Gary Gensler Says Prediction Markets Should Not Override State Sports Betting Laws

A growing legal battle over sports related prediction markets has drawn fresh attention after former U.S. regulator Gary Gensler argued that federal law does not give regulators exclusive authority over these products. The comments were made in a court filing tied to an ongoing dispute involving prediction market platform Kalshi and state gaming regulators.

Prediction Markets Face Regulatory Challenge

The case centers on whether sports event contracts should be treated as federally regulated financial products or as sports betting subject to state laws. Gensler argued that Congress never intended sports betting contracts to fall under the definition of swaps in the Dodd-Frank Act, noting that swaps are generally designed to help businesses manage financial risk.

He stated that sports wagers rarely serve a hedging purpose and therefore do not fit the legal framework governing traditional derivatives markets.

State Gaming Laws at the Center of Debate

Several gaming groups, tribal organizations and industry advocates have also filed court briefs supporting state authority over sports betting activities. They argue that prediction market operators are offering products that closely resemble traditional sportsbooks while avoiding state licensing requirements and tax obligations.

Court Decisions Remain Divided

Courts across the United States have issued mixed rulings on the issue. Some have supported prediction market providers, while others have sided with state regulators. The outcome could have major implications for state tax revenue, tribal gaming rights and the future expansion of prediction markets.

With legal arguments continuing in multiple courts, many observers expect the dispute to eventually reach the U.S. Supreme Court.