Gensler Yanks CFTC's Sports Betting Pass, Says Dodd-Frank Wasn't Written on a Parlay Slip

Former Commodity Futures Trading Commission and Securities and Exchange Commission chair Gary Gensler filed an amicus brief late Thursday with the Sixth Circuit Court of Appeals, arguing that Congress did not give the CFTC authority over nationwide sports wagering when it passed the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, and that state gaming laws still apply. The brief was filed in support of Ohio in an appeal brought by Kalshi after U.S. District Court Judge Sarah Morrison for the Northern District of Ohio denied the platform's request for a preliminary injunction challenging state cease-and-desist orders.

Gensler filed alongside a coalition of amici backing the State of Ohio, including the Indian Gaming Association, the American Gaming Association, and Better Markets, according to gaming attorney and prediction market expert Daniel Wallach. Wallach noted in a June 12 post that 30 Native American tribes and 11 tribal associations had also filed an amicus curiae brief in support of Ohio in the Sixth Circuit appeal. Nevada filed a separate brief, and co-signers included the Utah Attorney General, representing a state where sports betting is outlawed entirely.

Gensler, who chaired the CFTC from 2009 to 2014 and helped negotiate Dodd-Frank following the 2008 financial crisis, said the law was written to regulate swaps and curb risky derivatives, not to authorize sports betting. "Millions of people were out of work. Millions of people had lost their homes," he said in a CNBC interview, describing legislation aimed at credit-default and interest-rate swaps. "I testified in Congress 54 times, and literally Republicans and Democrats alike, nobody said, oh, you know what? Gensler, I think we should give your small agency under President Obama authority to regulate sports betting," Gensler said. The brief notes that no one drafting the statute "was attempting to put a curve ball by the Senate Majority Leader to legalize a national sports-betting regime."

The filing invokes the court's warning that Congress does not "hide elephants in mouseholes," contending that preempting a $165-billion-a-year industry would not be tucked into "a subpart of a definition." Gensler also opposed the CFTC's new 267-page proposal, which would allow betting on sports outcomes while prohibiting contracts tied to war, assassination, and certain injury- and referee-related events.

As SEC chair, Gensler led one of the most aggressive crypto enforcement campaigns in the agency's history, bringing roughly 100 actions and describing the industry on his way out as "a field that was built up around noncompliance." He is now siding with states against a CFTC-blessed market.