Feds Sue Minnesota Hours After Governor Signs Prediction Markets Ban

TLDR

• Minnesota Governor Tim Walz signed SF 4760, the first outright state ban on prediction markets in the US, set to take effect August 1.
• The CFTC and DOJ sued Minnesota less than 24 hours after the bill was signed, claiming federal “exclusive jurisdiction” over prediction markets.
• The CFTC argues prediction market contracts are federally regulated “swaps” and that states cannot criminalize them.
• The law could expose banks, payment processors, media companies, and sports leagues to criminal liability.
• Minnesota also recently passed laws allowing crypto custody services at banks and banning crypto ATMs statewide.

Minnesota has become the first US state to outright ban prediction markets, and the federal government wasted no time fighting back.

LATEST: The CFTC and DOJ are suing Minnesota over a newly signed law banning prediction markets, calling it a "flagrant" incursion on federal jurisdiction. pic.twitter.com/LxZHfQRTJy

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Governor Tim Walz signed Senate File 4760 into law on Monday. Less than 24 hours later, the US Commodity Futures Trading Commission and the Department of Justice filed a lawsuit against Minnesota, Walz, Attorney General Keith Ellison, and Public Safety Director Jon Anglin.

The law, set to take effect on August 1, prohibits advertising, creating, operating, or facilitating prediction market platforms. It labels event contracts — covering sports, weather, military conflicts, and more — as illegal “wagers.”

Platforms like Kalshi and Polymarket would be directly affected.

CFTC Claims Federal Oversight

The CFTC says it has “exclusive jurisdiction” over prediction markets under the Commodity Exchange Act. The agency argues that these contracts are “swaps” traded on CFTC-approved exchanges and that states have no authority to ban them.

“This flagrant and unprecedented incursion into the Commission’s exclusive regulatory sphere must be preliminarily and permanently enjoined,” the complaint states.

The lawsuit also says Minnesota’s law wrongly extends criminal liability to banks, payment processors, media companies, and sports leagues that partner with or advertise prediction market platforms.

The CFTC specifically named partnerships with Major League Baseball, the NHL, Fox, Dow Jones, and the Wall Street Journal as examples.

A Kalshi spokesperson called the Minnesota law “unenforceable” and a “blatant violation of the constitution and federal law.” Polymarket did not respond to requests for comment.

A Pattern of State Pushback

Minnesota is not the first state to clash with the CFTC over prediction markets. The agency has also filed suits against Illinois, Arizona, Connecticut, and New York over similar attempts to restrict these platforms under state gambling laws.

CFTC Chair Michael Selig, currently the agency’s only sitting commissioner, has consistently said state-level bans would be challenged. As of Tuesday, President Trump had not nominated additional commissioners to fill out the five-person panel.

In March, the CFTC published a formal advisory on prediction markets and invited public comment on potential rulemaking.

Minnesota’s Mixed Crypto Approach

Minnesota has taken different directions on crypto and blockchain regulation in recent weeks.

On the same day the prediction markets ban took effect, Walz also signed a bill allowing Minnesota banks and credit unions to offer virtual currency custody services, also effective August 1.

Earlier, in February, Minnesota became the second US state — after Indiana — to ban crypto ATMs and kiosks, citing widespread fraud and scam activity targeting residents.

The CFTC’s lawsuit asks a court to both preliminarily and permanently block the Minnesota prediction markets ban before it takes effect.

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