Minnesota becomes first state to ban prediction markets, drawing CFTC lawsuit

Governor Tim Walz signed legislation making Minnesota the first state to criminalize hosting or advertising prediction markets like Kalshi and Polymarket, with felony exposure for operators when the law takes effect in August. The statute defines prediction markets broadly as wagers on future outcomes — sports, elections, entertainment, even word choices — and extends to enabling infrastructure such as VPNs that could be used to evade the ban. Carve-outs exist for genuine hedging instruments and, after agricultural-industry pushback, weather contracts that farmers use to offset crop risk.

The Trump administration’s Commodity Futures Trading Commission immediately sued to block the law, arguing federal jurisdiction over event contracts is exclusive. The CFTC has now filed similar suits against five states, while 14 states have introduced restrictive bills and a Nevada court has already forced Kalshi to pause sports markets there after finding them indistinguishable from regulated sports betting. Over 20 lawsuits are pending on the state-versus-federal regulatory question.

The fight matters because these platforms have effectively become a workaround for state gambling laws: more than 85% of Kalshi’s volume is sports-related, and the sites process billions in weekly trades despite open questions about insider trading and incentives to manipulate the underlying real-world events being wagered on.