Market forecaster Kalshi has spent months arguing that betting on sports results should be considered a form of financial trading. Now, the former chairman of the SEC and CFTC Gary Gensler has joined the discussion that supports Ohio’s opposition against Kalshi, arguing that Congress did not intend for federal regulators to control the American market of $165 billion in betting.
Why Gensler Says Congress Didn’t Want This
In amicus Briefly filed and the Sixth Circuit Court of Appeals, Gensler argued that the Dodd-Frank Act of 2010 was designed to manage financial problems after the 2008 financial crisis, not allowing sports betting nationwide.
Gensler, who chaired the Commodity Futures Trading Commission (CFTC) from 2009 to 2014 and later became SEC chairman, said lawmakers have not discussed giving the agency more power over gaming.
“I testified in Congress 54 times. No one said we should give the CFTC the authority to regulate sports betting.”
According to him, Congress is focused on avoiding another financial crisis, not creating a federal system for gambling.
The listing also highlights the size of the market at risk. Sports betting has grown into a $165 billion annual industry, making it hard to believe that such a regulation would be hidden within a tax reform bill.
A $165 Billion War
The lawsuit began after Kalshi challenged the actions of the Ohio administration. The platform fought to prevent states from banning sports betting contracts, arguing that the CFTC already oversees the trade.
What makes this case so important is the money involved. The US betting market is estimated to generate about $165 billion a year. States, casinos, color game operators, sportsbooks, and betting markets have a stake in who controls the market.
Supporting Ohio alongside Gensler is the Indian Gaming Association, more than 30 Native American tribes, 11 tribal organizations, the American Gaming Association, and Fair Trade.
Their concern is that if Kalshi wins, the state regulators may lose control over the sporting events.
Is It Trading Or Gambling?
At the heart of this case is a surprisingly simple question, is sports betting a financial transaction or a gamble?
Kalshi argues that event contracts exist in capital markets. Even critics argue that calling sports betting a financial product doesn’t change the facts.
Gensler’s writing also cites the well-known fact that Congress is “hiding elephants in holes,” arguing that lawmakers cannot quietly change the regulation of sports betting through the use of legislative technology.
The battle is becoming one of the most important legal battles facing the prediction markets. Losses can strengthen the government’s leadership and slow growth.
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