Gensler Joins Industry Group in Filing Court Brief: Prediction Markets Should Not Be Above State Gaming Regulation

BlockBeats News, June 12, former SEC Chair Gary Gensler stated in a recent court filing that prediction markets should not be construed under federal law as financial derivatives that can circumvent state gambling regulations.

The filing was submitted to the U.S. Sixth Circuit Court of Appeals in relation to a lawsuit between the prediction market platform Kalshi and the state of Ohio. The core dispute in the case is whether sports event contracts fall under federal oversight as "swap agreements" or are fundamentally part of state-level gambling activities.

In the opinion filed, Gensler pointed out that the U.S. Congress did not include sports entertainment in the swap definition under the Dodd-Frank Act framework. Such contracts usually do not have the characteristics of hedging economic risks and therefore should not be subject to CFTC regulatory coverage.

Various parties, including U.S. regulatory agencies, Native American tribal organizations, and Better Markets, have also submitted filings supporting the state regulatory position. They believe that prediction markets are not economically different from traditional sports betting and could erode the entertainment tax revenue system of states and tribes.

The case originated from Kalshi's preemptive lawsuit against Ohio to prevent enforcement actions against the platform. Previous court rulings have shown discrepancies between different circuit courts, and the case may ultimately be appealed to the U.S. Supreme Court.

Analysts point out that the case's outcome will directly impact the regulatory path of prediction markets in the United States and may determine whether they will expand as a financial derivatives market or be included in state entertainment regulatory systems.