Minnesota Becomes First State to Ban Prediction Markets
ST. PAUL, Minn. – Minnesota has become the first US state to outlaw prediction markets after Governor Tim Walz signed a new law that immediately triggered a legal challenge from federal regulators.
LISTEN TO THIS ARTICLE:The ban was included within broader public safety legislation under SF 4760, signed Monday and scheduled to take effect on Aug. 1. One day later, the Commodity Futures Trading Commission filed a lawsuit seeking to block the law before enforcement begins.
The dispute marks one of the biggest clashes yet between state gambling authorities and federally regulated prediction market platforms such as Kalshi and Polymarket.
Minnesota Targets Sports and Event Contracts
Under SF 4760, Minnesota prohibits the offering, hosting or advertising of event contracts tied to sports, elections, entertainment, weather events and other real-world outcomes. Violations could lead to felony charges under the legislation.
Lawmakers backing the measure argued that prediction markets operate too similarly to gambling products while avoiding the same state-level controls applied to sportsbooks and casinos.
“It’s important that the state of Minnesota put a marker in the sand and say that the Legislature should be able to debate and look at what forms of gambling we want to legalize”, Republican Senator Jordan Rasmusson said during committee discussions earlier this year.
The bill received strong bipartisan backing, passing the Minnesota House 100-32 and the Senate 57-9 before reaching Walz.
More Regulation
Federal Regulators Move Quickly to Block Law
The CFTC responded almost immediately after the law was signed. In its lawsuit, the federal agency argued that prediction markets fall under federal commodities regulation and remain outside direct state gambling oversight.
CFTC chair Michael Selig said the Minnesota measure would unlawfully criminalise federally regulated markets.
“This Minnesota law turns lawful operators and participants in prediction markets into felons overnight”, Selig said in a statement announcing the lawsuit.
Federal regulators also argued the law interferes with derivatives markets used by industries including agriculture, where farmers use weather and crop-based contracts to hedge risk.
Minnesota Attorney General Keith Ellison defended the state’s concerns around the rapid growth of prediction markets.
“I’m very concerned about the harms of prediction markets on Minnesotans”, Ellison said. “Prediction markets are designed to be addictive and prey especially on young people and low-income folks.”
Prediction Markets Face Growing National Scrutiny
Prediction markets have expanded rapidly since 2024, allowing users to trade contracts tied to political outcomes, sports events, economic indicators and entertainment news.
Kalshi and Polymarket have become two of the sector’s biggest names, with both platforms drawing increasing attention from regulators and lawmakers.
Critics argue the platforms function as gambling markets while avoiding state sports betting laws by classifying wagers as financial event contracts.
Supporters counter that prediction markets are federally regulated exchanges similar to commodity or futures markets.
The Minnesota lawsuit is part of a wider legal battle already involving several other states, including Arizona, Connecticut, Illinois, New York and Wisconsin.
The dispute also comes as tribal gaming groups and casino organisations prepare for a broader legal confrontation over sports-event contracts and prediction market expansion, with the Indian Gaming Association recently preparing a legal fight against sports prediction markets.
The debate has also intensified around insider trading concerns. Federal authorities recently alleged that a US Army soldier used classified information linked to a Venezuelan operation to profit from prediction market bets.
Minnesota’s ban is considered the most aggressive state-level action taken so far against the industry and could become a major test case over whether states can restrict federally regulated prediction market platforms.
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