Gary Gensler backs states in prediction market regulation fight

Gary Gensler, the man who spent years as crypto’s most persistent regulatory thorn, is back in the arena. This time he’s not swinging at exchanges or token issuers. He’s taking aim at prediction markets.

The former SEC and CFTC chair filed an amicus brief with the Sixth Circuit Court of Appeals on June 11-12, siding with state gaming regulators in their escalating legal battle against prediction market platforms. His core argument: Congress “categorically” did not intend for the 2010 Dodd-Frank Act to hand the CFTC exclusive federal authority to override state gambling laws when it comes to sports event contracts.

The legal argument, translated

Prediction markets like Kalshi and Polymarket have been operating under the assumption that federal CFTC approval gives them something like a nationwide pass. States disagree, arguing these platforms are effectively running sports betting operations that violate local gambling statutes.

Gensler’s brief lands squarely on the states’ side. He contends that contracts on sporting events don’t meet the statutory definition of “swaps” under Dodd-Frank, and therefore shouldn’t qualify for federal preemption over state law.

Gensler served as CFTC Chair from 2009 to 2014, meaning he was directly involved in crafting the very legislation at the center of this dispute. He then ran the SEC from 2021 to 2025. In April and May of this year, he made similar public comments, reiterating that sports betting falls under the category of “gaming,” which was expressly excluded from CFTC oversight under rules established in 2011.

A $150 billion question

The combined lifetime trading volume of Kalshi and Polymarket reached $150 billion by April 2026, with monthly trading volumes frequently surpassing $10 billion.

Kalshi, which holds CFTC registration, is currently locked in litigation challenging Ohio’s gaming restrictions. The platform’s legal theory is straightforward: federal regulation preempts state gambling law, so state-level restrictions shouldn’t apply. Gensler’s intervention could accelerate this case toward the Supreme Court.

Why this matters for crypto investors

Polymarket’s election markets drew enormous attention during the 2024 US presidential race, and the sector has only grown since. If courts side with the states, platforms like Kalshi and Polymarket could face a patchwork of state-by-state compliance requirements, with some states banning sports event contracts outright and others imposing licensing regimes that resemble traditional gambling regulation.

The current CFTC under the Trump administration has generally been more permissive toward prediction markets than its predecessor. Gensler’s brief essentially argues that this permissiveness exceeds what Congress authorized, regardless of who sits in the chair.

Investors should watch the Sixth Circuit’s ruling closely. If it reaches the Supreme Court, the decision could establish precedent not just for prediction markets, but for how federal and state regulators divide authority over any novel financial product that blurs the line between trading and gambling.

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