Overview
Former Senator Christopher Dodd[1] and former Commodity Futures Trading Commission Chairman Gary Gensler[2] have filed separate amicus briefs supporting New Jersey’s petition for Supreme Court review in Flaherty v. KalshiEX, LLC, No. 26-299. Both challenge the Third Circuit’s conclusion that Kalshi was likely to succeed on its claim that federal commodities law preempts New Jersey’s regulation of its sports event contracts. The briefs ask the Court to take the case; they do not change the governing law.
Their central argument is straightforward: Congress enacted Dodd-Frank to regulate financial derivatives, not to move sports-betting oversight from states and tribes to the CFTC. Dodd offers the perspective of a principal legislative sponsor. Gensler draws on the history of the swap definition and the CFTC's implementation of Dodd-Frank. Although the case concerns Kalshi, their arguments could apply to other designated contract markets (DCMs) offering similar products.
Two separate questions: Are sports contracts swaps, and does federal law preempt state gaming laws?
The briefs challenge both parts of the federal-preemption argument. First, they contend that sports event contracts are not swaps under the Commodity Exchange Act (CEA).[3] Second, they argue that even if the contracts are swaps, the CEA does not displace state gaming laws. Those are separate questions, and resolving the first does not necessarily resolve the second.
On classification, both briefs focus on CEA § 1a(47)(A)(ii), which covers certain contracts whose payments depend on an event associated with a potential financial, economic, or commercial consequence. They argue that the contract’s payout cannot itself supply the economic consequence needed to bring the underlying event within that definition. They also dismiss the effects of sporting events on advertisers, sponsors, broadcasters, and franchises as too indirect, emphasizing hedging and price discovery as the purposes of derivatives regulation. Dodd points to parlays combining unrelated games or player performances as especially difficult to reconcile with those purposes.[4]
On preemption, the briefs argue that CEA § 2(a)(1)(A)'s grant of exclusive jurisdiction does not give federally regulated markets blanket immunity from state gaming laws. They rely on savings clauses and provisions elsewhere in the statute that expressly displace state law. Both highlight the Sixth Circuit's alternative holding that state law was not preempted even if the contracts were swaps. Gensler also acknowledges that the Ninth Circuit recognized preemption for swaps traded on a DCM but concluded that the sports contracts before it were not swaps. The circuit disagreement thus extends beyond the definition of "swap."[5]
One important distinction is between a market's economic function and an individual trader's motive. As Gensler recognizes, hedging markets need speculators as counterparties. A buyer’s lack of a hedging purpose therefore does not, by itself, put a contract outside the swap definition. The statutory question is whether the underlying event meets the economic-consequence requirement—not whether every purchaser is hedging an existing exposure.
What Dodd and Gensler add to the debate
Dodd emphasizes Dodd-Frank's origins in the financial crisis, contemporaneous statements by Senator Blanche Lincoln about sports-related event contracts, and the potential loss of state and tribal consumer protections. He argues that federal derivatives oversight is not a substitute for gaming rules governing age limits, advertising, self-exclusion, and permissible wagers.[6]
Gensler traces the event-contingency language to the Commodity Futures Modernization Act of 2000 and the development of weather derivatives. In his view, Congress carried that language into Dodd-Frank to cover instruments used to manage commercial risks. He also points to the absence of a sports-betting mandate in the implementation record, discusses Senator Harry Reid's role in the legislation, and asks whether a broad reading of the swap definition could require sportsbooks to register as swap dealers. These arguments offer context for interpreting the statute, but they do not independently establish its scope.[7]
Gensler's suggestion that Senator Harry Reid would never have allowed this result needs to be considered in its historical setting. In 2010, there was no nationwide, state-licensed sports-betting industry for Congress to consider displacing. Nevada stood largely alone, with limited forms of sports wagering grandfathered elsewhere. The US market familiar today developed after Murphy v. NCAA[8] in 2018, and today's sports event contracts are an outgrowth of the innovation and liquidity found in modern sportsbook markets in the United States and internationally. Congress's failure to debate CFTC oversight of that evolving market says more about the world in which it legislated than about a deliberate decision to exclude products that would emerge years later. The claim that Reid "wouldn't have allowed it" risks projecting today's dispute onto a legislative debate conducted under very different circumstances.
The Special Rule and Rule 40.11
Both briefs reject the argument that the CEA's Special Rule for event contracts necessarily makes gaming contracts swaps. The provision covers agreements, contracts, transactions, or swaps in excluded commodities and allows the CFTC to prohibit specified contracts after a public-interest determination. Dodd and Gensler describe it as a safeguard against gambling on derivatives markets, not an authorization for nationwide sports betting.[9]
Gensler also argues that, when the CFTC adopted Rule 40.11 in 2011, it made a categorical public-interest determination against gaming contracts. On that reading, no further contract-specific determination is needed once a contract is found to involve gaming.
These arguments raise distinct issues: what the Special Rule authorizes; what Rule 40.11 prohibits; whether a product is a swap; and whether federal law preempts state regulation. Changing the agency’s rule would not, on its own, settle the statutory classification or preemption questions.
What Murphy does—and does not—decide
The briefs invoke Murphy v. NCAA and the broader gambling-law framework to argue that Congress did not quietly transfer sports-betting oversight through Dodd-Frank. But Murphy did not give states exclusive authority over sports gambling. It invalidated PASPA's commands to state legislatures while expressly recognizing that Congress can regulate sports gambling directly.[10] The decision distinguishes federal regulation of private actors from unconstitutional directions to state governments.[11]
Federally regulated markets can respond that Congress used its commerce power to regulate derivatives markets and private participants through the CEA. Congress did not have to label that statute a gambling law for it to reach an instrument that qualifies as a derivative but also resembles a wager. If a contract falls within the statutory definition and a state restriction conflicts with the federal scheme, the issue is statutory coverage and preemption—not commandeering. Calling the contract gambling does not itself put it beyond federal regulation.
That establishes Congress's authority, however, not the result in this case. Exchanges still must show that their products fall within the statute and explain why the particular state restrictions are preempted. Neither the history of state gambling regulation nor Murphy answers those questions.
Sportsbook wagers and self-certification
Both briefs argue that treating sports wagers as swaps would have consequences beyond exchange-traded contracts. CEA § 2(e) generally prohibits persons who are not eligible contract participants from entering into swaps outside a DCM. Under the briefs' reasoning, ordinary retail sportsbook bets would become unlawful off-exchange swaps.[12]
This is a significant challenge to a broad interpretation of the swap definition. A response would need to explain any legally meaningful differences between the contracts at issue and conventional sportsbook wagers—or address the consequences of treating both as swaps. An instrument does not become a swap simply because it is listed on a registered exchange.
The briefs also challenge reliance on self-certification. Dodd argues that exchanges cannot determine whether state law is preempted by choosing to list a product. Gensler raises a constitutional objection to private parties or an agency exercising that power.
The answer for federally regulated markets is that preemption, if it applies, comes from Congress's statute, not an exchange's certification. Self-certification does not conclusively establish that a product falls within the CEA. Courts remain responsible for deciding statutory coverage and preemption.
Implications for exchanges and intermediaries
The briefs develop arguments that could be used against other DCMs and product designs, particularly parlays and player-performance contracts. They do not establish liability for other exchanges, brokers, or intermediaries. They do underscore, however, that federal registration and completed self-certification may not end the state-law inquiry.
Market participants should review the statutory basis for their products, document their connection to identifiable economic consequences, and assess state-law exposure under the relevant circuit’s approach to both classification and preemption. Products and marketing that closely resemble sportsbook offerings may bolster the opposing argument, although labels and presentation do not determine statutory coverage. Consumer safeguards also remain relevant to enforcement and policy risk, even where a firm asserts federal preemption.
The briefs bring added attention to the questions the Supreme Court would face if it takes the case: which sports event contracts qualify as federally regulated derivatives; what authority states retain over those contracts; and how the CEA fits with existing gaming laws. Dodd's and Gensler's experience gives their views prominence. Ultimately, though, the case turns on the statute Congress enacted—its text, structure, and preemptive effect.
[1] Brief for Christopher J. Dodd as Amicus Curiae, Flaherty v. KalshiEX, LLC, No. 26-299 (U.S. pet. for cert. filed Sept. 2, 2026) https://www.supremecourt.gov/DocketPDF/26/26-299/428889/20261008124402049_No.%2026-299%20Zuckerman%20Dodd%20Amicus%20Brief.pdf.
[2] Brief for Gary Gensler as Amicus Curiae, Flaherty v. KalshiEX, LLC, No. 26-299 (U.S. pet. for cert. filed Sept. 2, 2026) https://www.supremecourt.gov/DocketPDF/26/26-299/428887/20261008124016827_No.%2026-299%20Zuckerman%20Gensler%20Amicus%20Brief.pdf.
[3] 7 U.S.C. §§ 1–26.
[4] Dodd, pp. 8–11; Gensler, pp. 15–18.
[5] Dodd, pp. 11–14; Gensler, pp. 23–25.
[6] Dodd, pp. 14–24.
[7] Gensler, pp. 9–18, 25–27.
[8] 584 U.S. 453 (2018).
[9] Dodd, pp. 14–17; Gensler, pp. 19–23.
[10] Murphy, 584 U.S. at 470-82 (2018).
[11] Id. at 477–480, 486 (2018).
[12] Dodd, pp. 22–23; Gensler, pp. 17–18, 25–26.
