Federal authorities at the Commodity Futures Trading Commission quickly filed a lawsuit Tuesday aiming to stop the law from going into effect on Aug. 1, arguing that prediction markets fall under federal oversight.
The Minnesota prediction market ban was tucked in a broader public safety bill, which passed with substantial margins in the House (100-32) and the Senate (57-9).
“It’s important that the state of Minnesota put a marker in the sand and say that the Legislature should be able to debate and look at what forms of gambling we want to legalize,” said Sen. Jordan Rasmusson, R-Fergus Falls, a co-author on the prediction market bill, in an April 14 committee hearing.
The federal litigation was expected — the commission, which has been friendlier to prediction markets under the Trump administration, has already sued five states over their attempts to regulate prediction markets. The lawsuit is just one of at least 30 court cases involving states, federal authorities and prediction markets.
Prediction markets, which have soared in popularity since 2024, allow people to bet on almost anything. Users of Kalshi, a popular prediction market platform valued at $22 billion, have bet nearly $6 million on whether Walz will resign before his term is over, for example. Polymarket, valued at $12 billion, facilitates similar bets and is making a comeback in the United States, newly free to operate under the more permissive Trump administration after the company ran afoul of federal regulators in 2022 under the Biden administration.
Donald Trump Jr., President Donald Trump’s eldest son, is an adviser to both Polymarket and Kalshi, and the president’s media company introduced its own prediction market product last year, though it’s since been scaled back.
Kalshi is available in all 50 states, even in Utah and Hawaii, which have outright bans on gambling, as well as nine states like Minnesota that allow some gambling but ban sports betting. The platform gets around sports betting restrictions — which fall under state control since a 2018 Supreme Court decision — by selling bets as financial contracts tied to the outcome of events, known as event contracts, and arguing that prediction markets are akin to commodity markets.
Some Minnesota lawmakers who are in favor of legalizing sports betting voted in favor of the prediction market ban because they said they want more say in how sports gambling is regulated here. Sen. Matt Klein, DFL-Mendota Heights, who led an effort last year to legalize sports betting, was an author on the bill to ban prediction markets, for example.
Minnesota statute now lists several prohibited categories of bets, including bets related to sports, elections and popular culture, and bans advertising related to prohibited bets.
Michael Selig, the sole commissioner of the CFTC, argued that Minnesota’s ban on prediction markets harms farmers who use derivatives markets to offset risks, for example by betting in favor of worse weather conditions.
“This Minnesota law turns lawful operators and participants in prediction markets into felons overnight,” said Selig in the press release announcing the CFTC’s lawsuit.
Selig appeared to be responding to the version of the bill passed into law on Monday, which explicitly prohibits betting on weather events and catastrophes. A last-minute revision that is set to be signed into law soon removes the ban on weather betting and includes other changes in response to lingering concerns about how the ban would affect futures markets, said Sen. John Marty, DFL-Roseville, the main author of the bill.*
The legal fight over Minnesota’s ban will likely be protracted. A year after the Nevada Gaming Control Board issued a cease-and-desist against Kalshi in March 2025, a Nevada state court ruled in favor of a temporary ban of Kalshi in the state, which has been extended. Nevada is currently the only state with a court-ordered ban in effect against a prediction market. Utah, which bans gambling outright, recently passed a law that banned proposition betting, which it defines as “gambling bet on an individual action, statistic, occurrence, or non-occurrence.” Though the language focuses on the bets themselves and not betting platforms, Utah lawmakers behind the bill have said that the law applies to prediction markets.
In a written statement, Kalshi spokesperson Elisabeth Diana called Minnesota’s ban “peak hypocrisy.”
The statement continues: “Does anyone believe that casinos are safe and well-regulated, but CFTC-registered exchanges and clearinghouses are not? It’s illegal to ban federally regulated exchanges (imagine one single state banning access to the New York Stock Exchange). This move would hurt Minnesotans and push them to offshore, unsafe markets.”
The platforms have also received scrutiny for the presence of insider trading — or bets that look suspiciously like insider trading — that gives certain bettors an inside track on profits.
One anonymous Polymarket user made $400,000 from a series of well-timed bets in December and January on the downfall of Venezuelan President Nicolás Maduro. In April, the CFTC alleged that the user was a U.S. Army soldier who participated in the operation to capture Maduro and profited off classified information.
Also in April, Kalshi fined three congressional candidates, including Klein, for betting on their own races. Klein said he had placed a $50 bet on his own primary election, and that his bet “points to the need for clearer rules and regulations for these types of markets.”
U.S. senators unanimously passed a resolution to prohibit themselves and their staffers from trading on the platforms; the U.S. House has held off on a similar ban.
This story first appeared in the Minnesota Reformer. Read the original here.
