Minnesota has become the first state in the nation to enact a law banning prediction market platforms from operating within its borders, escalating a growing jurisdictional fight between state governments and federal regulators over who controls the rapidly expanding industry.
Gov. Tim Walz (D) signed legislation that makes it a crime to host or advertise prediction market services in the state, directly targeting platforms such as Kalshi and Polymarket. The law is scheduled to take effect in August and immediately prompted a lawsuit from the Commodity Futures Trading Commission (CFTC) seeking to block enforcement.
The dispute marks the latest flashpoint in a widening conflict between states attempting to regulate what they view as gambling operations and federal officials who argue the markets fall under federal commodities law.
Under Minnesota’s new law, prediction markets are defined broadly as systems that allow consumers to place wagers on future outcomes, including sports contests, elections, live entertainment, “someone’s word choice” and world affairs. The measure also targets supporting technologies such as virtual private networks that users could employ to evade geolocation restrictions. Violations could expose operators to felony charges.
“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,” Minnesota state Rep. Emma Greenman, the Democratic sponsor of the legislation, told Minnesota Public Radio News.
The law contains carve-outs for traditional commodities and securities trading as well as certain event contracts used as insurance against “harm, or loss sustained.” Lawmakers also revised the bill following objections from agricultural interests that use weather-related futures products to hedge against crop losses. An amended version permitting weather trading was expected to receive Walz’s signature.
The CFTC, however, argues that Minnesota is unlawfully intruding on an area reserved for federal oversight. In its lawsuit, the agency contends that prediction markets should be regulated exclusively at the federal level under commodities law.
Related: CFTC Moves To East Reporting Requirements for Prediction Markets
“This Minnesota law turns lawful operators and participants in prediction markets into felons overnight,” CFTC Chairman Michael Selig said, according to NPR. Selig also argued that the measure could harm farmers who rely on weather-related hedging tools.
The legal confrontation reflects the broader nationwide crackdown by states concerned that prediction markets are effectively offering unregulated sports betting and online gambling. According to the NPR report, legislation restricting or banning prediction markets has now been introduced in 14 states, with Hawaii and North Carolina considering statewide bans.
At the same time, the CFTC has filed lawsuits against multiple states, including Arizona, Wisconsin and New York, seeking to override state enforcement actions against the platforms. More than 20 lawsuits involving prediction market regulation are currently pending nationwide.
The industry’s central legal argument is that prediction contracts qualify as federally regulated “event contracts” rather than gambling products traditionally overseen by state gaming authorities. That distinction has allowed companies like Kalshi and Polymarket to offer sports-related trading even in states where sports betting remains illegal.
Critics argue the platforms have drifted far beyond the CFTC’s traditional commodities oversight mission. NPR noted that former CFTC officials and legal experts have questioned whether wagers on football games, presidential remarks or celebrity appearances belong under federal commodities regulation at all.
Despite mounting legal scrutiny, the industry continues to grow rapidly. Bettors now conduct billions of dollars in weekly trades on the platforms, according to the report, even as regulators raise concerns about insider trading risks and incentives to manipulate real-world events.
Industry executives argue state bans threaten innovation and consumer protection. Kalshi spokeswoman Elisabeth Diana called Minnesota’s law a “blatant violation” of federal law and compared banning prediction markets to “trying to ban the New York Stock Exchange.”
