Minnesota Bans Prediction Markets, Federal Regulators Sue to Block State Law
Why It Matters
Minnesota has become the first state in the nation to outlaw prediction markets — platforms that allow users to place financial bets on the outcome of real-world events — setting up a direct legal confrontation between state lawmakers and federal regulators over who has authority to govern the rapidly growing industry.
The outcome of this dispute could determine whether states retain meaningful power to regulate new forms of gambling or whether federally licensed financial exchanges operate beyond state reach. For Minnesota lawmakers who wrapped up a busy 2026 legislative session, the prediction market ban emerged as one of the session’s most consequential and legally contested actions.
What Happened
Gov. Tim Walz signed SF4760, a broader public safety bill containing the prediction market ban, into law on May 18, 2026. The measure prohibits betting on categories including sports, elections, weather events, and popular culture, and bars advertising for prohibited wagers.
Within one day, the Commodity Futures Trading Commission filed a federal lawsuit seeking to block the law before it takes effect on August 1. The CFTC argues that prediction markets are financial instruments regulated under federal law and that states have no authority to ban them. CFTC Commissioner Michael Selig stated that the Minnesota law “turns lawful operators and participants in prediction markets into felons overnight.”
Lawmakers supporting the ban pushed back, arguing the state legislature should retain authority to determine which forms of gambling are permitted within its borders. Sen. Jordan Rasmusson, a Republican from Fergus Falls and a co-author of the ban, said the legislature should be empowered to “debate and look at what forms of gambling we want to legalize.”
A last-minute amendment, set for a separate signing, removes the prohibition on weather-related betting and makes additional adjustments intended to limit the law’s interference with established commodity futures markets.
By the Numbers
- 100–32: House vote margin in favor of the public safety bill containing the prediction market ban
- 57–9: Senate vote margin for the same legislation
- $22 billion: Estimated valuation of Kalshi, one of the leading prediction market platforms
- $12 billion: Estimated valuation of Polymarket, a competing platform
- 30+: Active court cases nationwide involving prediction market regulation disputes between states and federal authorities
- August 1, 2026: Date Minnesota’s ban is scheduled to take effect, pending litigation
Zoom Out
Prediction markets have surged in popularity since 2024, and states across the country have been grappling with how — or whether — to regulate them. The CFTC under the Trump administration has taken a notably permissive approach toward the platforms, having already filed suit against five other states that moved to restrict prediction market activity.
The platforms operate in a legal gray zone by classifying user bets as “event contracts” — structured as financial instruments tied to outcomes rather than as traditional wagers — and arguing this places them under federal commodity law rather than state gambling statutes. That argument gained weight following a 2018 Supreme Court ruling that returned sports betting regulation to individual states, a distinction the platforms contend does not apply to their products.
The industry has attracted scrutiny on other fronts as well. The CFTC alleged in April that a U.S. Army soldier used classified information to profit roughly $400,000 on Polymarket bets tied to the fall of Venezuelan President Nicolás Maduro. Separately, Kalshi fined three congressional candidates — including Minnesota state Sen. Matt Klein, who also authored the prediction market ban — for placing bets on their own races. Klein, who acknowledged a $50 wager on his own primary, said the incident illustrated the need for clearer industry rules.
Nevada remains the only state with an active court-ordered restriction against a prediction market platform, following a ruling that extended a temporary ban against Kalshi after the Nevada Gaming Control Board issued a cease-and-desist in early 2025. Utah has also enacted legislation targeting proposition-style betting that state lawmakers have said applies to prediction markets.
Connections between the platforms and the current administration have drawn attention. Donald Trump Jr. serves as an adviser to both Kalshi and Polymarket, and the president’s media company launched its own prediction market product, though that offering has since been scaled back.
What’s Next
The CFTC lawsuit will likely trigger an extended legal battle over the scope of federal preemption in financial and gambling regulation. Minnesota officials are expected to defend the law in court while the amended version addressing commodity futures concerns moves toward a separate signing. The August 1 effective date may be delayed if federal courts grant a preliminary injunction — an outcome that has precedent in other states facing similar litigation.