Key Takeaways
- Governor Tim Walz of Minnesota enacted SF 4760, making it the nation’s first state-level prohibition of prediction markets, with enforcement beginning August 1.
- Federal regulators, including the CFTC and DOJ, filed legal action against Minnesota within a day, asserting federal “exclusive jurisdiction” over these platforms.
- According to the CFTC, prediction market instruments qualify as federally supervised “swaps,” placing them beyond state criminalization authority.
- The legislation potentially subjects financial institutions, payment services, media outlets, and professional sports organizations to criminal prosecution.
- Concurrently, Minnesota enacted legislation permitting cryptocurrency custody at banking institutions while prohibiting crypto ATMs across the state.
Minnesota has achieved the distinction of being the first American state to completely prohibit prediction markets, prompting an immediate legal response from federal authorities.
Governor Tim Walz approved Senate File 4760 on Monday afternoon. Before a full day had passed, the US Commodity Futures Trading Commission alongside the Department of Justice initiated legal proceedings against Minnesota, naming Walz, Attorney General Keith Ellison, and Public Safety Director Jon Anglin as defendants.
The legislation, scheduled for implementation on August 1, forbids the promotion, establishment, management, or enabling of prediction market operations. It categorizes event-based contracts — spanning athletics, meteorological events, armed conflicts, and other outcomes — as unlawful “gambling activities.”
Services such as Kalshi and Polymarket face direct impact from this prohibition.
Federal Regulators Assert Exclusive Authority
The CFTC maintains it possesses “exclusive jurisdiction” concerning prediction markets through the Commodity Exchange Act. The regulatory body contends these instruments constitute “swaps” executed on CFTC-sanctioned platforms, rendering state prohibition powers null.
“This flagrant and unprecedented incursion into the Commission’s exclusive regulatory sphere must be preliminarily and permanently enjoined,” the legal filing declares.
The lawsuit further contends Minnesota’s statute improperly expands criminal accountability to financial institutions, transaction processors, news organizations, and athletic leagues maintaining relationships with or promoting prediction market services.
The CFTC explicitly referenced collaborations with Major League Baseball, the NHL, Fox, Dow Jones, and the Wall Street Journal as illustrations.
A Kalshi representative characterized the Minnesota statute as “unenforceable” and a “blatant violation of the constitution and federal law.” Polymarket declined to provide commentary.
Emerging Trend of State-Federal Conflicts
Minnesota isn’t the initial state encountering CFTC opposition regarding prediction markets. The regulatory agency has previously initiated litigation against Illinois, Arizona, Connecticut, and New York concerning comparable efforts to limit these services through state gaming regulations.
CFTC Chair Michael Selig, presently the commission’s sole active member, has repeatedly indicated state-imposed prohibitions would face federal challenges. Through Tuesday, President Trump hadn’t appointed replacement commissioners for the five-member board.
During March, the CFTC released an official advisory regarding prediction markets and solicited public feedback concerning prospective regulatory frameworks.
Minnesota’s Contrasting Cryptocurrency Policies
Minnesota has pursued divergent paths regarding cryptocurrency and blockchain oversight in recent periods.
Coinciding with the prediction markets prohibition’s signing, Walz approved separate legislation enabling Minnesota banking institutions and credit unions to provide digital currency custody operations, likewise beginning August 1.
Previously, during February, Minnesota followed Indiana as the nation’s second state to prohibit cryptocurrency ATMs and terminals, referencing extensive fraudulent schemes and deceptive practices victimizing state residents.
The CFTC’s legal action seeks judicial intervention to both temporarily and permanently prevent Minnesota’s prediction markets prohibition from commencing.
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