Feds sue Minnesota to block law that would make prediction market trading a felony
The federal agency that regulates commodity futures markets has sued Minnesota to block a new state law that would make operating or assisting in the operation of a prediction market a criminal felony.
The Commodity Futures Trading Commission filed the lawsuit and is asking a federal court to issue a preliminary injunction to stop the law from taking effect on Aug. 1, 2026.
The CFTC described the Minnesota law as the most aggressive move by any state to shut down CFTC-regulated markets and undermine the federal regulatory framework Congress established more than 50 years ago. The agency said the law's reach is broader than any other state law it has challenged to date, including by criminalizing weather-related event contracts.
The head of the Commodity Futures Trading Commission said the law would turn people who use those prediction markets "into felons overnight."
"Minnesota farmers have relied on critical hedging products on weather and crop-related events for decades to mitigate their risks. Gov. Walz chose to put special interests first and American farmers and innovators last," CFTC Chairman Michael S. Selig added Tuesday.
The CFTC noted that Minnesota is one of the largest agricultural producers in the United States, and said farmers in the state have long used weather and crop-related contracts to manage financial risk.
The lawsuit comes after the Minnesota Senate passed the underlying legislation 56-10. The bill bans most bets placed on prediction markets such as Kalshi and Polymarket, explicitly outlawing wagers on topics including sports, weather, popular culture events, war, and death.
Supporters of the ban argued that the platforms represent an unregulated form of gambling and could encourage behavior comparable to insider trading.
Nine connected Polymarket accounts have made nearly $2.5 million dollars betting on U.S. military actions alone, such as the exact dates of the first U.S. strikes on Iran, the removal of the supreme leader, and the announcement of a ceasefire.
Last month, prosecutors charged a soldier with using insider information to bet on the capture of Nicolas Maruro of Venezuela. The soldier helped plan that mission.
In Minnesota, Kalshi banned a lawmaker from the platform for betting that he'd win his primary.