Minnesota bans prediction markets, CFTC fires back

The CFTC has sued Minnesota to block a new law that would ban prediction markets from Aug. 1, setting up a court fight over state gambling rules and federal market authority.

The Commodity Futures Trading Commission filed the lawsuit on May 19, one day after Governor Tim Walz signed the Minnesota measure into law. The agency said the law would make it a criminal felony to operate or help operate a prediction market in the state. It asked for a preliminary injunction before the Aug. 1 start date.

CFTC Chair Michael Selig criticized the law in the agency’s release. “This Minnesota law turns lawful operators and participants in prediction markets into felons overnight,” he said. The regulator also said the law reaches many CFTC-regulated markets, including weather-related event contracts.

Minnesota targets prediction market activity

Minnesota’s law targets platforms that allow users to trade on future events. These can include sports, elections, weather, and other outcomes. Reuters reported that the measure would make it a crime to operate, host, or promote such markets in Minnesota from Aug. 1.

The CFTC argues that these contracts fall under its federal authority as derivatives. The agency said Minnesota’s law conflicts with the federal framework for CFTC-regulated markets. Reuters reported that Minnesota Attorney General Keith Ellison said his office was reviewing the case and would respond in court.

Meanwhile, the lawsuit comes as Kalshi and Polymarket face growing attention from state officials. Reuters reported that Kalshi has been fighting several state-level cases tied to claims that its event contracts amount to illegal wagering.

Kalshi criticized Minnesota’s law after the lawsuit. A company spokesperson told Reuters the ban was unenforceable and would push activity offshore. Polymarket said the case showed that Minnesota’s law runs against the federal framework for prediction markets.

Minnesota moves on wider crypto rules

The case lands as Minnesota takes several actions touching crypto users and investors. Recent crypto.news coverage noted that Walz signed HF 3709, allowing state-chartered banks and credit unions to offer virtual-currency custody services from Aug. 1.

The same reporting thread noted that Minnesota is also banning virtual currency kiosks. Walz signed SF 3868 on May 5. That ban also starts on Aug. 1, while operators must remove public kiosks by Dec. 31.

Prediction markets move further into finance

Prediction markets are also expanding beyond politics and sports. Separate crypto.news coverage reported that Polymarket partnered with Nasdaq Private Market to launch markets linked to private-company events, including valuation milestones, IPO timing, and secondary-market activity.

That expansion gives the Minnesota case wider relevance for crypto-linked trading platforms. The court will now weigh whether Minnesota can treat prediction markets as prohibited wagering, or whether federal derivatives law blocks the state from enforcing the ban.