The Commodity Futures Trading Commission (CFTC) has filed a lawsuit against Minnesota in an attempt to block a new state law that would criminalize prediction market activity from August 1.
The law, signed by Governor Tim Walz, would make it a felony to operate, assist, host or promote prediction markets in the state. It covers event-based contracts tied to areas including sports, politics, commodities, elections, weather and cultural events.
The CFTC is seeking a preliminary injunction before the law takes effect, arguing that Minnesota is attempting to regulate markets that fall under the federal derivatives framework established through the Commodity Exchange Act.
CFTC Chairman Michael Selig said: “This Minnesota law turns lawful operators and participants in prediction markets into felons overnight.”
The case expands a wider dispute between federal regulators, state gaming authorities and prediction market operators over whether event contracts should be treated as federally regulated derivatives or unlawful gambling products under state law.
Prediction markets have grown in visibility through operators such as Kalshi and Polymarket, particularly around sports, elections and financial outcomes.
The segment has drawn scrutiny from state regulators because some contracts resemble sports bets, while operators argue they are exchange-traded financial products.
Minnesota’s measure is broader than many previous state actions because it directly creates criminal exposure for operators and promoters, rather than relying only on cease-and-desist orders or civil enforcement.
The CFTC has taken an increasingly active position in defending its claimed jurisdiction over designated contract markets. In April, it filed lawsuits against Arizona, Connecticut and Illinois, stating that a national derivatives framework was intended to avoid a fragmented state-by-state approach.
A federal court in Arizona has already issued a preliminary injunction preventing the state from using gambling laws to prosecute prediction market operators. However, legal outcomes remain mixed across jurisdictions, with Nevada securing a court-enforced ban against Kalshi.
Minnesota Attorney General Keith Ellison has said the state is reviewing the CFTC lawsuit and will respond in court. He has raised concerns about consumer harm and the effect of prediction markets on young and lower-income users.
The latest case follows the CFTC’s action against Wisconsin regulators last month, when the agency sought to stop enforcement of state laws against prediction market operators.
Minnesota lawmakers passed the prediction market ban through SF 4760, with reported votes of 100-32 in the House and 57-9 in the Senate
