The recent court decision tossing out a rule setting federal position limits in commodities markets probably shouldn’t have come as a shock.

After all, the legal battle pitted two of Wall Street’s biggest, deep-pocketed lobbying groups against the Commodity Futures Trading Commission, which has been frequently depicted as cash-strapped and understaffed by its chairman over the past two years.

The lawsuit was argued by Eugene Scalia, the son of a Supreme Court justice and, according to his profile “one of the industry’s go-to guys for challenging financial regulations.”

Scalia led the industry’s successful effort to have the Securities and Exchange Commission proxy access rule overturned by a federal appeals court in July 2011.

In addition, legal sources have targeted position limits as the rule most likely to be overturned by a court since President Obama signed the Dodd-Frank Act into law in 2010.

Even when it was approved in October 2011, then-Commissioner Michael Dunn, a Democrat and ultimately the deciding vote for the rule, said position limits were likely unnecessary and may do nothing to control market volatility.

“This is the law,” Dunn said before casting his reluctant vote. “The law is clear, and I will follow the law.”

In an op-ed published in The Wall Street Journal Wednesday (link here, but it’s behind registration), Scalia pointed to this as an example of “an agency failing to deploy expert judgment,” and one of the key reasons this and other recent financial regulations have been overturned in court.

“When the rule was adopted, a majority of CFTC commissioners said it was likely to harm consumers,” Scalia wrote. “But the commission adopted it anyway, saying that Dodd-Frank required it. The court disagreed and faulted the agency for failing ‘to bring its expertise and experience to bear.’” Scalia said instead of blaming the courts for recent decisions against regulations, Democrats should look to “badly written regulations.”

In December, the Securities Industry and Financial Markets Association and the International Swaps and Derivatives Association filed their lawsuit to overturn the limits and by February US District Court Judge Robert Wilkins told a courtroom of lawyers and reporters that he would decide “quickly” on whether the block the imposition of these limits.

Some expected a decision from Wilkins in days, but days soon became weeks and weeks became months. By the time the CFTC set October 12 as the start date for its first phase of the limits, many were confident that position limits would be taking place as the CFTC had planned.

Then on Friday, shortly after US markets closed and just two weeks before the limits were scheduled to take root, Wilkins’ decision shocked many.

CFTC Commissioner Bart Chilton, the agency’s most public position limits proponent, called the decision “deeply flawed,” “tough news” and “clearly a setback” in ridding commodity markets of excessive speculation.

US Representative Joe Courtney, a Connecticut Democrat, called the ruling a “blow to consumers and a setback in the broader effort to stabilize energy markets.”

US Senator Bernie Sanders, a Vermont independent, called the decision “another victory for Wall Street speculators who have been given a green light to rip off the American people at the gas pump.”

“Wall Street wins, consumers lose,” said Robert Weissman, president of Public Citizen, a consumer advocacy group.

CFTC Chairman Gary Gensler, who said the agency has made no decision on how to proceed, said he was “disappointed” by the decision and repeated his frequent claim that the limits were mandated by Dodd-Frank.

Wilkins, in his 50-page decision, overturned the limits since he claimed the agency did not make a finding that position limits were necessary to curb excessive speculation.

For a more detailed take on Wilkins’ decision, check out a detailed analysis by Craig Pirrong, a finance professor at the University of Houston’s Bauer College of Business, here.

But is the battle over position limits over? Chilton this week called for the agency to appeal the decision while simultaneously working on a new rule, but Gensler has said the CFTC, which committed to getting position limits in place, is still considering its options.

But legal sources believe this will likely be an uphill battle for the agency.

Paul Pantano, the head of the energy and commodities group at Cadwalader, Wickersham & Taft, told Platts this week that the chances of a judge granting such a stay, particularly of a rule that is not in effect, are “probably nonexistent.”

Pantano said any appeal process would likely take 10 months to a year.

Congress could always pass new position limits legislation, this time without a requirement for the CFTC to prove their necessity, but getting such a controversial bill through aRepublican-controlled House, even in the lame duck session following next month’s election, is seen as an extreme longshot.

Senator Sanders, for example, has proposed a bill which would require the CFTC to use its “emergency powers” to impose the position limits in the natural gas, crude oil and gasoline markets. Sanders, an independent who caucuses with the Senate’s Democrats, said such trading limits would diminish the influence of speculators and help lower the price of gasoline, but said this week that the bill was no closer to a vote than when it was introduced in March.

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