Federal Lawsuit Against Minnesota’s Ban on Prediction Markets

The Commodity Futures Trading Commission (CFTC) has initiated a lawsuit against Minnesota, aiming to block the state’s recent ban on prediction markets. The federal agency argues that the new state law is overridden by federal authority.

This legal action claims that the Commodity Exchange Act grants exclusive jurisdiction to the CFTC over event-contract derivatives, meaning Minnesota doesn’t have the constitutional authority to outlaw them.

This lawsuit was filed just a day after Governor Tim Walz (D-Minn.) enacted the ban as part of a larger “public safety” legislation.

The law is set to come into effect on August 1st and would make Minnesota the first state to entirely prohibit platforms like Kalshi and Polymarket. It categorizes the operation, promotion, or advertising of prediction markets as a criminal felony.

The CFTC stated in its lawsuit, “Minnesota’s attempt to criminalize derivatives contracts is exactly what Congress aimed to prevent. If this law is allowed to take effect, exchanges and their partners could face felony charges. This unprecedented overreach into our regulatory authority must be stopped.”

The Trump administration supports strict regulation of prediction markets under the CFTC, which manages the U.S. derivatives markets. However, various states have been trying to impose their own laws to restrict prediction markets as trading volumes soar into billions monthly.

While the CFTC has previously challenged states like Arizona and New York regarding local restrictions, Minnesota’s law is notable for its explicit criminal penalties.

CFTC Chairman Michael S. Selig remarked, “This Minnesota law turns lawful operators and participants in prediction markets into felons overnight. Governor Walz prioritized special interests over American farmers and innovators.”

The CFTC has expressed concerns that the extensive nature of the ban could affect professional sports leagues, news organizations, and financial institutions providing real-time market data. It also threatens traditional weather-hedging contracts that have aided Minnesota farmers for years in minimizing risks.

In response, Minnesota Attorney General Keith Ellison shared his worries about prediction markets, saying, “They are designed to be addictive and often exploit young and low-income individuals. They benefit the wealthy and widen the gap for the rest of us. My office is reviewing the lawsuit and will respond accordingly.”