Key Takeaways
- Governor Tim Walz approved SF 4760, making Minnesota the first state to completely prohibit prediction markets, with enforcement beginning August 1.
- Federal regulators, including the CFTC and DOJ, filed legal action against Minnesota within a day, asserting sole federal authority over these platforms.
- Federal officials contend that prediction market instruments qualify as regulated “swaps” under their purview, beyond state criminalization powers.
- The legislation threatens criminal penalties for financial institutions, payment systems, news organizations, and professional sports associations.
- Separately, Minnesota enacted legislation enabling cryptocurrency custody at financial institutions while prohibiting crypto ATM installations.
In an unprecedented move, Minnesota has enacted the nation’s first comprehensive prohibition on prediction markets, immediately triggering a federal legal challenge.
On Monday, Governor Tim Walz put his signature on Senate File 4760. In less than a full day, the Commodity Futures Trading Commission partnered with the Justice Department to initiate legal proceedings against Minnesota, along with Walz, Attorney General Keith Ellison, and Public Safety Director Jon Anglin.
Scheduled for implementation on August 1, the legislation outlaws promotional activities, establishment, management, or support of prediction market operations. The statute classifies event-based contracts — spanning athletic competitions, climate conditions, armed conflicts, and additional categories — as prohibited “gambling activities.”
Services such as Kalshi and Polymarket face direct operational restrictions.
Federal Regulators Assert Sole Authority
The CFTC maintains it possesses “exclusive jurisdiction” regarding prediction markets through the Commodity Exchange Act. Federal regulators contend these instruments represent “swaps” conducted through CFTC-sanctioned platforms, placing them outside state regulatory reach.
“This flagrant and unprecedented incursion into the Commission’s exclusive regulatory sphere must be preliminarily and permanently enjoined,” the complaint states.
The federal filing further contends Minnesota’s statute inappropriately imposes criminal consequences on financial institutions, transaction processors, publishing entities, and athletic organizations maintaining relationships with or promoting prediction market services.
The CFTC explicitly referenced collaborations involving Major League Baseball, the NHL, Fox, Dow Jones, and the Wall Street Journal as illustrative cases.
A Kalshi spokesperson called the Minnesota law “unenforceable” and a “blatant violation of the constitution and federal law.” Polymarket did not respond to requests for comment.
Growing Conflict Between State and Federal Powers
Minnesota joins a growing list of states confronting federal pushback on prediction market regulations. The CFTC has initiated similar legal actions against Illinois, Arizona, Connecticut, and New York regarding their efforts to limit these services through state gaming regulations.
CFTC Chair Michael Selig, presently serving as the sole active commissioner, has repeatedly indicated state prohibition efforts would face federal opposition. Through Tuesday, President Trump had not put forward nominees for the remaining positions on the five-member commission.
This past March, the CFTC released an official guidance document addressing prediction markets and opened a public commentary period regarding possible rule development.
Contradictory Cryptocurrency Policy in Minnesota
Minnesota’s approach to digital assets and distributed ledger technology has shown contrasting directions in recent legislative activity.
Coinciding with the prediction markets prohibition, Walz approved separate legislation permitting Minnesota banking institutions and credit cooperatives to provide digital currency storage solutions, likewise starting August 1.
Previously, during February, Minnesota followed Indiana as the nation’s second state to prohibit cryptocurrency automated teller machines and terminals, referencing extensive fraudulent schemes and scam operations affecting state residents.
The CFTC’s legal filing requests judicial intervention to both temporarily and permanently halt Minnesota’s prediction markets prohibition prior to its scheduled implementation.
