Gensler Says Kalshi’s Swap Theory Would Outlaw Off-Exchange Sports Bets

Gensler, who chaired the Commodity Futures Trading Commission (CFTC) from 2009 to 2014 and later led the SEC, submitted a 37-page amicus brief supporting New Jersey. He is not a party to Flaherty v. KalshiEX, No. 26-299.

Kalshi maintains that its exchange-listed sports contracts are swaps under federal commodities law, putting them under CFTC rather than state gambling oversight. Gensler counters that Congress passed Dodd-Frank to address the 2008 financial crisis and regulate derivatives, not to replace state sports-betting rules.

The Problem Goes Back to October 2012

Section 2(e) of the Commodity Exchange Act bars people who are not eligible contract participants from entering swaps outside designated contract markets. Most ordinary retail bettors would not qualify for that exemption.

Gensler says the definition cannot change simply because someone places a sports bet at a different venue. Taken to its conclusion, Kalshi’s interpretation would make off-exchange retail wagers illegal from October 2012, including bets at Nevada sportsbooks that were otherwise permitted at the time.

That is a hypothetical consequence of Kalshi’s legal position, not a court finding that sportsbooks broke federal law. Gensler also points out that sports betting never came up during his 54 appearances before Congress as CFTC chair, despite his role in implementing the derivatives reforms.

His objection is not entirely new. In June, his lawyers presented a similar position to the Sixth Circuit in an Ohio case. The October submission puts that argument before the Supreme Court as it considers whether to hear New Jersey’s petition.

NFL and Tribal Groups Submit Separate Briefs

Gensler was one of five supporters to submit briefs on October 8. The others were the NFL, a coalition of 145 tribes and tribal organizations, former Senator Christopher Dodd and the American Gaming Association. A separate filing from Ohio, 38 other states and Washington, DC, had arrived a day earlier.

They are pressing the justices to take up a question with different consequences for each group: whether federally supervised sports contracts can operate nationally without following individual states’ gambling rules.

Kalshi’s Response Is Due November 9

The Third Circuit backed Kalshi’s position at the preliminary-injunction stage in April. But the Sixth Circuit later rejected Kalshi’s bid for protection in Ohio and Tennessee, a decision 15M covered in September. Kalshi argues that a patchwork of state rules is unworkable for a national market, Reuters reported.

The Supreme Court has not agreed to hear the case. Its docket gives Kalshi until November 9 to respond to New Jersey’s petition. For now, Gensler’s filing adds the account of a former CFTC chair to an unresolved dispute over which regulator gets the final say.