires the reviewing court to
draw on its judicial experience and common sense.” Id.
at 679.

    For claims of fraud, we require additional specificity:
who, what, when, where, and how. See Fed. R. Civ. P. 9(b);
Vess v. Ciba-Geigy Corp., USA, 317 F.3d 1097, 1106 (9th
Cir. 2003).

                         Discussion

   A. The Actual Delivery Exception

    We must first determine whether the actual delivery
exception is an element of a CEA claim or an affirmative
defense. This distinction is important because Rule 8 does
not require plaintiffs to plead around affirmative defenses.
See Jones v. Bock, 549 U.S. 199, 216 (2007). And
“[o]rdinarily, affirmative defenses . . . may not be raised on
a motion to dismiss.” Lusnak v. Bank of Am., N.A., 883 F.3d
1185, 1194 n.6 (9th Cir. 2018).

    The Eleventh Circuit has ruled that the actual delivery
exception “is an affirmative defense on which the
commodities trader bears the burden of proof.” CFTC v. S.
Trust Metals, Inc., 894 F.3d 1313, 1324–25 (11th Cir. 2018).
We agree. Placing the burden on the defendant is, after all,
the “general rule where [the defendant] claims the benefits
of an exception to the prohibition of a statute.” United States
v. First City Nat’l Bank of Houston, 386 U.S. 361, 366
(1967). And this “longstanding convention is part of the
backdrop against which Congress writes laws,” so courts
must “respect it unless we have compelling reasons to think
that Congress meant to put the burden of persuasion on the
12 U.S. COMMODITY FUTURES TRADING COMM’N V. MONEX

other side.” Meacham v. Knolls Atomic Power Lab.,
554 U.S. 84, 91–92 (2008).

    Nevertheless, we can consider an affirmative defense on
a motion to dismiss when there is “some obvious bar to
securing relief on the face of the complaint.” ASARCO, LLC
v. Union Pac. R.R. Co., 765 F.3d 999, 1004 (9th Cir. 2014).
In other words, dismissal based on an affirmative defense is
permitted when the complaint establishes the defense. See
Sams v. Yahoo! Inc., 713 F.3d 1175, 1179 (9th Cir. 2013).
To determine whether Atlas, described in the CFTC’s
complaint, includes “actual delivery,” we must identify the
meaning of that statutory term.

      Under CEA §§ 2(c)(2)(D)(i) and (iii), any “agreement,
contract, or transaction in any commodity that is entered into
. . . on a leveraged or margined basis” is subject to “sections
6(a), 6(b), and 6b” of the CEA “as if the agreement, contract
or transaction was a contract of sale of a commodity for
future delivery.” 7 U.S.C. §§ 2(c)(2)(D)(i) and (iii). But not
all sales; the adjacent section excludes “a contract of sale that
results in actual delivery within 28 days.” Id.
§ 2(c)(2)(D)(ii)(III)(aa).

     The statute does not define “actual delivery,” and
undefined terms receive their ordinary meaning. See
Taniguichi v. Kan Pac. Saipan, Ltd, 566 U.S. 560, 566
(2012). “Delivery” means “[t]he formal act of voluntarily
transferring something; esp. the act of bringing goods,
letters, etc. to a particular person or place.” Black’s Law
Dictionary (9th ed. 2009). Black’s defines “actual” as
“[e]xisting in fact; real.” Id. “Actual delivery” is the “act of
giving real and immediate possession to the buyer or the
buyer’s agent.” Id. By contrast, “constructive delivery”
denotes “[a]n act that amounts to transfer of title by
   U.S. COMMODITY FUTURES TRADING COMM’N V. MONEX 13

operation of law when actual transfer is impractical or
impossible.” Id.

    The Eleventh Circuit adopted these definitions in CFTC
v. Hunter Wise Commodities, LLC, 749 F.3d 967 (11th Cir.
2014), where it held that a seller failed to actually deliver
commodities when it “did not possess or control an
inventory of metal from which it could deliver to retail
customers.” Id. at 980. The court did “not define the precise
boundaries of ‘actual delivery,’” but it held that “[d]elivery
must be actual.” Id. at 979 (emphasis in original). “If ‘actual
delivery’ means anything, it means something other than
simply ‘delivery,’ for we must attach meaning to Congress’s
use of the modifier ‘actual.’” Id. The defendant in Hunter
Wise could not actually deliver anything because it did not
have the commodities.

    According to Monex, Hunter Wise tells us that the actual
delivery exception applies only when the commodities do
not in fact exist. Monex argues that it makes actual delivery
“because the metals exist in fact and, upon sale, are
voluntarily delivered to independent depositories for the
buyer’s benefit.” Appellee Br. at 10–11. Monex, unlike the
defendant in Hunter Wise, has the underlying
commodities—they actually exist. So, Monex argues,
Hunter Wise does not apply, and Atlas fits the exception.

    Hunter Wise is not so limited. That court first held that
“actual delivery” means giving “real and immediate
possession to the buyer or buyer’s agent.” Hunter Wise,
749 F.3d at 979 (quoting Black’s Law Dictionary 494 (9th
ed. 2009)). The seller in Hunter Wise did not give the buyer
possession of the commodities because it did not possess any
in the first instance. Id. Without inventory, the seller could
not actually deliver anything. Id. But “actual’ in the statute
modifies delivery, not existence. See id. Of course, as
14 U.S. COMMODITY FUTURES TRADING COMM’N V. MONEX

Hunter Wise recognizes, existence is a prerequisite to
delivery—one cannot deliver that which does not exist. But
the fact that the commodity’s existence is necessary to
comply with the exception does not mean existence is
sufficient to fit the exception. If Congress wanted only to
ensure enough inventory it could have said so. It did not; it
required “actual delivery.”

   Thus, the plain language tells us that actual delivery
requires at least some meaningful degree of possession or
control by the customer. It is possible for this exception to
be satisfied when the commodity sits in a third-party
depository, but not when, as here, metals are in the broker’s
chosen depository, never exchange hands, and are subject to
the broker’s exclusive control, and customers have no
substantial, non-contingent interests.

    This interpretation is confirmed by the broader statutory
context. See Abramski v. United States, 573 U.S. 169, 179
(2014). Dodd-Frank expanded the CEA to close the so-
called Zelener loophole, which allowed companies to offer
commodity sales on margin without regulation, because
these transactions mimic conventional futures trades long
regulated by the CFTC. See Zelener, 373 F.3d at 866. On
the other hand, sales where customers obtain meaningful
control or possession of commodities, i.e., when actual
delivery occurs, do not mimic futures trading and are
therefore exempt from registration and related CEA
requirements.

   Monex argues that in the context of a provision
regulating leveraged commodity sales, it would make little
sense for “actual delivery” to turn on possession or control,
because such a reading would clash with “margin,” which
means “[c]ash or collateral required to be paid to a securities
broker by an investor to protect the broker against losses
   U.S. COMMODITY FUTURES TRADING COMM’N V. MONEX 15

from securities bought on credit.” Black’s Law Dictionary
(9th ed. 2009). Because the very meaning of the word
“margin” requires that the buyer deposit collateral with the
seller, actual delivery must mean something other than
transferring possession or control to the buyer. Otherwise,
Monex argues, margin would mean nothing.

    Yet, even if the commodity serves as collateral, there is
no reason why the buyer cannot control it. In many
financing contexts, some degree of buyer possession or
control is commonplace. While permitting customers to
obtain significant control over or possession of metals might
be practically difficult here, that fact does not displace the
statute’s plain meaning.

    If we had any lingering doubt about the statute’s plain
meaning, resort to conventional canons of interpretation
would further support our conclusion. First, the CEA uses
“delivery” in § 1a(27), which we have said “cannot be
satisfied by the simple device of a transfer of title.” CFTC
v. Noble Metals Int’l, Inc., 67 F.3d 766, 773 (9th Cir. 1995).
And because we assume that “Congress means the same
words in the same statute to mean the same thing,” actual
delivery must require more than simple title transfer. Texas
Dept. of Housing & Cmty. Affairs v. Inclusive Cmtys.
Project, Inc., 135 S. Ct. 2507, 2535 (2015). Second, our
interpretation presents no ineffectiveness or surplusage
problems because it does not, as the district court believed,
mean that “every financed transaction would violate Dodd-
Frank,” thus “eliminat[ing] the Actual Delivery Exception
from the CEA.” 311 F. Supp. 3d 1173, 1181 (C.D. Cal.
2018) (quoting CFTC v. Worth Grp., Inc., No. 13-80796-
CIV, 2014 WL 11350233, at *2 (S.D. Fla. Oct. 27, 2014)).
The CFTC does not present a bare-bones complaint. It
includes detailed and specific factual allegations. All we say
16 U.S. COMMODITY FUTURES TRADING COMM’N V. MONEX

today is that those allegations, taken as true, do not establish
actual delivery.

    Finally, even if the statute were ambiguous, we would
find the CFTC’s interpretive guidance persuasive. Retail
Commodity Transactions Under CEA, 78 Fed. Reg. 52,426
(Aug. 23, 2013); see Skidmore v. Swift & Co., 323 U.S. 134
(1944). There, the CFTC stated it would employ a
“functional approach” that considers “[o]wnership,
possession, title, and physical location of the commodity
purchased or sold.” 78 Fed. Reg. at 52,428. Other factors
included “the nature of the relationship between the buyer,
seller, and possessor of the commodity,” and the “manner in
which the purchase or sale is recorded and completed.” Id.

    Monex insists that Atlas matches the second illustrative
example of actual delivery set forth in the guidance: physical
transfer of all purchased commodities into an independent
depository plus transfer of title to the buyer. Id. However,
these steps constitute actual delivery only if they are “not
simply a sham.” Id. The CFTC engages in a “careful
consideration” of the relevant functional factors (listed
above) to determine if the exception is indeed applicable.
Here, customers have no contractual rights to the metal;
Monex, not customers, has a relationship with depositories;
Monex maintains total control over accounts and can
liquidate at any time in its own discretion; and the entire
transaction is merely a book entry. This amounts to sham
delivery, not actual delivery.

    To recap, “actual delivery” unambiguously requires the
transfer of some degree of possession or control. Other
interpretive tools, including the CFTC’s guidance, reinforce
this conclusion.         Monex challenges the CFTC’s
characterization of its delivery scheme, but, at the 12(b)(6)
stage, we ignore such factual disputes and accept as true
   U.S. COMMODITY FUTURES TRADING COMM’N V. MONEX 17

allegations in the complaint. Because this affirmative
defense does not, on the face of the complaint, bar the CFTC
from relief on Counts I, II, and IV, the district court erred in
dismissing those claims.

    B. Manipulative or Deceptive

    In Count III, the CFTC alleges that Monex violated CEA
§ 6(c)(1), 7 U.S.C. § 9(1), and 17 C.F.R. § 180.1 by
fraudulently deceiving its customers. There is no allegation
that Monex manipulated the market, so we must decide
whether § 6(c)(1) covers fraud claims in the absence of
manipulation. The text:

        It shall be unlawful for any person, directly
        or indirectly, to use or employ, or attempt to
        use or employ, in connection with any swap,
        or a contract of sale of any commodity in
        interstate commerce, or for future delivery on
        or subject to the rules of any registered entity,
        any manipulative or deceptive device or
        contrivance, in contravention of such rules
        and regulations as the Commission shall
        promulgate.

7 U.S.C. § 9(1).

    The crucial question is whether “any manipulative or
deceptive device” allows stand-alone fraud claims or
requires fraud-based manipulation. The district court
determined that the statute unambiguously requires “both
manipulative and deceptive conduct, not one or the other.”
Or, another way to say it, the district court held that “or”
really meant “and.” We disagree.
18 U.S. COMMODITY FUTURES TRADING COMM’N V. MONEX

     When the word “or” joins two terms, we apply a
disjunctive reading. See, e.g., United States v. Woods,
571 U.S. 31, 45–46 (2013). When Congress places “or”
between two words, we assume that Congress intended the
two terms as alternatives. See Scalia & Garner, Reading
Law, § 12 at 116 (2012). While there are exceptions, this is
not an instance where a disjunctive meaning would produce
absurd results and statutory context compels us to treat “or”
as if it were “and.” See De Sylva v. Ballentine, 351 U.S. 570,
573 (1956); United States v. Bonilla-Montenegro, 331 F.3d
1047, 1051 (9th Cir. 2003) (“a statute’s use of disjunctive or
conjunctive language is not always determinative”). We
conclude that § 6(c)(1)’s language is unambiguous.
Authorizing claims against “[m]anipulative or deceptive”
conduct means what it says: the CFTC may sue for
fraudulently deceptive activity, regardless of whether it was
also manipulative.

    Again, if we had any doubt, see Conn. Nat’l Bank v.
Germain, 503 U.S. 249, 253–54 (1992), other interpretive
tools support our conclusion. This CEA provision is a mirror
image of § 10(b) of the Securities Exchange Act, which the
Supreme Court has interpreted as a “catch-all clause to
prevent fraudulent practices,” Chiarella v. United States,
445 U.S. 222, 226 (1980), that authorizes fraud-only claims,
see SEC v. Zandford, 535 U.S. 813, 822–25 (2002). We
presume that by copying § 10(b)’s language and pasting it in
the CEA, Congress adopted § 10(b)’s judicial interpretations
as well. Merrill Lynch, Pierce, Fenner & Smith, Inc. v.
Dabit, 547 U.S. 71, 85–86 (2006).

    The canon against surplusage does not point to a
different answer: § 6(c)(1)’s overlap with other provisions is
minimal, and partial redundancy hardly justifies displacing
otherwise clear text. See J.E.M. Ag Supply, Inc. v. Pioneer
Hi-Bred Int’l, Inc., 534 U.S. 124, 144 (2001). Nor does the
   U.S. COMMODITY FUTURES TRADING COMM’N V. MONEX 19

fact that the applicable statutory headings mention only
manipulation and not fraud. The full extent of a statutory
provision rarely fits into its title, so headings are often under
inclusive. See Lawson v. FMR LLC, 571 U.S. 429, 446
(2014).     Finally the CEA elsewhere references a
“manipulative device or contrivance,” see 7 U.S.C.
§ 25(a)(1)(D)(i), suggesting that Congress knew how to
require market manipulation when it sought to do so. The
inclusion of “deceptive” in § 6(c)(1) must have meaning.

    Monex pulls two final arrows from its quiver. First,
Monex argues that the CFTC’s enforcement jurisdiction
comes only from CEA § 2. Without an independent
jurisdictional grant in § 2, Monex argues, the CFTC cannot
bring a § 6(c)(1) fraud claim. In support, Monex cites CFTC
v. White Pine Tr. Corp., 574 F.3d 1219 (9th Cir. 2009),
where we considered whether the CFTC had jurisdiction
over certain foreign currency trades. There, we focused on
CEA § 4c, which applies only to a “transaction involving
any commodity regulated under this chapter.” 7 U.S.C.
§ 6c(b). The question in White Pine was whether foreign
currency trades were “regulated under this chapter.”
574 F.3d at 1223. Section 2 of the CEA generally excludes
foreign currency from regulation, see § 2(c)(1), but some
foreign currency are covered, see § 2(c)(2). Reading §§ 4c,
2(c)(1), and 2(c)(2) together, we held in White Pine that the
specific trades in that case did not fall under the CFTC’s
jurisdiction because foreign currency trades were
categorically excluded from the CEA under § 2(c)(1), unless
they were trades specifically exempted from that exclusion
under § 2(c)(2). The White Pine trades did not fall under
§ 2(c)(2), and thus were excluded under § 2(c)(1). Id.

    As the district court noted, retail commodity transactions
are not addressed in § 2(c)(1)’s general exclusion. Thus,
there is no need for a specific jurisdictional grant to
20 U.S. COMMODITY FUTURES TRADING COMM’N V. MONEX

overcome the general exclusion, as was required in White
Pine. Instead, the retail commodity provision merely
describes the types of transactions to which other CEA
sections—§§ 4(a), 4(b), and 4b—apply. In other words,
§ 2(c)(2)(D)—the retail commodity provision—clarifies the
interplay between margined commodity sales and other
sections that apply to future contracts. This is necessary
because §§ 4(a), 4(b), and 4b applied only to futures trades,
until § 2(c)(2)(D) confirmed that those sections also apply to
leveraged commodity sales.

    No such clarification is needed with § 6(c)(1) because
the section applies to “any . . . contract of sale of any
commodity in interstate commerce.” And in those sales,
§ 6(c)(1) outlaws the use of any manipulative or deceptive
device. Later, the CEA clarifies that “[w]henever it shall
appear to the Commission that any registered entity or other
person has” violated “any provision of this chapter . . . the
Commission may bring an action in the proper district court
of the United States.” 7 U.S.C. § 13a-1(a). When someone
violates § 6(c)(1), the CFTC can bring an enforcement
action.

    Finally, Defendants argue that if § 6(c)(1) means what
the CFTC says, then the statute applies not only to margined
commodity sales, but to ordinary retail cash commodity
sales, too. As Monex tells it, this would mean that even
everyday grocery sales would be subject to the CFTC’s
enforcement power. See Appellee Br. at 35. This, Monex
argues, cannot be the case because such an “explosive
increase of an agency’s . . . authority” requires a clear
statement from Congress. Id. at 53. And “Congress . . . does
not alter the fundamental details of a regulatory scheme in
vague terms or ancillary provision—it does not, one might
say, hide elephants in mouseholes.” Whitman v. Am.
Trucking Ass’ns, 531 U.S. 457, 468 (2001).
   U.S. COMMODITY FUTURES TRADING COMM’N V. MONEX 21

    In the first place, it is not clear that this amounts to an
elephant in a mousehole. By its terms, § 6(c)(1) applies
broadly to commodities in interstate commerce. More
important, this case does not involve retail cash commodity
sales. This case involves only margined commodity sales.
And even Monex admits that § 6(c)(1) applies to at least
some margined commodity sales—those that involve fraud-
based manipulation. The question we address is only
whether § 6(c)(1) also applies to stand-alone fraud claims in
the sale of leveraged commodities. Whether the statute
extends to non-leveraged sales is not before us.

                         Conclusion

    In bill drafting, as in life, little things often make big
differences. Here, three words stand between dismissal and
discovery. Although Monex contends that no fraud
occurred, we must, at this point, accept as true the CFTC’s
well-pleaded complaint to the contrary. And because the
CFTC’s claims are plausible, this lawsuit should continue.

   REVERSED and REMANDED for further proceedings
consistent with this decision. 1




  1
    Monex’s unopposed motion for judicial notice (Dkt. 28) is
GRANTED.
