CFTC and DOJ Sue Minnesota Over State Ban on Prediction Markets

The Commodity Futures Trading Commission and the U.S. Department of Justice filed suit Tuesday against the state of Minnesota, Gov. Tim Walz and several state officials over SF 4760, an omnibus bill that bans prediction markets.

The complaint, filed less than 24 hours after Walz signed the bill, calls SF 4760 “the first outright ban on prediction markets in the U.S.” The law is set to take effect Aug. 1.

Prediction markets are platforms where users place wagers on the outcome of future events, including sports results, weather, company valuations and government actions. The agencies say contracts traded on those platforms are effectively swaps that trade on exchanges and fall under the CFTC’s exclusive jurisdiction.

The complaint asks a federal court to issue a preliminary and permanent injunction to block enforcement of the law. “This flagrant and unprecedented incursion into the Commission’s exclusive regulatory sphere must be preliminarily and permanently enjoined,” the filing reads.

The suit argues the statute improperly extends criminal liability to banks, payment processors, media organizations and sports leagues that advertise, verify or provide data tied to prediction markets.

The complaint highlights business relationships between prediction market platforms and mainstream partners, including major sports leagues and publishers, as examples of third parties that could face exposure under the law.

The litigation continues a broader legal clash between state gambling regulators and prediction market platforms such as Kalshi and Polymarket. In recent months the CFTC has sued Illinois, Arizona and Connecticut after those states sought to apply gambling laws to prediction market activity.

Under Chairman Mike Selig, the CFTC has moved this year to clarify how event contracts fit within its framework. In March the agency issued a formal advisory on prediction markets and opened a public process to gather feedback on potential rulemaking for event contracts.

Minnesota has taken varied policy actions on digital-asset issues this year. Earlier this week the governor signed legislation allowing state banks and credit unions to offer crypto custody services. In February the state banned crypto ATMs and kiosks, citing fraud concerns.

The CFTC and DOJ named the state, the governor and several state officials as defendants. The agencies said they filed suit quickly to prevent a direct conflict between the state statute and the federal regime that governs certain exchange-traded contracts and derivatives.