The prediction market in the United States faced additional resistance this week with two heavyweight names joining the fray. Former CFTC Chairman Gary Gensler officially joined the judicial hunt against Kalshi—on June 11, he submitted an amicus brief in the Ohio case against Kalshi, and on Wednesday, he criticized the current CFTC path at the "New Normal" webinar hosted by the Indian Gambling Association. On the same day, the world's largest derivatives exchange, the Chicago Mercantile Exchange Group, filed a lawsuit in the Federal Court of the District of Columbia, directly targeting the CFTC's decision to approve Kalshi's listing of permanent futures. One is a veteran who managed the CFTC at the depths of the financial crisis, and the other is a derivatives giant with a market value of over $80 billion—two forces colliding with the prediction market from completely different directions, creating ever-expanding cracks.
"Congress never intended for the CFTC to act as the national gambling regulator"
Gensler's core argument is succinct to the point of being blunt. In his brief, he wrote: "Congress never considered betting on sports event outcomes, wagering on individual player scores per quarter, or sports betting-style parlays as swap contracts. These contracts do not involve hedgers and speculators meeting, transferring risk—this is not a swap." He gave a more vivid version at the seminar—originally, everyone at the CFTC "clearly did not attempt to let a federal regulatory agency manage sports betting." If sports event contracts were truly swaps, then every legal sports bet made in states and tribal casinos over the past decade would be legally untenable—"This is highly unlikely to be Congress's legislative intent."
This "swap argument" has become a decisive factor in multiple prediction market lawsuits. Nevada's Carson City District Court Judge Jason Woodbury initially approved a temporary injunction against Kalshi, but eventually revoked it—the core reason being his changed judgment on the swap issue. This remains the only case in the United States where a court has ordered the suspension of prediction market trading within a specific jurisdiction. Gensler also quoted the late Supreme Court Justice Antonin Scalia, describing the CFTC's current practices as "trying to hide an elephant in a mousehole"—using vague regulatory language to seize enormous power for the executive branch, something the Supreme Court has repeatedly denied.
Only Commissioner at CFTC: "The chairman has the final say"
Voices from the prediction market side are not silent. Novig's Chief Regulatory Officer Elie Mishory, who previously held the same position at Kalshi and was an advisor to both the CFTC and SEC, posted on LinkedIn this week, stating: "The CFTC is a chairman-driven agency. So is the SEC. It was clearer than ever when Gensler was at the helm of the SEC. The chairman sets the agenda, allocates staff priorities, decides what gets pushed forward, what gets shelved, what goes to vote. If the chairman has the votes, the agenda moves forward; without them, it basically stalls."
By this logic, the current chairman, Michael Selig, has a much more positive attitude towards the prediction market than his predecessor—under his administration, the CFTC has sued nine states to affirm federal jurisdiction over platforms, including Kentucky this week. The first set of prediction market regulatory proposals has also been released, and if approved, many sports event contracts will be untouched. However, since taking office in December last year, Selig has been the only commissioner at the CFTC—the process of presidential nomination and Senate confirmation has not progressed for anyone else. Gensler does not buy this, saying on Wednesday that he participated in thousands of votes between the CFTC and SEC, "Even if sometimes slow, sometimes cumbersome, three to five people debating together, seeking compromise, only makes this country stronger."
CME's aggression: perps moved Wall Street's cheese
CME chose to sue the CFTC on June 18, focusing not on sports contracts but on another more controversial type—permanent futures. Perps, as they are known, are derivative contracts without an expiration date, allowing speculators to hold positions indefinitely. Supporters call it innovation, while critics believe it encourages extreme leverage and threatens market stability. On Kalshi, the most popular perps markets are tied to cryptocurrency prices—the 24-hour trading volumes for Bitcoin and Ethereum perpetual contracts are $240 million and $105 million respectively. In the first week of listing, the cumulative trading volume of perps on Kalshi exceeded $1 billion.
CME is clearly uncomfortable with this. The language in the lawsuit is unapologetic: "The chairman overturned Congress's definition of 'swap' with a stroke of the pen, bypassing the regulatory framework Congress established for such derivatives. Shortly thereafter, Kalshi self-certified a dozen additional cryptocurrency perpetual contracts under the chairman's order, generating over one billion dollars in trading volume." CME is asking the court to revoke Kalshi's approval of cryptocurrency perpetual contracts and rule that **"digital commodity perpetual contracts fall under 'swaps' as defined by the Commodity Exchange Act."** Once this ruling is in place, the CFTC will no longer have the authority to authorize Kalshi and other designated contract markets to list such products.
The CFTC's response to the Financial Times escalated the conflict to a political dimension—accusing CME of "waging a legal battle against the Trump administration's agenda to support innovation." Readers following PASA's official website should sense the dangerous nature of this rift: the two major growth engines of the prediction market—sports contracts and cryptocurrency perpetual contracts—are simultaneously facing challenges on judicial, regulatory, and political fronts. If sports contracts are halted by state judicial actions and perps are cut off by CME's lawsuit, the growth narrative that the prediction market relied on during a period of fervent capital influx will face a fundamental disproof. CME can afford to lose a lawsuit, but Kalshi and Polymarket cannot afford to lose a product line.
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This article is from "PASA-Global iGaming Leaders," a gambling industry news channel:https://t.me/pasa_news
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