Minnesota Bans Prediction Markets, Kalshi Sues to Block the Law

Minnesota has become the first state in the country to make operating a prediction market a felony offense, and Kalshi is fighting back in federal court. Governor Tim Walz signed the legislation on May 18, 2026, as part of a broader public safety bill. The new law, set to take effect August 1, 2026, broadly prohibits the operation, hosting, and advertising of prediction market platforms within Minnesota and covers a wide range of event categories from sports and elections to weather events and pop culture.

Within hours of the signing, the Commodity Futures Trading Commission filed its own federal lawsuit seeking a preliminary injunction to block the Minnesota law before it takes effect. The CFTC argued that prediction markets on regulated exchanges like Kalshi are federally overseen derivatives products and that state gambling laws cannot override the federal jurisdiction established by the Commodity Exchange Act. Kalshi filed a separate lawsuit making similar constitutional arguments.

Why This Case Matters for Sports Bettors

The legal battle between Minnesota and the prediction market industry is significant far beyond the state’s borders. If the CFTC and Kalshi win a preliminary injunction and eventually prevail on the merits, it would establish a powerful precedent limiting states’ ability to ban or restrict prediction market products that are regulated at the federal level. That outcome would effectively make prediction markets a nationally available product regardless of individual state gambling policies.

If Minnesota’s law is allowed to stand, however, it would signal that states retain meaningful authority to impose criminal penalties on prediction market activity even when the CFTC has authorized those contracts. Several other states have introduced similar legislation, and a Minnesota victory in the courts could trigger a wave of comparable bans across the country.

The distinction matters to sports bettors because prediction markets have become a significant alternative wagering destination. Kalshi and Polymarket allow users to trade on the outcome of sporting events, and because they operate as CFTC-regulated exchanges rather than licensed sportsbooks, they are accessible in states where traditional sports betting remains illegal and available to users as young as 18 where legal sportsbooks require users to be 21. They also operate without paying state sports betting taxes, which has drawn criticism from the established sportsbook industry and from state legislators who see that revenue gap as a problem.

What Minnesota’s Law Actually Covers

Minnesota’s law defines a prediction market broadly as any system that allows consumers to place wagers on future event outcomes that the parties to the contract do not determine or control. That definition sweeps in not just sports event contracts but also election outcome markets, weather prediction contracts, government action contracts, and even markets based on whether a specific person will make a particular public statement. Criminal penalties attach not only to the platforms themselves but also to payment processors, advertisers, data verification services, and other facilitators of the prohibited activity.

The CFTC filed for a preliminary injunction on May 19, 2026, and the federal court’s decision on that request is expected before August 1. The outcome will determine whether Minnesota’s law goes into effect on schedule or is paused while the underlying constitutional questions are litigated. That decision, and the eventual resolution of the case on the merits, will be closely watched by every state government, every prediction market operator, and every licensed sports betting operator in the country.