Minnesota has enacted the first state law to ban prediction markets, setting the stage for a legal confrontation over the authority to regulate these emerging platforms. The bipartisan legislation, signed into law by Governor Tim Walz in May, responds to concerns that apps like Kalshi and Polymarket are being used by underage individuals and may serve as an unregulated form of sports betting, which remains illegal in Minnesota.
The bill was introduced earlier this year by state Representative Emma Greenman, a Democrat and voting-rights attorney. Greenman and other lawmakers were prompted to act after teachers reported that students were widely accessing prediction market apps, which allow users to place wagers on a range of events, including Federal Reserve interest rate changes and sporting outcomes. Greenman characterized the issue as both a public safety and public health concern.
Minnesota’s legislation was folded into an omnibus public safety bill and quickly enacted, reflecting longstanding resistance in the state to legalizing sports betting despite the presence of some casinos and a state lottery. The law’s passage has drawn sharp opposition from the affected companies and the federal regulator overseeing these markets, the Commodity Futures Trading Commission (CFTC).
Within a day of the law’s enactment, the CFTC, backed by the prediction market operators, filed a federal lawsuit to block enforcement, contending that the markets are regulated exclusively at the federal level and operate as financial exchanges crossing state lines. Kalshi and Polymarket have argued that Minnesota’s ban reflects a misunderstanding of their products and an unprecedented regulatory overreach.
The legal dispute has attracted national attention as it highlights a growing conflict between state governments seeking to impose their own restrictions on gambling-like activities and the federal government’s claims of exclusive oversight. A federal district judge in Minneapolis, Kate M. Menendez, temporarily halted the Minnesota law’s enforcement pending resolution of the case. During hearings, the judge questioned whether certain types of wagers, such as those on reality television outcomes, fall under the CFTC’s jurisdiction as financial tools.
The outcome of this litigation is expected to influence how prediction markets are regulated across the United States. Approximately 20 states have taken or considered steps to control similar platforms amid concerns about consumer protection and the potential for addiction, especially among minors.
Supporters of the Minnesota bill emphasize the need for state-level control. Attorney General Keith Ellison defended the ban as necessary to prevent predatory and addictive behaviors linked to these platforms. Conversely, companies and the CFTC argue that prediction markets function like financial exchanges and are best regulated uniformly by federal authorities. Michael S. Selig, chairman of the CFTC, has stated that Congress did not intend for these markets to be subject to a patchwork of state gambling laws.
Public reaction within Minnesota has been mixed. Some educators and community members, like high school teacher Devon Bowker, have voiced concern about the accessibility and appeal of prediction markets to youth. Meanwhile, some users describe the platforms as high-risk, speculative investments rather than traditional gambling, highlighting the presence of a carve-out in the law for certain weather-related markets.
A pretrial conference in the federal lawsuit is scheduled for October, with legal experts viewing the case as a test of the balance of power between state authority and federal regulatory jurisdiction in the rapidly evolving landscape of online wagering and financial trading platforms. Representative Greenman expressed confidence in the state’s legal position and readiness to continue defending the legislation.