Gary Gensler, the former SEC chair, has backed states in their regulatory battle over prediction markets, arguing that Congress never intended to grant the federal government exclusive control over sports betting oversight.
In a statement addressing the ongoing jurisdictional dispute, Gensler asserted that Congress "categorically" did not create a federal monopoly on sports betting regulation. His position supports state-level authority to regulate prediction markets within their borders, a stance that carries weight given his recent tenure leading the SEC and his prior experience at the CFTC.
The prediction market sector has become a flashpoint for regulatory conflict. Platforms like Polymarket operate in a gray zone, offering price predictions on elections, sports events, and other outcomes. The federal government has traditionally claimed authority over commodity derivatives and gambling markets, while states argue for concurrent or primary jurisdiction over betting activities within their boundaries.
Gensler's intervention reflects a broader tension between federal and state regulators. The CFTC oversees commodity futures, while the SEC has pushed for broader crypto and derivative oversight. Meanwhile, states have moved to establish their own frameworks for sports betting and prediction markets following the 2018 Supreme Court decision that struck down the federal sports betting ban.
Prediction markets have exploded in popularity, with on-chain trading volumes surging ahead of major political and sporting events. Polymarket, built on the Polygon network, has become the dominant player in the space. The platform generated billions in notional trading volume during the 2024 election cycle, demonstrating both the sector's appeal and its regulatory vulnerability.
Gensler's backing of state authority represents a notable shift from his aggressive stance toward crypto regulation during his SEC tenure. His support strengthens the legal footing for states seeking to regulate prediction markets independently and could influence how federal agencies handle their own jurisdiction claims.
The dispute matters for market operators and users alike. Federal enforcement actions have targeted prediction market platforms in the past. A clearer delineation between state and federal authority could reduce legal uncertainty for platforms and traders. Conversely, a patchwork of state regulations might create compliance headaches for national platforms attempting to operate across multiple jurisdictions.
The outcome will shape how prediction markets evolve in the United States. States may move more aggressively to license and regulate platforms operating within their borders, while platforms could adapt their operational models to comply with varying state requirements rather than awaiting federal preemption.