Former U.S. Securities and Exchange Commission Chair Gary Gensler has argued that the Commodity Futures Trading Commission does not have legal authority to regulate sports betting through prediction markets, according to an amicus brief filed with the U.S. Court of Appeals for the Sixth Circuit.
Gensler said the Dodd-Frank Act, enacted after the 2008 financial crisis, does not extend the CFTC’s jurisdiction to wagering on sports outcomes, directly challenging the agency’s current stance.
Legal clash over federal versus state control
The filing targets positions taken by current CFTC Chair Michael Selig and prediction market platform Kalshi. Both have argued that federal law grants the CFTC oversight of event-based contracts tied to sports, while several states maintain these activities fall under state gambling laws.
The dispute is part of an ongoing legal battle between Kalshi and the state of Ohio. Kalshi sued in October 2025 after the Ohio Casino Control Commission blocked it from offering sports-related contracts. A judge later denied the company’s request for a preliminary injunction.
A broader fight over market classification
At the heart of the conflict is whether prediction market contracts should be treated as federally regulated financial instruments or as gambling products governed by state law. The distinction will decide which authority regulates a fast-growing market where Americans have already traded an estimated $25 billion in 2026.
State regulators have continued to push back against federal involvement, arguing that expanded CFTC oversight would interfere with established local control over gambling.
CFTC pushes to expand oversight
The CFTC has supported Kalshi’s position and, under Selig, is actively working to broaden its authority over prediction markets. Earlier this week, the agency introduced a 267-page proposal outlining a regulatory framework for the sector.
The proposal would allow many sports-related contracts, including bets on game outcomes and player performance, while restricting certain categories such as wagers involving terrorism, assassinations, armed conflict, and highly granular “micro-markets” like individual plays or officiating decisions.
Market growth intensifies regulatory urgency
The regulatory debate comes amid rapid expansion in both sports betting and prediction markets. The global sports betting market is projected to grow from about $125 billion in 2026 to more than $153 billion by 2030.
Prediction markets have grown even faster, with monthly transaction volumes rising sharply from $1.2 billion in early 2025 to over $20 billion by January 2026.
Resource concerns and agency limits
In his brief, Gensler Ő¶ŐˇÖ‡ pointed to structural limitations within the CFTC. He noted the SEC has roughly six times the staff of the CFTC and said the commodities regulator has not sought congressional funding or developed expertise to oversee sports wagering.
Gensler concluded that both the statutory framework and the agency’s experience make it ill-suited to regulate this category.
State enforcement pressures increase
Tensions with state authorities are already producing financial consequences. In April 2026, the Ohio Casino Control Commission said it intended to fine Kalshi $5 million for allegedly operating as an unlicensed sports gaming business.
This highlights the risk facing platforms operating in a fragmented regulatory environment, where federal approval may not shield them from state enforcement.
Uncertainty ahead for traders and platforms
With multiple court cases underway, differing rulings across U.S. circuit courts could create a patchwork system in which legality varies by jurisdiction. This uncertainty leaves platforms and traders navigating unclear rules as federal and state authorities assert competing claims.
Attention is now turning to the 45-day public comment period on the CFTC’s proposal. Responses from industry participants and regulators, along with court decisions, are expected to shape how prediction markets are governed in the near term.
To see how prediction markets could evolve under clearer rules, explore our guide: prediction markets in 2026.
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