U.S. Prediction Market Regulatory Jurisdiction Sparks Dispute: Former SEC and CFTC Chairs Support State-Level Oversight

This Thursday, former SEC and CFTC Chair Gary Gensler officially submitted court documents to the U.S. Court of Appeals for the Sixth Circuit regarding the regulatory jurisdiction of prediction markets.

Gensler believes that businesses related to prediction markets cannot, in the first place, supersede each state’s regulatory rules, directly targeting the increasingly intensifying regulatory disagreements between the federal and local governments in this area.

The statement comes out of a legal dispute between the Kalshi (formerly KalshiEx) platform and the state of Ohio. Kalshi previously brought a lawsuit in an effort to avoid state-level regulation, but the lawsuit was dismissed by a federal judge in March this year.

In his amicus brief filed with the court, Gensler based his analysis on the Dodd-Frank Act and the Commodity Exchange Act, arguing that sports prediction contracts do not fall within CFTC’s federal regulatory scope.

In his view, these contracts essentially fit within the scope of constraints under state laws related to sports betting. Therefore, the federal government does not have the authority to override state regulatory rules, and states should retain primary oversight of sports prediction markets.

Organizations that co-file an amicus brief with Gensler include the Indiana Sports Betting Association and the American Sports Betting Association. These organizations also support state-level regulation, arguing that sports prediction markets are not substantively different from traditional sports betting.

However, the U.S. regulator CFTC has a significantly different position. Current CFTC Chair Mike Selig insists that event contracts are financial derivatives and should fall under the CFTC’s exclusive regulatory authority.

In summary, this jurisdiction battle continues to escalate, and the related case will most likely be appealed to the Supreme Court. The ruling’s outcome will also profoundly shape the compliance direction of the U.S. prediction market industry.

#GaryGensler #Prediction market regulation jurisdiction