Kostelanetz Partner Victor Suthammanont served as co-counsel to Gary Gensler—a former Chair of both the Commodities Futures Trading Commission (CFTC) and the Securities & Exchange Commission (SEC)— on an amicus brief filed in the U.S. Court of Appeals for the Sixth Circuit in KalshiEx LLC v. Matthew T. Schuler, et. al., a case in which prediction market company Kalshi is challenging Ohio’s right to regulate sports event contracts listed on Kalshi’s exchange.
Victor, who previously worked as Gensler’s Enforcement Counsel at the SEC, served as co-counsel with attorneys at Zuckerman Spaeder LLP on the brief.
In the case leading to the Sixth Circuit appeal, Kalshi challenged the Ohio Casino Control Commission’s attempts to regulate it as a sportsbook, claiming that it is instead a federally regulated entity under the CFTC and federal commodities laws preempted state gaming laws. The U.S. District Court for the Southern District of Ohio denied Kalshi’s petition for an injunction barring Ohio from regulating it as a sportsbook. Kalshi appealed that ruling to the U.S. Court of Appeals for the Sixth Circuit.
In the amicus brief, Gensler, who served as CFTC Chairman from 2009 to 2014 and was intimately involved in the Congressional negotiations over the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, provides a history of commodities regulation in the United States and argues that Congress never intended to make the CFTC “a nationwide sports betting regulator” nor did it intend to deny states their “traditional police power to regulate gaming, including sports betting.”
The brief argues that Congress’ decision to include some “event contracts within the statutory definition of swap” was not intended to extend and does not extend to sports betting contracts. Among other things, the brief notes that sports betting contracts are not specifically included within Dodd-Frank’s statutory definition of swap, and no one in Congress at the time called for federal preemption of states’ or their gaming commissions’ authority over sports betting.
Additionally, the brief argues—contrary to Kalshi’s argument that current law’s definition of “swap” applies to their “events contracts,” including for sporting events—that Congress does not and would not have made “fundamental changes in the balance of state and federal power” in a statutory definition.
“It’s not the kind of thing Congress hides in a subpart of a definition,” the brief states. “If Dodd-Frank had preempted the state on sports betting, it would have been one of the biggest stories about Dodd-Frank at the time. But nobody ever mentioned it.”
Gensler in particular notes that then-Senate Majority Leader Harry Reid of Nevada was a staunch advocate of states’ rights to regulate gaming, given Nevada’s long history of serving as a gaming and casino mecca.
“To put the argument in the plainest real-world terms: Senate Majority Leader Harry Reid of Nevada would never have consented to or passively accepted legislation displacing an activity so critical to his state’s economy and politics by permitting sports betting only under CFTC auspices,” the brief states.
The full brief can be viewed here.
About Victor
Victor served for a decade as a securities enforcement attorney in the U.S. Securities and Exchange Commission, including as a Senior Trial Counsel and as the Enforcement Counsel to Chair Gary Gensler. Prior to his extensive experience in the SEC’s Division of Enforcement, Victor represented and advised clients in private practice in complex commercial disputes and litigations, as well as in internal and governmental investigations.