Gensler backs Ohio in fight over sports prediction markets

Former Commodity Futures Trading Commission chair Gary Gensler filed an amicus brief on June 11 in KalshiEX v. Schuler, supporting Ohio’s argument that the Dodd-Frank Act does not give the federal government exclusive control over sports prediction markets. Gensler asserted that the law’s drafters did not intend to bring ordinary sports wagering into the CFTC’s derivatives regime.

Gensler led the CFTC from 2009 to 2014 and helped shape Dodd-Frank’s derivatives rules after the 2008 financial crisis. He noted he had testified before Congress 54 times and reported that no legislator indicated the statute should extend the agency’s authority to sports betting. In the brief he argued Congress would not quietly preempt a $165 billion-a-year industry through a technical definition in a derivatives law. The brief also cited a unanimous 2011 CFTC decision that barred contracts tied to gaming, war and assassination, a rule a recent CFTC proposal would reverse.

The case concerns Kalshi, a prediction market platform that offers contracts on sports outcomes. In March, U.S. District Judge Sarah Morrison in Ohio ruled Kalshi’s sports contracts are likely not swaps and therefore not subject to the CFTC’s exclusive jurisdiction. Kalshi appealed that decision to the Sixth Circuit. The platform has won similar rulings in other courts, including a Third Circuit panel and a Tennessee federal judge earlier this year.

Thirty Native American tribes and 11 tribal associations filed briefs supporting Ohio, arguing federal control would interfere with state and tribal gaming sovereignty and invoking the major questions doctrine because Kalshi grounds its jurisdiction claim in statutes dating to 1974 and the Commodity Futures Modernization Act of 2000. The American Gaming Association and the public interest group Better Markets also submitted briefs urging the Sixth Circuit to affirm the lower court’s decision. Separately, the CFTC and the Justice Department have sued six states to defend what they describe as exclusive federal jurisdiction. Minnesota enacted a ban that makes operating prediction markets a felony starting Aug. 1.

Gensler’s brief objected to a June 10 CFTC proposal that would allow most sports outcome contracts while banning wagers on injuries and officiating. He argued matters of addiction and consumer protection should be handled by state regulators rather than the federal derivatives regulator. The brief aligns a former federal regulator with state and tribal interests opposing the current CFTC policy.

Legal analysts note that conflicting rulings between federal appellate courts could prompt Supreme Court review if the Sixth Circuit affirms and creates a split with the Third Circuit. The central question is whether prediction markets will be governed primarily by federal derivatives law or by state and tribal gambling rules, a determination that will affect operators, bettors and gaming regulators nationwide.