Minnesota Gov. Tim Walz signed legislation on May 18 making the state the first in the United States to formally ban prediction markets by statute, triggering a federal lawsuit from the Commodity Futures Trading Commission within 24 hours.
The law, embedded in public safety bill SF4760, takes effect August 1, 2026. It makes operating, facilitating, or advertising prediction markets a felony in Minnesota, covering contracts tied to sports, elections, war, terrorism, popular culture events, death, and other future outcomes. Traditional securities products and certain commodities contracts are carved out.
A Legislative Supermajority, Then a Federal Lawsuit
The bill cleared the Minnesota House 100-32 before Walz signed it. Bill sponsor Rep. Emma Greenman framed the vote as a question of state authority over gambling decisions.
“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.” — Rep. Emma Greenman, bill sponsor
Sen. John Marty, DFL-Roseville, authored the legislation in the Senate.
The CFTC filed its complaint in the US District Court for the District of Minnesota on May 19, jointly with the Department of Justice. The agency is seeking a preliminary injunction to block the law before August 1. CFTC Chairman Michael S. Selig described the measure as the most aggressive state challenge yet to federally regulated prediction markets.
“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.” — Michael S. Selig, CFTC Chairman
Weather Carveout Signals Agricultural Pressure
The farming sector secured a notable concession during the legislative process. Minnesota is one of the largest agricultural producers in the United States, and farming groups raised concerns that a broad ban could impair access to weather and crop-related hedging products used to manage financial risk.
A revised version of the bill, separate from the text signed on May 18, removes the prohibition on weather-related event contracts and is expected to be signed in a follow-on action. The CFTC argued in its complaint that even the amended version would still improperly criminalize federally regulated products relied upon by commercial participants.
Minnesota Becomes the Sixth State Drawn Into Federal Litigation
The CFTC has already filed lawsuits against Arizona, Connecticut, Illinois, and New York over state efforts to restrict prediction market operators through gaming laws. A federal judge in Arizona granted a preliminary injunction blocking that state from pursuing criminal enforcement while litigation proceeds. Minnesota is now the sixth state to face a federal suit — and the first where the restriction came via statute rather than regulatory action alone.
That distinction matters. Prior state efforts relied on gaming regulators or attorneys general attempting to classify platforms such as Kalshi and Polymarket as illegal gambling operators. Minnesota’s legislature voted to outlaw the sector outright, a more direct challenge to the federal regulatory framework. Legal analysts note the core jurisdictional question — whether prediction market contracts fall under the Commodity Exchange Act’s federal remit or within state gambling authority — may ultimately reach the US Supreme Court.
You can read more on how state regulators have approached this debate in our coverage of the Massachusetts AG’s lawsuit against Kalshi and Robinhood’s federal counter-suit against Massachusetts gaming regulators.
Platforms Push Back
Kalshi spokesperson Elisabeth Diana rejected the characterisation of prediction markets as gambling in a statement responding to the Minnesota law. She called the ban “peak hypocrisy” and argued that restricting a CFTC-registered exchange was equivalent to a state attempting to block access to the New York Stock Exchange. Diana warned the restriction would reduce competition and drive activity to offshore markets.
Supporters of the ban raised different concerns during legislative debate — pointing to contracts tied to assassinations, geopolitical events, and war outcomes, as well as what they described as insider-trading-adjacent activity on the platforms. Nine connected Polymarket accounts were reported to have made nearly $2.5 million betting on specific US military actions including the dates of airstrikes and ceasefire announcements.
No Sports Betting, A Prediction Market Ban Instead
Minnesota is one of 11 US states without legal sports betting. Bills to legalise retail and mobile sportsbooks made little progress during the state’s 2026 legislative session. Lawmakers had both a prediction market ban and a sports betting legalisation bill before them and advanced only the former. That outcome undermines the argument — made by prediction market advocates in other states — that event contracts can serve as a pathway toward broader online gambling legalisation.
The CFTC’s counter-lawsuit leaves the August 1 effective date in question. Whether a preliminary injunction is granted, as occurred in Arizona, will determine whether Minnesota’s ban has any near-term practical effect on platforms serving the state. The jurisdictional tension between federal oversight and state gambling authority is playing out across multiple courts simultaneously, with no resolution in sight before the law is scheduled to take effect.
Source: Commodity Futures Trading Commission
