“To put the argument in the simplest real-world terms: Senate Majority Leader Harry Reid of Nevada would never have acquiesced or passively agreed to legislation that would displace an activity so critical to his state’s economy and politics by allowing sports betting only under the auspices of the CFTC,” Gensler’s report said.
Until now the courts have been divided; some have ruled in favor of prediction market providers, while others have ruled in favor of states.
The Third Circuit Court of Appeals ruled in April that the state of New Jersey could not shut down prediction markets, but the Ninth Circuit Court of Appeals panel seemed more inclined to rule in favor of the states.
The Supreme Court will likely eventually take up the issue, and Congress is snooping around, too.
amicus briefs
The CFTC, currently led by Chairman Mike Selig, filed its own amicus brief in this case last month, arguing that any event contract traded by a designated contract market overseen by the regulator is a swap.
Congress’ swap definition was broad and the language of the statutes allows CFTC-regulated companies to offer their products, according to the regulator’s filing.
Genler’s brief disagreed.
“The CFTC now raises hedging theories for some sports bets that, at best, are only weakly connected to reliable coverages of commercial risks. That connection, however, is crucial, since Congress included only those event contracts that hedge risks in a swap-like manner and are sufficiently ‘associated with a potential financial, economic, or commercial consequence,'” Gensler’s report said.
