Gary Gensler, former Chair of both the US Commodity Futures Trading Commission and the Securities & Exchange Commission, has intervened in the legal dispute over sports prediction markets, arguing that sports bets should not be treated as federally regulated swaps.
Gensler filed a brief in a federal appeals court in Ohio as Kalshi, one of the leading US operators, continues to argue that its sports event contracts fall under federal derivatives law rather than state gambling regulation. This intervention is significant because Gensler helped implement the Dodd-Frank Act after the global financial crisis and previously led the CFTC, the federal agency responsible for regulating US derivatives markets.
His brief says: “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.”
The argument directly challenges Kalshi’s position that sports event contracts should sit within federal financial market regulation. It also complicates the CFTC’s current approach, after the regulator proposed new rules that could create a clearer federal route for sports prediction markets.
This distinction matters because a federal derivatives classification could allow prediction market operators to offer sports contracts across the US without obtaining state-by-state sports betting licences or paying state gambling taxes.
Gensler rejects the idea that Congress intended Dodd-Frank to give the CFTC exclusive authority over sports betting; to see somebody trying to kind of tuck into that whole thing, wow.”
“The Commodity Futures Trading Commission was given exclusive jurisdiction and pre-empts the states for sports betting… nothing could be further from what we were working on.”
The dispute comes as prediction markets move deeper into sport. The 2026 FIFA World Cup will be a major test for platforms such as Kalshi and Polymarket, with analysts forecasting billions of dollars in tournament-linked trading volume. The CFTC has proposed that sports contracts based on outcomes such as scores, spreads, win/loss results and tournament progression may provide useful market information. However, it has indicated that contracts linked to player injuries, children’s sport, officiating decisions or markets that could encourage cheating are unlikely to satisfy the public interest test.
For prediction market operators, the legal argument remains central to their growth strategy. For licensed sportsbooks, the issue is equally important. If sports betting can be recast as a federally regulated event contract, it could challenge the state licensing, tax and market-access model that underpins the US sports betting industry.
