The Commodity Futures Trading Commission is suing Minnesota after the state passed legislation that bans several major categories of prediction markets and criminalizes offering them.
Gov. Tim Walz signed an omnibus public safety bill containing the prediction markets language on May 18. The new restrictions are scheduled to take effect Aug. 1.
The CFTC says it is seeking a preliminary injunction to stop the law from taking effect. CFTC Chairman Michael Selig leaned into the agricultural implications of the law, arguing it could threaten hedging products tied to weather and crop-related events.
“This Minnesota law turns lawful operators and participants in prediction markets into felons overnight,” Selig said in the lawsuit announcement. “Minnesota farmers have relied on critical hedging products on weather and crop-related events for decades to mitigate their risks. Governor Walz chose to put special interests first and American farmers and innovators last.”
Minnesota joins a growing list of states sued by the CFTC over prediction market restrictions. The agency has already filed suits against Arizona, Connecticut, Illinois, New York and Wisconsin, arguing that, in their efforts to impose restrictions, those states are interfering with federally regulated event contract markets.
CFTC says Minnesota law is most aggressive state action yet
The CFTC said Minnesota’s law criminalizes trading in many CFTC-regulated markets and has a wider reach than any other state law the agency has challenged so far.
The agency specifically pointed to the law’s coverage of weather-related event contracts, arguing that the restrictions could affect risk-management tools used in an agricultural state.
The CFTC called the legislation “the most aggressive move by a state to shut down CFTC-regulated markets and undermine the federal regulatory regime set up by Congress more than 50 years ago.”
The CFTC’s complaint says Minnesota enacted “the first outright ban on ‘prediction markets’ in the United States,” targeting event contracts traded on CFTC-regulated exchanges.
The agency said the law would criminalize not only designated contract markets that list event contracts, but also futures commission merchants, clearing organizations, banks, credit-card companies, news organizations, sports leagues and data providers that support or interact with those markets.
“Emergency and permanent injunctive relief is even more critical in Minnesota,” the complaint says. “Unlike other States, which have largely attempted to enforce their existing gambling laws against sports-related event contracts, Minnesota enacted a tailor-made prohibition that targets all event contracts.”
Walz signs public safety bill with prediction market ban language
Minnesota lawmakers formally approved the U.S.’s most expansive state-level legislative crackdown on prediction markets on May 12 after both chambers repassed a public safety package containing the provisions.
The Senate repassed the final negotiated version of SF 4760 on May 13 in a 57-9 vote before the House approved the updated omnibus package 100-32, sending the legislation to Walz on May 14.
The votes capped a procedural shift that saw lawmakers revive the prediction market proposal after the House path for the Senate’s standalone prediction market ban bill, SF 4511, stalled amid deadline and procedural concerns.
Rather than continuing to pursue the standalone bill, lawmakers inserted nearly identical language into the omnibus public safety package through a House floor amendment led by Rep. Emma Greenman. The maneuver ultimately moved the issue into conference committee negotiations tied to one of Minnesota’s key end-of-session bills.
Lawmakers warned that CFTC legal action would come
Some lawmakers warned throughout the process that the legislation was likely to trigger costly federal litigation.
House Republican Floor Leader Harry Niska raised concerns as the Senate bill moved through the committee process, questioning how Minnesota could regulate prediction markets given the CFTC’s position that it has exclusive jurisdiction over the products.
“I’m concerned about the sort of legal status of that,” Niska told CBS Minnesota. “How do we do that with federal commodities laws, which apparently the [CFTC] thinks that they have exclusive jurisdiction over prediction markets.”
Rep. Nolan West said during an April 14 committee hearing that Minnesota could be exposing taxpayers to legal costs before courts clarify whether states can regulate federally listed prediction market contracts.
“Perhaps they would rule that the states have the right to regulate it,” West said. “Until that happens, all we’re doing is engendering taxpayers to pay for litigation costs that we very likely will lose if any recent court case is determining it.”
Gaming attorney Daniel Wallach later made a similar argument, in the wake of a Semafor report that said the CFTC was likely to pursue a lawsuit against Minnesota if any prediction market ban was passed. Wallach described state prediction market bills as misguided and premature “time-wasters” because the federal preemption fight remains unresolved.
“Once enacted into law, these bills become automatic tickets to federal court,” Wallach wrote in a LinkedIn post.
In an interview with SiGMA, Wallach said the state cases may ultimately turn on whether courts frame the dispute as derivatives trading or sports gambling. He argued the CFTC’s position relies on broad definitions in commodities law, while states are likely to focus on their traditional authority over gambling and whether Congress clearly authorized the CFTC to regulate sports betting through event contracts.
“The salient question is whether Congress ever spoke clearly about empowering the CFTC to regulate sports gambling,” he said.
What the Minnesota bill would ban
Minnesota’s legislation goes further than other state prediction market proposals introduced this year.
While other states have generally pursued narrower approaches tied to taxation, licensing, age limits, public-official restrictions or specific market categories like sports, the Minnesota bill establishes a criminal prohibition targeting many of the most common categories currently offered by prediction market platforms, along with several already restricted under federal law.
The legislation prohibits prediction markets tied to:
- Sports
- Esports
- Elections
- Government actions
- Wars
- Terrorism
- Disasters
- Public health emergencies
- Short-term weather events
- Entertainment outcomes
- Legal proceedings
- Mention markets (whether a person will say a particular word or phrase)
The bill does not expressly list financial or economic markets, such as crypto prices, stock prices, interest rates, economic indicators or company earnings, among the prohibited prediction market categories. Minnesota gambling law excludes “a contract for the purchase or sale at a future date of securities or other commodities” from the definition of a bet, but the new legislation adds a cross-reference to the prediction market statute.
That leaves some uncertainty over finance-oriented event contracts. Platforms could argue that those markets fall outside the ban if they do not touch the listed categories, while state officials could take a more expansive view of which event contracts the new law reaches.
The bill extends liability beyond operators themselves. The language targets businesses that knowingly facilitate or support prohibited prediction market activity, including payment processors, geolocation providers, advertisers and data services.
Violations could carry felony penalties under the legislation’s new criminal framework.
CFTC lawsuits continue against states
The CFTC’s central claim in all of its state lawsuits is that federally listed prediction market contracts fall under its exclusive jurisdiction, meaning states cannot use gambling laws or other state-level restrictions to block them.
In today’s Minnesota announcement, the agency pointed to one early win in Arizona, where a federal court granted a preliminary injunction blocking the state from using gambling laws to criminally prosecute prediction market operators.
The other CFTC lawsuits are still in early procedural stages. In Wisconsin, according to Green Bay’s WBAY, a federal judge recently gave the state until June 7 to respond to the government’s request for a preliminary injunction and file any motion to dismiss, while also signaling he wants to examine whether the CFTC and Department of Justice have standing to sue before addressing the core preemption issue.
The Connecticut case is also beginning to move. As first noted by prediction market analyst Mick Bransfield on X, a federal judge scheduled a May 27 telephonic conference over Connecticut’s anticipated motion to dismiss the CFTC’s lawsuit and other procedural matters.
