CFTC Sues Minnesota Hours After State Signs the Nation’s First Explicit Prediction Market Ban

The Commodity Futures Trading Commission sued Minnesota on Tuesday, hours after Governor Tim Walz signed the nation’s first law explicitly banning prediction markets, escalating a growing constitutional fight over whether event contracts are federally regulated derivatives or state-regulated gambling.

The law, set to take effect August 1, makes it a felony to create, operate, or advertise a prediction market covering sports, elections, assassinations, weather, and what the statute calls “mention markets.” It also authorizes cease-and-desist orders and court enforcement actions. Minnesota is one of 11 states with no legal form of sports betting, and an effort to legalize sportsbooks gained no traction in the 2026 legislative session.

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The CFTC filed in Minnesota district court, arguing the state law violates the U.S. Constitution by criminalizing activity that falls under the commission’s “exclusive jurisdiction” over commodity derivatives. “This Minnesota law turns lawful operators and participants in prediction markets into felons overnight,” Chairman Michael Selig said. He warned the law could also disrupt weather and crop-related hedging contracts that Minnesota farmers have relied on for decades.

Minnesota Attorney General Keith Ellison said his office is reviewing the lawsuit and will respond in court. “I’m very concerned about the harms of prediction markets on Minnesotans,” he said. State Representative Emma Greenman (D-MN), who proposed the original ban, called the lawsuit “unsurprising, given the pressure they’re under from President Trump, whose son has financial ties to the two largest prediction-market companies.” Donald Trump Jr. is an investor in Polymarket through his firm 1789 Capital and a strategic advisor to Kalshi.

The suit is the sixth the CFTC has filed against a state. The agency has already sued Arizona, Connecticut, Illinois, New York, and Wisconsin for laws limiting prediction-market companies from offering sports-related contracts. But Minnesota’s law goes further than any of them, banning the platforms themselves rather than restricting specific contract types.

The core constitutional question is whether the Commodity Exchange Act preempts state gambling law when applied to event contracts. The CFTC says yes. Minnesota says no. Legal observers expect the dispute to reach the U.S. Supreme Court, making the immediate practical outcome uncertain regardless of which side wins in district court.