CFTC Sues Minnesota to Block First-in-Nation Prediction Market Ban

The Commodity Futures Trading Commission (CFTC) filed a federal lawsuit on May 19, 2026, to block a new Minnesota law that bans prediction market sites such as Kalshi and Polymarket. Signed by Governor Tim Walz and effective August 1, the law makes it a felony to host, create, or advertise prediction markets within the state, with penalties including up to five years in prison and a $10,000 fine. The ban extends to supporting services like VPNs but includes carve-outs for securities, commodities, and weather trading following pressure from the agricultural lobby.

CFTC Chairman Michael S. Selig argues the law undermines a 50-year-old federal regulatory regime and turns lawful operators into felons. The commission asserts that under the Commodity Exchange Act, event contracts are classified as swaps, granting the federal government exclusive jurisdiction. This legal action aligns with broader efforts by the Trump administration to challenge similar state restrictions in Arizona, Connecticut, Illinois, New York, and Wisconsin.

Minnesota Attorney General Keith Ellison and Representative Emma Greenman defended the legislation, stating that prediction markets are designed to be addictive and prey on low-income individuals and youth. While Greenman maintains that the bill includes necessary exceptions for weather derivatives, the CFTC contends the law still harms farmers. Market operators Kalshi and Polymarket have characterized the ban as unenforceable and a violation of the U.S. Constitution.