Gensler Tells Appeals Court the CFTC Never Had Authority Over Sports Prediction Markets
Gary Gensler, the former chair of both the SEC and the CFTC, filed an amicus brief in the U.S.
Gary Gensler, the former chair of both the SEC and the CFTC, filed an amicus brief in the U.S. Sixth Circuit Court of Appeals on June 12, arguing that federal commodity regulators have no statutory authority to override state gambling laws governing sports-linked prediction market contracts. The filing puts Gensler in direct opposition to the current CFTC, and it defies easy ideological framing: a former crypto-industry antagonist is now aligned with state gambling interests and tribal sovereignty advocates against a Trump-appointed CFTC chair who supports the very platform Gensler once would have constrained. The brief adds a significant voice to a legal dispute that could reshape a market now processing over $24 billion in monthly trades.
The Core Argument
The case, KalshiEx LLC v. State of Ohio / Matthew T. Schuler, centers on whether sports event contracts offered by prediction platform Kalshi qualify as "swaps" under the Commodity Exchange Act (CEA). Kalshi sued Ohio's Casino Control Commission in October 2025, arguing the state had no authority to block its sports contracts because federal commodity law gives the CFTC exclusive jurisdiction over designated contract markets. Judge Sarah D. Morrison, a federal district judge, rejected Kalshi's request for a preliminary injunction in March 2026, and the company is now appealing.
Gensler's brief argues that Congress, when it passed the Dodd-Frank Act in 2010, deliberately excluded sports betting from the definition of a swap, and he points to his own direct participation in that legislative process. "I testified in Congress 54 times, and literally Republicans and Democrats alike, nobody said...give your small agency authority to regulate sports betting," he said [ellipsis in original]. The brief states the point plainly: "Congress did not include sports betting contracts within the statutory Dodd-Frank definition of swap." Gensler also invokes the Supreme Court's "elephants in mouseholes" canon, the principle that courts should not read sweeping regulatory authority into statutes where Congress provided no clear signal of such intent. Sports contracts, he adds, almost never serve a hedging purpose, which is the core economic rationale behind the CEA's derivatives framework.
A Regulator Against Its Own Agency
The current CFTC, led by Trump-appointed Chair Michael Selig, filed its own amicus brief in May 2026, taking the opposite position. Selig's agency supports Kalshi and has accused Ohio of what it called "overzealous attempts to undermine federal authority." Former Senator Blanche Lincoln, who helped draft Dodd-Frank and is now a registered Kalshi lobbyist, backs the company's position as well. Her alignment with Kalshi illustrates how the legislative architects of the law and the regulators who implemented it have ended up on opposite sides of the dispute: Lincoln shaped the statute's text in Congress, while Gensler's authority derives from having served as the regulator charged with applying it and from testifying before Congress throughout its drafting.
Two days before Gensler's filing, the CFTC released a 267-page proposed rulemaking that would formally authorize most sports prediction contracts at the federal level while banning contracts on events particularly susceptible to manipulation, such as individual player injuries, referee decisions, and specific in-game events.
The CFTC's current posture represents a full reversal of its 2011 position, when the agency unanimously banned sports event derivative contracts. Gensler was CFTC chair during that period and argues the agency's original interpretation was correct. The alignment on his side is notable: 39 states plus the District of Columbia filed amicus briefs backing Ohio, alongside the American Gaming Association, the Indian Gaming Association, 30 Native American tribes, and 11 tribal associations. Tribal groups have particular standing here because their gaming operations depend on state-level compacts under the Indian Gaming Regulatory Act. If federal law preempts state authority entirely, those compacts lose legal force. A tribal representative captured what is at stake for those communities: "For tribes, gaming is not just an economic endeavor but an existential one."
The Scale of What Is at Stake
Prediction markets have grown rapidly. Combined monthly trading volume on Kalshi and Polymarket exceeded $24 billion in April 2026, up from under $5 billion in September 2025. Sports contracts account for roughly 80 percent of Kalshi's total volume since July 2024. The broader US sports betting and prediction market is estimated at approximately $165 billion annually, according to reporting by Decrypt and CoinDesk. A CFTC victory would shift tax collection and licensing authority away from states to the federal level, stripping state gaming commissions of jurisdiction over a substantial revenue source.
What This Means Outside the United States
The outcome carries real weight beyond US borders because it sets the vocabulary regulators elsewhere use to classify these products. India's Ministry of Electronics and Information Technology blocked Polymarket in April 2026 under the Promotion and Regulation of Online Gaming Act 2025, which treats prediction markets as prohibited online money gaming. Similar action against Kalshi was reported to be in preparation. India's approach illustrates what a national prohibition framework looks like in practice. If US federal courts ultimately adopt Gensler's reasoning, it strengthens the argument that sports prediction contracts are gambling products rather than financial instruments, reinforcing the restrictive positions already taken by governments such as India's.
In South Africa, legal analysts at ENS Africa have identified the same three-way jurisdictional conflict the US courts are now deciding. Sports event contracts sit at the intersection of the Financial Sector Conduct Authority's crypto asset framework, the Financial Markets Act governing derivatives, and the National Gambling Act, which defines a bet broadly as staking anything of value on a contingency. The regulatory environment grew more complex in 2026 with South Africa's "Great Re-Bordering," a new Capital Flow Management framework replacing 1961-era exchange controls that explicitly targets crypto assets and adds further compliance layers for cross-border prediction market activity. How US courts draw the line between a derivative and a bet will serve as persuasive precedent in jurisdictions still drafting their own rules.
Nigeria and Kenya present additional test cases. Nigeria is Africa's largest crypto market by volume, with active retail participation in prediction platforms and a developing regulatory framework grappling with the same classification questions now before the Sixth Circuit. Kenya has an active prediction market brokerage ecosystem, no current blocking orders, and a large mobile-money user base that makes it a natural addressable market for these products. Both countries are watching the US proceedings closely, and a definitive ruling on whether sports contracts are commodities or gambling products would directly inform how their regulators respond.
What Comes Next
The Sixth Circuit is not the only court weighing this question. The Third Circuit ruled 2-1 in April 2026 in favor of Kalshi against New Jersey, while the Ninth Circuit has indicated it may reach a different conclusion. That circuit split makes Supreme Court review likely by late 2026 or 2027, meaning the fundamental legal question could remain unresolved for another year or two. During that window, non-US regulators, platform developers, and users will be operating without clarity on whether these products are financial instruments subject to commodity law, gambling products subject to consumer protection and gaming law, or something that falls into neither category cleanly. Jurisdictions from South Africa to Nigeria to India are already setting their own precedents in the absence of US guidance, and the longer domestic courts remain divided, the more durable those local frameworks become.