Gensler tells Second Circuit Dodd-Frank did not put sports betting under CFTC control

Former Commodity Futures Trading Commission Chairman Gary Gensler has urged the U.S. Court of Appeals for the Second Circuit to reject KalshiEX’s claim that federal derivatives law overrides New York’s gambling restrictions on its sports-event contracts.

In a Nov. 6 amicus brief in KalshiEX LLC v. Williams, No. 26-1835, Gensler supported the New York State Gaming Commission and its officials. He argued that Congress neither put sports-betting contracts within the legal definition of swaps nor transferred authority over sports wagering from states to the CFTC.

Gensler’s filing said the 2010 Dodd-Frank Act was a response to the 2008 financial crisis, not an effort to displace traditional state and tribal gaming regulation. He argued that the text, history, purpose and structure of the Commodity Exchange Act show that sports-betting contracts are not swaps, and that sports bets do not serve the hedging and price-discovery functions central to derivatives markets.

The former chairman drew on his involvement in negotiating and implementing Dodd-Frank and amendments to the Commodity Exchange Act. Gensler led the CFTC from 2009 to 2014 and later chaired the Securities and Exchange Commission from 2021 to 2025.

His brief challenged Kalshi’s interpretation as one under which Congress had covertly made the CFTC the country’s sports-betting regulator, an outcome he said “defies logic and common sense.” He also said Congress had “no reason” to understand swap-definition language, first used in the Gramm-Leach-Bliley Act, as covering sports bets.

The appeal arose after the Southern District of New York denied Kalshi’s request for a preliminary injunction on July 7. The district court found that Kalshi had not shown New York’s gambling laws were preempted by the Commodity Exchange Act, and held that the company could comply with both federal law and the state’s restrictions.

New York’s Gaming Commission had sent Kalshi a cease-and-desist demand alleging it was operating an unlicensed mobile sports-wagering platform. In a separate state-court petition, New York alleged that Kalshi’s website and app allowed users to wager on sports and other events without a Gaming Commission licence.

The Second Circuit denied Kalshi’s request for an injunction pending appeal on Nov. 3, together with similar motions in two related appeals, finding the appellants had not shown that such relief was warranted.

Gensler also attacked the CFTC’s Oct. 9 interim final rule excluding casino-style gambling products, including sportsbook wagers and casino games, from the definition of swap. The agency said the rule clarified that such products are not derivatives and fall outside its regulatory remit. Gensler argued that the sportsbook carve-out lacked grounding in the statutory text, was adopted without notice and comment, and was not issued jointly with the SEC as he said Dodd-Frank Section 712(d) required.

On the same day, the CFTC proposed a rule that would include event contracts based on sports, politics, culture and weather within the swap definition. CFTC Chairman Michael S. Selig said the agency considered those event contracts commodity derivatives within the CFTC’s exclusive jurisdiction.

The New York case differs from an April 6 Third Circuit decision, which found Kalshi had shown a reasonable likelihood of success on its argument that the Commodity Exchange Act preempted New Jersey law as applied to sports-related event contracts traded on a CFTC-licensed designated contract market.