Minnesota enacts first US state law to ban various prediction markets, CFTC sues state

Minnesota became the first US state to ban certain prediction markets following Gov. Tim Walz’s approval of SF 4760, an omnibus public safety package that includes language to prohibit prediction market contracts based on sports, politics, war, weather, and other markets.

The package includes language from Sen. John Marty’s SF 4511, a bill approved by the Minnesota Senate in a 56-10 vote on April 30. Marty’s standalone legislation later stalled in the House, but the prediction market provisions were inserted into SF 4760 before final legislative approval.

The Minnesota House approved the conference committee report by a 100-32 vote after the Senate passed the amended version by a 57-9 margin.

The law prohibits prediction market contracts tied to athletic events, elections, weather, war, terrorism, public health crises, legal proceedings, deaths, assassinations, and entertainment-related events. It also covers contracts involving whether a person will make a particular statement and games played with cards, dice, equipment, or electronic devices.

Under the legislation, prediction markets are defined as systems allowing consumers to place wagers on future outcomes. The prohibition also applies to services supporting access to the platforms, such as virtual private networks that allow users to disguise their location and get around the ban. 

Operators continuing to offer services in Minnesota after the law takes effect on August 1, 2026, could face felony charges.

CFTC files challenge in federal court

Less than 24 hours after Walz signed the legislation, the Commodity Futures Trading Commission filed a lawsuit in Minnesota US District Court seeking a preliminary injunction to stop the law from taking effect.

The complaint names Walz and several Minnesota officials, including Attorney General Keith Ellison.

The CFTC argued that prediction markets fall under federal jurisdiction and requested immediate court intervention.

“This Minnesota law turns lawful operators and participants in prediction markets into felons overnight,” said CFTC Chairman Michael S. Selig. “Minnesota farmers have relied on critical hedging products for 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.”

In its filing, the CFTC stated: “The injury to the United States, moreover, is irreparable and requires immediate injunctive relief. Constitutional violations, including Supremacy Clause violations, are always irreparable. Furthermore, if Minnesota is permitted to enforce its law, the harm to the United States’s sovereign interests and regulatory jurisdiction could not be undone after final judgment. Preliminary injunctive relief is required to preserve the status quo during the pendency of the case.”

Industry operators oppose the restriction

Prediction market operators Kalshi and Polymarket criticized the Minnesota law following the federal lawsuit.

Kalshi spokeswoman Elisabeth Diana described the prohibition as a “blatant violation” of the law.

“Minnesota banning prediction markets is like trying to ban the New York Stock Exchange,” Diana said, adding that “this actively harms users because it reduces competition and drives activity offshore.”

A Polymarket spokesman said Minnesota’s prohibition conflicts with the federal government’s “established framework” for regulating prediction markets.

Questions over whether states or federal regulators should oversee the sector have already resulted in more than 20 lawsuits. The CFTC has also filed lawsuits against Arizona, Wisconsin, and New York over attempts to restrict prediction market activity.

Sports contracts remain central to trading activity

Although online sports betting remains illegal in Minnesota, prediction market platforms have provided access to sports-related event trading in jurisdictions where sports wagering is prohibited.

Federal regulators classify the products as event contracts instead of gambling products regulated by state gaming agencies.

Sports-related trading accounts for most activity on some platforms. More than 85% of trading volume on Kalshi is tied to sporting events, including parlays involving multiple outcomes such as points scored, fouls, and passes.

In Nevada, a judge previously ruled Kalshi’s sports event contracts were “indistinguishable” from state-regulated sports wagering, leading the company to suspend sports trading activity in the state.

Minnesota Rep. Emma Greenman, who introduced the measure, said states should determine the regulations attached to gambling activity.

“We as a state should decide how best and what regulations we think should attach to gambling, to protect public safety, to protect our kids,” Greenman said.

More states consider restrictions

According to the National Conference of State Legislatures, lawmakers in 14 additional states have introduced bills targeting prediction markets. Hawaii and North Carolina currently have pending legislation seeking statewide prohibitions.

An updated version of Minnesota’s legislation later included an exception allowing weather-related trading after objections from agricultural interests that historically used weather futures to hedge against storms and harvest risks. The law also includes exemptions for event contracts serving as insurance against “harm, or loss sustained” and for securities and commodities purchases.

Industry observers said legal disputes have not slowed activity on prediction market platforms.

“The states are using any tactic they can to go after the prediction market companies,” said Melinda Roth, a professor at Washington and Lee University School of Law who studies the industry. “But they’ve embarked on a too-big-to-fail strategy and have become quite mainstream. It will be hard to put that genie back in the bottle.”