While the CFTC says trading around the outcomes of sports events on prediction markets are swaps that are within its jurisdiction, Gensler said that they are sports bets that are regulated by the states, Bloomberg reported Friday (June 12).
Gensler told Bloomberg in an interview that the 2010 Dodd-Frank Act, which he helped implement, does not apply to sports bets.
“To see somebody trying to kind of tuck into that whole thing, wow, the Commodity Futures Trading Commission was given exclusive jurisdiction and preempts the states for sports betting. Nothing could be further from what we were working on,” Gensler said.
Gensler spoke with Bloomberg ahead of his filing an amicus brief in a federal appeals court in Ohio on Thursday (June 11) as part of a legal battle between prediction market Kalshi and a state agency.
In that case, the CFTC argues that it is the primary regulator of prediction markets and that sports-related event contracts are swaps. Gensler argues in his brief that Congress never considered sports bets to be swaps, according to the report.
CoinDesk reported on Gensler’s amicus brief Thursday, saying that the case in which he filed the brief involves Kalshi suing the state of Ohio to stop it from filing a suit against the company.
Gensler said in the brief, per the report: “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 CFTC filed its amicus brief in the case in May, saying that the regulatory scheme designed by Congress preempts state laws as applied to markets regulated by the CFTC.
“The federal district court in Ohio took an improperly narrow view of the Commission’s jurisdiction, and we are asking the Court of Appeals to correct that error,” CFTC Chairman Michael S. Selig said at the time in a press release. “As I’ve said repeatedly, the CFTC will not allow overzealous state governments to undermine the agency’s longstanding authority over these markets.”
