Ex-SEC, CFTC Chair Gensler Files Kalshi Sixth Circuit Brief

Gary Gensler filed a Kalshi Sixth Circuit amicus brief Thursday with the federal appellate court, arguing that sports-related event contracts don’t qualify as federally regulated swaps and therefore cannot override state gaming laws, a direct shot at both Kalshi’s legal theory and the current CFTC’s position. Gensler, who chaired the CFTC from 2009 to 2014 and the SEC from 2021 to 2025, joined a coalition of gaming groups and consumer advocates in telling the appellate court that Congress simply never meant for sports bets to wear a derivatives costume.

What Gensler Argues in the Kalshi Sixth Circuit Brief

The core of Gensler’s argument is historical. In his brief, he traced the lineage of the Commodity Exchange Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, showing that Congress deliberately drew a line around what types of derivatives the CFTC could regulate, and sports betting contracts land well outside that line.

“Congress did not include sports betting contracts within the statutory Dodd-Frank definition of swap,” the brief stated. “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.”

That hedging argument is load-bearing. The entire federal framework for derivatives regulation rests on the idea that swaps serve an economic purpose, that a corn farmer can lock in a price to protect against a bad harvest, or a bank can hedge its currency exposure. A bet on whether the Chiefs cover the spread doesn’t fit that mold, Gensler argued, regardless of how Kalshi’s lawyers dress it up.

Senate Majority Leader Harry Reid of Nevada would never have consented to or passively accepted legislation displacing an activity so critical to his state’s economy and politics by permitting sports betting only under CFTC auspices.

The Kalshi Ohio Case: How We Got Here

The Sixth Circuit appeal stems from a lawsuit Kalshi filed against the state of Ohio, not the other way around. Kalshi went on offense, filing a preemptive suit to block Ohio from taking action against its sports prediction markets. That move tells you something about Kalshi’s confidence level: they’d rather pick the jurisdiction than wait to be sued.

It didn’t work. A federal judge ruled against Kalshi Ohio federal judge ruling sports betting in March 2026, finding the platform must comply with state gaming regulations. That ruling is now on appeal before the Sixth Circuit.

The broader legal landscape is fractured. The Third Circuit Court of Appeals ruled in April that New Jersey couldn’t shut down prediction markets, while a panel of the Ninth Circuit appeared more sympathetic to the states’ position. Courts are openly contradicting each other, which all but guarantees this ends up at the U.S. Supreme Court.

Current CFTC vs. Gensler: A Regulator at War With Its Own Legacy

Here’s where it gets awkward. The CFTC Sixth Circuit amicus brief prediction markets exclusive jurisdiction, filed last month under current Chair Mike Selig, took the opposite position from Gensler’s. The agency argued that any event contract traded on a designated contract market is a swap, full stop, and that the CFTC holds exclusive jurisdiction over prediction markets.

Gensler pushed back hard on that framing. “The CFTC now posits hedging theories for some sports bets that are at best only tenuously connected to reliable hedges of commercial risks,” his brief said. The word ‘tenuously’ is doing a lot of work there. That’s a former regulator calling the current one’s legal reasoning a stretch.

This split matters more than most agency disagreements. Gensler spent four years actually implementing Dodd-Frank. He knows what Congress intended because he was the one translating legislative text into rules. His brief isn’t just an opinion, it’s a primary source on Congressional intent, and courts treat that kind of institutional knowledge seriously.

The CFTC now posits hedging theories for some sports bets that are at best only tenuously connected to reliable hedges of commercial risks. That connection, however, is important, as Congress included only those event contracts that hedge risks in a manner similar to a swap.

Who Else Filed, and What’s Actually at Stake?

Gensler wasn’t alone. The Indian Gaming Association and affiliated tribal organizations filed their own brief, arguing that Kalshi’s operations directly infringe on tribal sovereignty. Under the Indian Gaming Regulatory Act, gaming on tribal lands must benefit the tribes, not private startups siphoning state and tribal revenue away from public coffers.

The Gary Gensler Kalshi amicus brief Sixth Circuit coalition also included the American Gaming Association, which made a particularly sharp argument: Kalshi’s own trademark application described its services as “providing of information related to sports betting; organizing, arranging, conducting sports betting and gambling tournaments, competitions and contests.” The AGA compared Kalshi’s offerings to traditional sportsbooks side-by-side, including parlay structures.

Better Markets filed separately, citing past Kalshi filings where the company itself drew a distinction between markets tied to political events and those tied to sporting events, essentially arguing Kalshi knew the difference and tried to blur it anyway.

The stakes here aren’t abstract. If the CFTC wins this fight across the court system, states lose substantial gambling tax revenue and regulatory jurisdiction over an industry operating inside their borders. If states win, Kalshi and its competitors face a patchwork of state licensing requirements, and potentially criminal liability in states like Arizona and Minneapolis where operating an unregistered gambling platform carries criminal penalties.

Kalshi has brazenly entered onto state and tribal lands across the nation to conduct unregulated gaming with its so-called ‘legal sports betting’ app. In doing so, Kalshi is siphoning away vital tribal and state governmental revenue to its owners’ pockets.

Does a Sports Bet Actually Hedge Anything?

This is the question the whole case hinges on, and Gensler’s framing cuts right to it. The Commodity Exchange Act was built around the concept of economic hedging, derivatives exist to let businesses manage real financial risk. A futures contract on soybeans hedges a farmer’s crop exposure. An interest rate swap hedges a borrower’s variable-rate risk.

Kalshi’s legal theory requires courts to accept that a sports event contract serves a similar hedging function. Maybe a sports bar owner is hedging against a slow Sunday if the local team loses. The argument exists on paper. But Gensler’s brief, and virtually every other amicus filing Thursday, argued that the connection is too thin to sustain federal preemption of state gambling law, and that letting it stand would gut state gaming regulation nationwide.

The Supreme Court will almost certainly have to resolve this. Congress is also circling: the prediction markets debate has drawn attention from legislators who aren’t thrilled about either a federal agency quietly claiming jurisdiction over sports gambling, or a startup from New York effectively setting national gambling policy through preemptive litigation.

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.

This article is for informational purposes only and does not constitute investment advice. Every investment and trading decision involves risk. Readers should conduct their own research before making any financial decisions.