Gensler Tells Court Sports Prediction Markets Are Just Gambling, Not Swaps

Gary Gensler, the former chair of both the CFTC and the SEC, just told the Sixth Circuit Court of Appeals that sports prediction markets are not swaps—they're sports gambling. His amicus brief, filed Thursday in the KalshiEx v. Ohio case, explicitly argues that Congress never intended the Dodd-Frank Act's swap definition to cover bets on football games.

"Congress did not include sports betting contracts within the statutory Dodd-Frank definition of swap," the brief states. "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."

Why Gensler's Position Splits With His Former Agency

The current CFTC, under Chair Mike Selig, filed its own amicus brief last month arguing that event contracts traded on a designated contract market are swaps by definition. Gensler—who wrote the Dodd-Frank derivatives rules while running the CFTC from 2009 to 2014—is now telling the court the opposite. That's not just a disagreement; it's a direct challenge to the agency's statutory interpretation from the guy who implemented the law.

Gensler's filing takes specific aim at the CFTC's hedging arguments: "The CFTC now posits hedging theories for some sports bets that are at best only tenuously connected to reliable hedges of commercial risks." He's calling out the agency for stretching the concept of hedging until it snaps.

The Real Stakes: State Revenue vs. National Compliance

A federal judge already ruled against Kalshi in March. Now multiple amici—including the Indian Gaming Association, the American Gaming Association, and Better Markets—are piling on to argue that prediction markets infringe on state and tribal sovereignty. The Indian Gaming Association's brief cites the Indian Gaming Regulatory Act, noting that any gaming on tribal lands must benefit the tribes, not a private exchange like Kalshi.

If the states win, prediction market providers face a nightmare: separate registration and compliance in every state, plus potential criminal penalties in places like Arizona and Minneapolis that treat unregistered platforms as illegal gambling. If the CFTC wins, states lose significant tax revenue from sports betting that currently flows to their coffers.

Courts are split. The Third Circuit ruled in April that New Jersey cannot shut down prediction markets. The Ninth Circuit panel seemed inclined to rule for the states. The Supreme Court will likely have to settle this, and Congress is circling. Gensler's brief drives the point home with a line about Harry Reid never consenting to legislation that displaces Nevada's core economic activity under CFTC auspices.

This case will define whether prediction markets operate as a single federally regulated market or as fifty separate gambling licenses. Gensler just bet on the states.

Source: Former SEC, CFTC Chair Gary Gensler argues that prediction markets don't overrule state regulations
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