Gensler argues prediction markets shouldn't override state gaming laws
In brief
- Gensler filed amicus brief opposing Kalshi's sports prediction market expansion
- Congress excluded sports bets from Dodd-Frank swap definition, he argues
- Gaming groups and tribal organizations support Gensler's position against market preemption
The regulatory clash
Kalshi filed a preemptive lawsuit against Ohio after a federal judge ruled against the prediction market platform in March. The Sixth Circuit case now sits at the center of a broader jurisdictional fight over who controls sports betting — state regulators or federal commodity overseers.
Gensler's brief is not alone. The Indian Gaming Association, Native American tribal organizations, the American Gaming Association, and Better Markets filed amicus briefs alongside him, all arguing that Kalshi's sports-related prediction markets violate state gaming regulations.
The core argument is straightforward. Gensler contends that Congress did not include sports betting contracts within the statutory Dodd-Frank definition of swap. Sports bets, he argues, are not about hedging economic risk — the purpose Dodd-Frank was designed to address.
Courts split on jurisdiction
The courts are split. The Third Circuit ruled in April that New Jersey could not shut down prediction markets, favoring the platforms. But a panel of the Ninth Circuit seemed more inclined to rule for the states in similar cases.
Meanwhile, the CFTC, now led by Chair Mike Selig, filed its own brief arguing that any event contract traded on a designated contract market is a swap under its jurisdiction. The stakes are enormous. If the CFTC prevails, states lose significant tax revenue. If states win, prediction market providers must register and comply with regulations in each state where they operate.
"Congress did not include sports betting contracts within the statutory Dodd-Frank definition of swap. Such contracts do not fit the CEA's purpose or the statutory language defining swap, which focus on hedging economic risk. Sports bets are very rarely, if ever, about hedging." — Gary Gensler, former CFTC and SEC chair, in amicus brief
