BlockBeats News, June 12, Gary Gensler stated in a recent court filing that prediction markets should not be construed under federal law as financial derivatives that can circumvent state gambling regulations.

The filing was submitted to the U.S. Court of Appeals for the Sixth Circuit in a lawsuit between the prediction market platform Kalshi and the state of Ohio. The key dispute in the case is whether sports event contracts are considered federally regulated "swap agreements" or fundamentally state-level gambling activities.

In the opinion filing, Gensler pointed out that the U.S. Congress did not include sports entertainment in the swap definition under the Dodd-Frank Act framework. Such contracts usually do not have the characteristics of hedging economic risks and therefore should not be covered by CFTC regulation.

Various parties, including U.S. regulatory agencies, Native American tribal organizations, and Better Markets, have also submitted briefs supporting the state regulatory position. They believe that prediction markets are no different from traditional sports betting in economic substance and could potentially erode state and tribal entertainment tax revenue systems.

The case originated from Kalshi's preemptive lawsuit against the state of Ohio to prevent enforcement actions against the platform. Previous court rulings have shown a split among different circuit courts, and the case may ultimately be appealed to the U.S. Supreme Court.

Analysts point out that the outcome of the case will directly impact the regulatory trajectory of prediction markets in the U.S. and may determine whether they will expand as a financial derivatives market or be included in state entertainment regulatory frameworks.