CFTC Sues Minnesota to Block Prediction Market Ban

The Commodity Futures Trading Commission filed a lawsuit Tuesday against Minnesota seeking to block enforcement of a new state law that would make it a crime to operate, host or promote prediction markets. The measure, signed by Gov. Tim Walz earlier this week, takes effect August 1 and imposes criminal penalties for such activity.

The CFTC contends the state lacks authority to regulate most prediction-market contracts because federal law places that responsibility with the agency.

The lawsuit states that Minnesota’s law would turn lawful operators and participants into felons overnight. It warns the measure would disrupt longstanding hedging products used by farmers for weather and crop-related events. “This Minnesota law turns lawful operators and participants in prediction markets into felons overnight,” CFTC Chairman Michael Selig said in a statement.

The complaint argues the state statute amounts to a massive short-circuiting of the CFTC’s regulatory role and asks a court to halt enforcement before the August 1 start date.

Ellison said his office would respond in court. He told Reuters that prediction markets are designed to be addictive and prey especially on young people and low-income individuals. Democratic state Sens. John Marty and Matt Klein sponsored the legislation, which passed the state senate 56-10 on April 30.

They described the measure as necessary to prevent prediction markets from skirting existing gambling rules. “People of both parties, people who are pro-gambling and anti-gambling together, can recognize that the prediction markets are ripe for conflict of interest,” Marty told WCCO.

Major prediction markets such as Kalshi and Polymarket have criticized the law. The CFTC has filed similar suits against other states and recently won a court order blocking Arizona from pursuing a criminal case against Kalshi. Nevada is the only state to have secured a court-enforced ban against Kalshi.

Massachusetts’ highest court is considering whether to uphold a currently paused injunction in that state.