Kostelanetz Partner Victor Suthammanont filed amicus briefs on behalf of Gary Gensler—a former Chair of both the Commodity Futures Trading Commission (CFTC) and the Securities & Exchange Commission (SEC)— in two cases related to states’ rights to regulate sports event contracts facilitated by prediction market exchanges.
The briefs support Wisconsin and New York in their efforts to regulate prediction market exchanges under state gaming laws. The cases are:
- CFTC v. Wisconsin, a 7th Circuit case in which the CFTC is seeking to enjoin the state of Wisconsin from suing prediction markets run by Kalshi, Coinbase, Polymarket, Crypto.com, and Robinhood.
- KalshiEx LLC v. New York, a 2nd Circuit case in which Kalshi seeks to enjoin the state of New York from regulating it under state gaming laws.
Victor, who previously worked as Gensler’s Enforcement Counsel at the SEC, served as co-counsel on both briefs with attorneys at Zuckerman Spaeder LLP.
The question in both the Wisconsin and New York cases is “what, if anything, Congress did in [the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act] with regard to sports betting. Kalshi’s argument is that, by encompassing some event contracts within the statutory definition of swap, Congress also included sports-betting contracts within the swap definition and, as a result, the [Commodity Exchange Act (CEA)] operates to preempt state gaming laws. The answer—from Amicus as someone who was there—is that Congress did nothing of the sort,” both amicus briefs explain.
The current CFTC has agreed with Kalshi that the federal government has “exclusive jurisdiction” over prediction markets because the agency interprets changes to the legal definition of “swap” in Dodd-Frank to include sports event contracts sold and traded by prediction markets.
However, many states have pushed back on that interpretation and are battling the CFTC and/or prediction market companies in federal court to affirm their right to regulate prediction sites under state gaming laws.
The Gensler amicus brief urges both the 7th Circuit Court of Appeals and the 2nd Circuit Court of Appeals to affirm lower-court rulings siding with Wisconsin and New York, respectively.
Referencing Gensler’s personal knowledge, as the then-CFTC Chair, of congressional negotiations over Dodd-Frank, the briefs note:
“When Congress amended the CEA through Dodd-Frank, it was addressing the causes of the 2008 financial crisis, not undoing federal policy against sports betting and displacing traditional state and tribal regulation. Congress did not include sports-betting contracts within the statutory definition of swap. Nor did it transfer jurisdiction over sports betting from the states to the CFTC.”
Victor has filed amicus briefs on behalf of Gensler in other related prediction market cases, including in the U.S. Supreme Court as it considers whether to consider Flaherty v. KalshiEx LLC, a case in which New Jersey gaming regulators are requesting that the high court resolve a circuit split on whether Kalshi is subject to state gambling regulations.
Victor has also filed an amicus brief on behalf of Gensler in the 6th Circuit Court of Appeals in KalshiEx LLC v. Matthew T. Schuler, et. al., a case in which Kalshi is challenging Ohio’s right to regulate sports event contracts listed on its exchange.
Read the full briefs:
About Victor Suthammanont
Victor Suthammanont 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.
