The Trump administration on Tuesday filed a lawsuit against Minnesota, seeking to block its new ban on prediction markets.
Gov. Tim Walz (D-MN) signed a controversial bill into law earlier this week that imposes criminal penalties for operating or advertising a prediction market in the state. The Commodities Futures Trading Commission sued to block its implementation, arguing that the state lacks the authority to ban most bets placed on prediction markets such as Kalshi and Polymarket. The federal government has jurisdiction over prediction markets through the CFTC, the lawsuit states, warning that the law would upend Minnesota’s agricultural industry due to its criminalization of weather-related event contracts.
“This Minnesota law turns lawful operators and participants in prediction markets into felons overnight,” FTC Chairman Michael Selig said in a statement. “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.”
Minnesota Attorney General Keith Ellison said his office would respond in court.
“Prediction markets are designed to be addictive and prey especially on young people and low-income folks,” he told Reuters. “They help the ultra-rich get richer, and the rest of us get poorer.”
Walz signed the bill into law after the Minnesota state senate passed the measure on April 30, 56-10. Democratic state Sens. John Marty and Matt Klein spearheaded SF4511, a bill they framed as necessary to stop prediction markets from skirting Minnesota’s gambling regulations.
“People of both parties, people who are pro-gambling and anti-gambling together, can recognize that the prediction markets are ripe for conflict of interest, things from insider trading for politicians, for others,” Marty told WCCO. “It’s a huge thing ripe for scandal. And it’s gone out of control.”
Major prediction markets such as Kalshi and Polymarket have slammed the law, calling it a blow to free competition and counter to government regulations.
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CFTC’s lawsuit seeks to halt enforcement of the law before it is set to take effect on Aug. 1.
“If Minnesota’s law is permitted to go into effect, the exchanges that offer these longstanding contracts—as well as those who partner with them—can be prosecuted as felons,” the lawsuit reads, arguing that Minnesota’s law amounts to a “massive short-circuiting” of the CFTC. “This flagrant and unprecedented incursion into the Commission’s exclusive regulatory sphere must be preliminarily and permanently enjoined.”