The Commodity Futures Trading Commission has moved to block a new Minnesota law that would criminalize prediction markets across the state, marking one of the sharpest clashes yet between federal regulators and state governments over the future of event-based trading.
In a lawsuit filed on May 19 in Washington, the CFTC asked a federal court to issue a preliminary injunction before the law takes effect on August 1, 2026. The agency argues that Minnesota overstepped its authority by targeting markets that fall under federal jurisdiction.
Federal regulator challenges state authority
Minnesota’s legislation, signed by Governor Tim Walz, makes it a felony to operate, assist, or promote prediction markets. The scope extends beyond platform operators. It includes data providers, payment processors, and advertisers linked to such markets.
The CFTC described the statute as the broadest state action it has faced to date. The agency stressed that the law reaches into areas traditionally regulated at the federal level, including weather-related event contracts used by farmers.
“This Minnesota law turns lawful operators and participants in prediction markets into felons overnight,” said CFTC Chairman Michael S. Selig. “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.”
The complaint argues that Congress established a federal framework for derivatives markets more than 50 years ago. The agency claims Minnesota’s move disrupts that system and creates legal uncertainty for market participants.
Governor Walz and Minnesota are putting special interests first and American farmers and innovators last.
— Mike Selig (@ChairmanSelig) May 19, 2026
Minnesota’s new law would make it a felony to trade event contracts in the state, hurting Minnesota farmers who have relied on weather and crop-related event contracts for…
A law with wide reach across sectors
The Minnesota statute bans wagers tied to a broad range of outcomes. The list includes sports events, elections, weather conditions, armed conflicts, and cultural developments. It also criminalizes contracts tied to disasters, legal proceedings, and public figures.
State lawmakers supported the measure with a decisive vote in the Senate. The bill passed 56-10 before it reached the governor’s desk. Supporters argued that prediction markets resemble unregulated gambling and raise concerns about insider access to sensitive information.
Recent incidents have intensified those concerns. Nine connected Polymarket accounts placed nearly $2.5 million in bets on US military actions, including the timing of strikes on Iran and potential ceasefire announcements. In a separate case, prosecutors charged a soldier who used non-public information to wager on the capture of Venezuela’s president Nicolas Maduro.
Minnesota lawmakers also cited a case involving a local politician. Kalshi banned the lawmaker after he placed bets on his own primary election outcome.
Federal response builds on prior legal actions
The Minnesota lawsuit does not stand alone. The CFTC has filed similar actions against Arizona, Connecticut, Illinois, and New York. In Arizona, a federal court issued a preliminary injunction that blocked the state from using gambling laws to prosecute prediction market operators.
The agency has also submitted amicus briefs in appellate courts, including the Sixth and Ninth Circuits and the Supreme Judicial Court of Massachusetts. These filings support the argument that event contracts fall under exclusive federal oversight.
The Minnesota case introduces a new dimension. It represents the first instance of a state imposing a full ban on prediction markets. The Department of Justice joined the CFTC in the lawsuit, which underscores the federal government’s position on the issue.
The complaint states:
“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. This flagrant and unprecedented incursion into the Commission’s exclusive regulatory sphere must be preliminarily and permanently enjoined.”
Farmers and hedging tools at the center
The dispute places agricultural markets at the center of the debate. Minnesota ranks among the largest agricultural producers in the United States. Farmers in the state have long used weather and crop-related contracts to manage financial risk.
The CFTC argues that the new law disrupts those tools. The agency maintains that such contracts differ from speculative wagers on entertainment or political outcomes. It frames them as essential risk management instruments tied to real economic activity.
State regulators take a different view. They group these contracts with broader prediction market activity, which has expanded into new areas over the past 18 months. Platforms now offer bets on topics that extend far beyond traditional commodities markets.
A broader jurisdictional conflict takes shape
The legal battle reflects a wider conflict between state governments and federal regulators. Several states have pursued enforcement actions against platforms such as Kalshi and Polymarket under gambling laws. These states argue that many event-based contracts qualify as unlicensed betting.
Prediction market platforms counter that their products operate as regulated event contracts under federal law. The CFTC supports that interpretation and has taken legal action to defend its authority.
The dispute now moves toward federal courts, where judges will determine whether states can impose criminal penalties on markets that the CFTC oversees. The outcome may influence how prediction markets operate across the United States.
What comes next
The court’s decision on the preliminary injunction will set the immediate direction. If granted, the order will pause enforcement of the Minnesota law before the August deadline. If denied, the statute could take effect and reshape access to prediction markets within the state.
The case may not end at the district level. Given the number of states involved and the federal questions at stake, the issue could reach higher courts. The result will define whether prediction markets remain under a unified federal framework or face a patchwork of state-level restrictions.
For now, the Minnesota law stands as the most aggressive test of that boundary.
Anastasiia G
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