Securities Regulation Daily Wrap Up, FEDERAL PREEMPTION—2nd Cir.: Former CFTC Chair Gensler argues federal law does not preempt states on prediction markets, (Nov 9, 2026)
Gensler contended that given the legal context at the time, Congress had “no reason” to think that a definition of swap contracts included sports bets.
In a new amicus brief, former CFTC Chair Gary Gensler argued that Congress never intended to preempt state gaming laws when it provided for federal oversight of event contracts in the Dodd-Frank Act in 2010. The brief takes the side of New York in an appeal by the Kalshi exchange of a district court ruling declining to block state gaming enforcement (KalshiEx v. Williams, No. 26-1835 (2nd Cir. Nov. 6, 2026)).
Drawing on personal experience with Dodd-Frank negotiations, Gensler said the idea that Congress “covertly” made the CFTC the nation’s sports-betting regulator “defies logic and common sense.”
Gensler added that an October 2026 CFTC interim final rule carving out sportsbook betting from CFTC oversight “has no grounding.”
Kalshi appeal. Gensler filed the brief in an interlocutory appeal by Kalshi to the Second Circuit. Kalshi is challenging a July order by a federal district court in the Southern District of New York denying its motion for injunction against enforcement by New York gaming officials who say Kalshi is offering illegal gambling.
The brief largely echoed Gensler’s arguments in previous amicus briefs filed in the Supreme Court on behalf of New Jersey and in the Sixth Circuit on behalf of Nevada.
Congress did not intend to preempt states. Gensler presented his view on Congressional intent “as someone who was there,” noting that he worked with Congress on the Dodd-Frank amendments to the Commodity Exchange Act (CEA). Dodd-Frank enacted a “Special Rule” setting forth a framework for event contracts.
Gensler observed that Dodd-Frank was aimed at the causes of the 2008 financial crisis, not sports betting. Kalshi’s interpretation “covertly but radically altering” sports-betting regulation “defies common sense,” he wrote.
“Common sense is wondering how in the real world Congress could have enacted a law that preempted Nevada gaming regulation and prohibited in-casino sports betting without then-Senate Majority Leader Harry Reid (and former Nevada Gaming Commission Chairman) noticing,” he stated.
Digging into statutory text, Gensler argued that the CEA’s text, history, purpose, and structure demonstrate sports-betting contracts are not swaps. When Congress used language for the CEA swap definition originally adopted in the Gramm-Leach-Bliley Act’s definition of “swap agreement,” it had no reason to think that language included sports bets, he asserted.
In fact, he said, the CFTC itself admitted as much in the October 2026 interim final rule that carved out sportsbook betting from CFTC jurisdiction.
“[T]here is no indication that ‘Congress intended to include [gambling products] in the swap... definition.’ To the contrary, Congress has long recognized a distinction between gambling products and derivatives contracts,” the CFTC wrote in the October 9 interim final rule.
“No grounding” for CFTC interim final rule. The rule codified that casino-style gambling products, including wagers placed on sportsbooks and casino games, are excluded from the “swap” definition. It addresses arguments by some states that giving the CFTC exclusive jurisdiction over sports-related event contracts would force all sports betting to be traded on CFTC-regulated financial exchanges.
But Gensler questioned the rule’s validity.
“That further definition, though, has no grounding in the statutory text, nor does the premise of the exclusion—that tradability is an inherent characteristic of a swap,” he wrote.
He further stated that the rule was adopted without notice and comment and was not issued jointly with the SEC as expressly required by Section 712(d) of Dodd-Frank.
This is case No. 26-1835.
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