Gensler Backs States Against CFTC in Prediction Market Battle
By John Nada·Jun 12, 2026·5 min read
Gary Gensler sides with states against CFTC in prediction market disputes, emphasizing state's rights over federal jurisdiction.
Gary Gensler, a name synonymous with tough regulatory stances in the crypto world, has stepped into a different arena: prediction markets. As the former chair of both the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC), Gensler has now become an unlikely ally to states contesting the CFTC's endorsement of prediction markets. His position is clear: concerns over gambling and addiction should remain within the purview of state governance.
This legal saga sees state regulators, tribal entities, and gaming groups aligning against Kalshi, a platform asserting federal jurisdiction over prediction markets. The contention has spread like wildfire, with thirty Native American tribes and eleven tribal associations voicing support for Ohio in the Sixth Circuit Court of Appeals. This follows Kalshi's unsuccessful attempt to secure a preliminary injunction against state cease-and-desist orders, denied by federal district judge Sarah Morrison.
Central to this dispute is the interpretation of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Enacted in response to the 2008 financial crisis, the Act was designed to regulate financial derivatives, not to extend the CFTC's reach into sports betting. Gensler, who played a pivotal role in shaping this legislation, has been vocal in his assertion that the Act was never intended to grant the CFTC authority over sports wagering.
Gensler's testimony before Congress, a staggering 54 times during his tenure, did not once encounter a suggestion that the CFTC should oversee sports betting. This reinforces his argument that the Dodd-Frank Act was not crafted to facilitate a federal takeover of a sector traditionally managed by states. "Congress does not hide elephants in mouseholes," his amicus brief states, underscoring the notion that such a significant shift in regulatory power would not be subtly embedded within the legislation.
Minnesota, a state that has taken a decisive stance against prediction markets, has banned them outright, criminalizing their operation and advertisement. This bold move sparked a swift response from the CFTC, which filed lawsuits against six states to protect what it sees as its regulatory domain. As legal battles unfold in sixteen states, the tension between federal and state jurisdiction grows more palpable.
The Trump administration further complicates the landscape by backing the CFTC's position, deeming the regulation of prediction markets a matter of national significance. The administration's support is not just rhetorical; it has materialized in legal actions, notably when the Department of Justice joined the CFTC in suing Minnesota shortly after Governor Tim Walz signed the state's prediction market ban into law.
Gensler's criticisms extend to the CFTC's new 267-page proposal, which seeks to allow betting on sports outcomes while prohibiting contracts related to war, assassination, and other sensitive topics. He views this as a misguided attempt to overturn a 2011 unanimous decision that banned similar contracts. "No, no," Gensler said, dismissing the proposal as a step in the wrong direction.
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The stakes in this legal confrontation are immense. With billions of dollars in potential revenue on the line, states and the federal government are locked in a high-stakes battle over who controls the reins of prediction market regulation. States argue that they are better equipped to manage the societal impacts of gambling, such as addiction, while the federal government insists on maintaining its jurisdictional authority.
Among those siding with Ohio are influential organizations like the Indian Gaming Association and the American Gaming Association, emphasizing the broad coalition supporting state sovereignty. The Utah Attorney General, from a state where sports betting is entirely outlawed, also lends his voice to this chorus, underscoring the diverse interests opposed to federal encroachment.
The legal discourse is further enriched by references to the major-questions doctrine, a legal principle that requires clear congressional authorization for significant expansions of agency authority. Kalshi's legal strategy, which invokes not only Dodd-Frank but also the Commodity Futures Modernization Act of 2000 and the CFTC Act of 1974, aims to anchor its claim of exclusive federal jurisdiction in longstanding statutory frameworks.
As these proceedings advance, the question of jurisdiction remains a pivotal issue. Should prediction markets be classified as a form of gambling, subject to state regulation, or as financial instruments under federal oversight? The resolution of this question could redefine the regulatory landscape of American gambling.
Gensler's involvement adds a layer of complexity and credibility to the states' case. His regulatory background and firsthand experience with the Dodd-Frank Act lend weight to the argument that Congress did not intend for the CFTC to oversee sports betting. His stance highlights a fundamental tension in American governance: the balance between state sovereignty and federal authority.
The outcome of this legal battle will have far-reaching implications, not just for prediction markets, but for the broader domain of state versus federal power in regulatory matters. As both sides prepare for the next rounds of legal challenges, the eyes of the nation are on the courts, awaiting a decision that could reshape the future of gambling regulation in the United States.