The ex-regulator joined various interest groups to assert that prediction markets are exceeding their legal boundaries by offering sports-related contracts.
By Nikhilesh De|Edited by Omkar Godbole Jun 12, 2026, 6:27 a.m. 4 min readMake preferred on ShareShare this articleCopy linkX (Twitter)LinkedInFacebookEmailMake preferred on Then-SEC Chair Gary Gensler speaking at the International Swaps and Derivatives Association Treasury Forum on June 5, 2024. (Nikhilesh De/CoinDesk)SummaryShow- Gary Gensler, former chair of both the CFTC and SEC, submitted an amicus brief to an appeals court emphasizing that federal law does not grant the CFTC authority over sports-related prediction markets.
- Several other organizations also filed similar briefs, asserting that sports-related prediction markets breach state and tribal regulations.
- U.S. courts are currently deliberating on whether these markets should be governed at the state or federal level, impacting tax revenues and regulations.
In a recent court filing, Gary Gensler stated that prediction markets should not override state laws concerning sports betting.
Gensler, along with the Indian Gaming Association, Native American tribes, the American Gaming Association, and Better Markets, submitted amicus briefs to the Sixth Circuit Court of Appeals, arguing that KalshiEx's sports-related prediction markets violate state gaming laws.
This case stems from Kalshi's preemptive lawsuit against Ohio, aiming to prevent the state from suing them. A federal court ruled against Kalshi in March.
In Thursday's filing, Gensler detailed the evolution of derivatives regulation, the Commodity Exchange Act, and the Dodd–Frank Wall Street Reform and Consumer Protection Act. He argued that Congress clearly defined the CFTC's jurisdiction over specific derivatives, stating that the agency does not have authority over sports betting contracts.
"Congress did not include sports betting contracts in the Dodd-Frank definition of swap," the brief noted. "These contracts do not align with the Commodity Exchange Act's purpose or the legal definition of swaps, which primarily focus on hedging economic risks. Sports bets are seldom about hedging."
The central issue in this case is whether contracts related to sports events, known as prediction markets, fall under federal regulation as swaps or if they are merely a rebranding of sports gambling as a novel financial product. This question has been at the forefront of legal debates nationwide.
Several states have taken legal action against prediction market operators, claiming they are breaching state laws by not registering as gambling entities. The CFTC has contested several states, asserting its rightful role as the regulator of prediction markets. Some companies have also initiated lawsuits against states, seeking rulings that exempt them from state regulations.
If the CFTC successfully argues its case, it could lead to significant tax revenue losses for states. Conversely, if states prevail, prediction market operators would be required to register and adhere to state regulations, potentially facing criminal charges in places like Arizona and Minneapolis for operating without registration.
Gensler's brief articulated the stakes, stating, "Senate Majority Leader Harry Reid of Nevada would never have agreed to legislation that compromises an activity so vital to his state's economy by allowing sports betting solely under CFTC governance."
Judicial opinions have varied; some courts have favored prediction market operators, while others have sided with state regulations.
In April, the Third Circuit Court of Appeals ruled that New Jersey could not shut down prediction markets, while a panel from the Ninth Circuit appeared more inclined to side with the states.
The Supreme Court is anticipated to eventually address this matter, with Congressional interest also evident.
Amicus briefs
The CFTC, currently led by Chair Mike Selig, submitted its own amicus brief last month, contending that any event contract traded on a designated market falls under the category of a swap.
According to the CFTC's filing, Congress's definition of swaps is expansive, allowing CFTC-regulated firms to provide their services.
Gensler's brief opposed this perspective, stating, "The CFTC now suggests hedging theories for some sports bets that are at best only loosely related to actual hedges of commercial risks. This connection is critical, as Congress included only those event contracts that hedge risks akin to swaps and are sufficiently 'associated with a potential financial, economic, or commercial consequence.'"
Other amicus briefs focused on different aspects of prediction markets. The Indian Gaming Association and related parties contended that sports-related prediction markets violate tribal sovereignty, arguing that all gaming activities on tribal lands must benefit the tribes, as outlined in the Indian Gaming Regulatory Act.
"Kalshi has audaciously entered state and tribal territories across the country to engage in unregulated gaming with its so-called 'legal sports betting' application," the brief claimed. "This action diverts essential tribal and state revenue into the pockets of private owners."
The American Gaming Association's brief argued that there is no substantive difference between sports prediction markets and sports betting, referencing a trademark application by Kalshi that stated its services were linked to "providing information related to sports betting; organizing, arranging, conducting sports betting and gambling tournaments, competitions, and contests."
The brief compared offerings on Kalshi's platform to traditional sportsbooks, analyzing various products, including parlays.
Both the AGA and Gensler's filings asserted that sports-related prediction markets do not provide genuine economic hedges for participants.
Better Markets' brief similarly stated that sports-related prediction markets should not be classified as swaps, citing previous Kalshi submissions that distinguished between markets for political events and sports events.