CFTC Sues Minnesota Over Prediction Market Ban

The U.S. Commodity Futures Trading Commission (CFTC) has filed a federal lawsuit to block Minnesota from enforcing a law that criminalizes the operation or promotion of prediction markets. The legislation, signed by Governor Tim Walz, would take effect on August 1, 2026, and the CFTC is seeking a preliminary injunction to halt its implementation.

Minnesota’s law, part of a broader public safety bill, would make it a felony to operate, host, facilitate, or advertise prediction markets, covering event contracts linked to sports, elections, weather, and a wide range of public occurrences. The measure also allows the state to issue cease-and-desist orders and pursue court enforcement actions against service providers and technology intermediaries connected to these platforms.

CFTC Chairman Michael S. Selig criticized the legislation, stating in a press release, “This Minnesota law turns lawful operators and participants in prediction markets into felons overnight. Minnesota farmers have relied on critical hedging products on weather and crop-related events for decades to mitigate their risks. Governor Walz chose to put special interests first and American farmers and innovators last.”

Federal Jurisdiction and Legal Arguments

The CFTC argues that the law violates the U.S. Constitution by interfering with markets Congress placed under federal oversight through the Commodity Exchange Act. Prediction markets, which allow users to trade contracts on future events for profit, are treated as derivatives under federal law, granting the CFTC exclusive regulatory authority.

“The injury to the United States, moreover, is irreparable and requires immediate injunctive relief. Constitutional violations, including Supremacy Clause violations, are always irreparable,” the complaint states. The CFTC maintains that allowing Minnesota’s law to take effect could irreversibly harm both the federal regulatory framework and participants in these markets.

Nationwide Legal Context

Minnesota is the latest state targeted by the CFTC in its broader legal effort to prevent state interference with federally regulated prediction markets. Previously, the agency filed lawsuits in Arizona, Connecticut, Illinois, and New York over similar state measures. In Arizona, a preliminary injunction was granted to block criminal prosecution of Kalshi, a prediction market operator.

Other states, including Wisconsin and Massachusetts, are involved in ongoing litigation over whether certain prediction market activities constitute illegal gambling or fall within the federal derivatives framework. Platforms under scrutiny include Kalshi, Polymarket, Coinbase, Crypto.com, and Robinhood.

The law in Minnesota is notable for its broad scope, criminalizing contracts on events beyond traditional sports, such as weather, elections, legal proceedings, and public health crises. Some lawmakers opposed the late addition of the prediction market ban, warning it could harm Minnesotans already using the platforms and trigger prolonged legal disputes.

Kalshi and Polymarket, in statements responding to the lawsuit, emphasized that Minnesota’s ban conflicts with federal regulations and could push activity offshore, reducing competition and limiting market access for state residents.

As litigation unfolds, the case highlights the ongoing tension between state efforts to regulate perceived gambling risks and the federal government’s exclusive authority over commodity derivatives. Minnesota’s law is expected to further intensify judicial consideration of the boundaries between state gambling regulations and federally regulated financial markets.