Gensler Breaks with CFTC, Argues Sports Markets Exempt from Swap Rules
In an amicus brief to the Sixth Circuit, former SEC chair Gary Gensler sided against the CFTC's position, arguing that sports prediction markets do not qualify as regulated swaps under Dodd-Frank.
Gary Gensler, the former chair of both the Commodity Futures Trading Commission and the Securities and Exchange Commission, has filed a legal brief with the Sixth Circuit Court of Appeals taking a position that contradicts his former agency's stance on sports prediction markets.
In the brief, Gensler argued that event-based prediction markets—such as those tied to sports outcomes—should not be classified as swaps under the Dodd-Frank Act, the post-2008 financial regulation law that grants the CFTC broad authority over derivatives trading.
The filing comes as part of ongoing litigation over KalshiEX, a prediction market platform that sought to operate sports-event contracts. The CFTC has opposed such markets, contending they fall under swap regulations and therefore require CFTC approval before launch. Ohio's regulations also restrict these markets, leading to the appeal.
Gensler's intervention marks a notable shift from his tenure at the SEC, where he took a harder regulatory stance on crypto and digital assets. His argument in this case aligns prediction markets more closely with traditional betting rather than derivatives requiring federal oversight.
The brief suggests that the statutory framework for swaps—designed to govern complex financial derivatives between institutions—was not intended to encompass simple outcome-based wagering on discrete events. The distinction could have significant implications for the regulatory future of prediction market platforms seeking to operate in the United States.
The case remains pending before the appeals court, with the outcome likely to clarify regulatory boundaries for event prediction markets.