Gensler Rejects Prediction Markets Overruling State Sports Betting Laws
1h ago|3 min readQuick Read
Fazen Markets Editorial Desk
Collective editorial team · methodology
prediction-marketsgary-gensler
Fazen Markets Editorial Desk
Collective editorial team · methodology
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Former Securities and Exchange Commission and Commodity Futures Trading Commission Chair Gary Gensler argued that event contract prediction markets do not supersede state-level sports betting prohibitions. Gensler joined a coalition of interest groups in a comment letter to the CFTC on June 12, 2026. The letter contends that prediction market platforms are overstepping legal bounds by offering sports-related contracts in jurisdictions where such wagering remains illegal. The regulatory challenge arrives as prediction markets gain traction among retail and institutional participants.
The CFTC is currently reviewing a proposal from the Consumer Financial Protection Bureau to potentially expand the types of event contracts permitted on designated contract markets. This review has sparked intense debate between free-market proponents and consumer protection advocates. Gensler's involvement carries significant weight due to his recent tenure overseeing both the SEC and CFTC, agencies with direct jurisdiction over many prediction market operators. His stance aligns with state attorneys general and gaming commissions seeking to protect established regulatory frameworks and tax revenue streams from legalized sports betting. The debate echoes the 2018 Supreme Court decision in Murphy v. NCAA, which overturned the federal ban on sports betting but empowered states to set their own rules. Since that ruling, 38 states have launched legal sports betting markets, generating over $4.3 billion in state tax revenue.
The prediction market industry has grown substantially, with leading platform Polymarket reporting over $100 million in monthly trading volume. Kalshi, a CFTC-regulated platform, has seen user growth exceed 200% year-over-year. UPS stock traded at $108.65 as of 07:29 UTC today, reflecting a 0.72% daily gain within a $103.64 to $108.59 range. This performance slightly outpaces the broader SPX index, which has gained 8% year-to-date. Traditional sports betting handle in the United States reached $119.8 billion in 2025, according to the American Gaming Association. The largest sportsbook operators, DraftKings and FanDuel, control a combined 75% market share in states where they operate.
| Metric | Prediction Markets | Traditional Sportsbooks |
|---|---|---|
| Monthly Handle (Est.) | $100M+ | $10B+ |
| Regulatory Oversight | CFTC | State Gaming Commissions |
| Market Access | Global | State-by-State |
Gensler's position creates immediate regulatory headwinds for crypto-native prediction markets like Polymarket, which settled a prior CFTC enforcement action in 2024. Platforms operating with a clearer CFTC designation, such as Kalshi, may face fewer immediate challenges but still contend with state-level enforcement actions. Established online sportsbook operators like DraftKings (DKNG) and FanDuel parent Flutter Entertainment (FLUT) stand to benefit from reduced competition if prediction markets face restrictions on sports contracts. These companies have invested heavily in compliance infrastructure tailored to state requirements. A counter-argument suggests prediction markets serve a distinct purpose as information aggregation tools rather than pure gambling vehicles, providing valuable forecasting data. Trading flow data indicates institutional players are increasingly using prediction markets to hedge event risk, particularly around political elections and macroeconomic releases.
Market participants should monitor the CFTC's final ruling on the CFPB's proposal, expected by Q3 2026. The commission's decision will establish a clearer boundary between permissible event contracts and prohibited gambling activities. Key levels to watch include the $100 million monthly volume threshold for prediction markets, a breach of which could attract greater regulatory scrutiny. State legislative sessions in California, Texas, and Florida will also consider new bills related to sports betting and event contracts in early 2027. Any federal legislation attempting to create a unified framework for prediction markets, akin to the 2024 FIT for the 21st Century Act, would represent a significant catalyst but faces long odds in a divided Congress.
Prediction markets are exchange-traded platforms where participants buy and sell contracts based on the outcome of future events. Contracts typically settle at $1 for a correct prediction and $0 for an incorrect one. These markets differ from traditional sportsbooks by often focusing on broader events like elections, economic indicators, and climate outcomes, not just sporting events.
Gensler's opposition to sports-based event contracts directly challenges crypto platforms like Polymarket that often facilitate trading with stablecoins and operate with global accessibility. His stance suggests a preference for bringing these platforms under existing state gambling frameworks rather than allowing them to operate under potentially more lenient CFTC oversight as markets for price discovery.
Full federal legalization would require an act of Congress explicitly exempting certain event contracts from existing gambling laws, similar to how futures contracts are treated. A more likely path is state-by-state legalization, mirroring the rollout of sports betting, which could take a decade or more to achieve nationwide coverage, if ever.
A former top US regulator argues prediction markets must comply with state gambling laws, not circumvent them.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.
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