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The Commodity Futures Trading Commission, backed by the U.S. government, has filed a lawsuit against Minnesota to stop enforcement of a new law that makes prediction markets a felony.
Governor Tim Walz signed SF 4760 on May 18, 2026, marking the first outright ban of its kind in the country. The statute defines prediction markets broadly, covering wagers on elections, government actions, sports, and even weather events.
Under the law, anyone who creates, operates, or facilitates such markets could face criminal charges. The CFTC argues that these contracts, known as event contracts, fall under its exclusive jurisdiction as swaps regulated by federal law.
“This Minnesota law turns lawful operators and participants in prediction markets into felons overnight,” CFTC Chairman Michael Selig said in a statement to Reuters.
Federal jurisdiction and Minnesota’s challenge
The lawsuit, like many others around the country, stresses that Congress gave the CFTC sole authority to regulate commodity derivatives, including event contracts.
Exchanges such as Kalshi and Polymarket are federally designated contract markets, and the Commission has approved thousands of event contracts over the years. Minnesota’s law, however, criminalizes not only the exchanges but also a wide range of actors connected to them, clearinghouses, brokers, banks, technology providers, and even advertisers.
The complaint argues that this sweeping scope intrudes on federal powers and violates the Supremacy Clause.
State officials defend the ban
Minnesota Attorney General Keith Ellison responded that his office is reviewing the lawsuit and will defend the law in court.
He raised concerns about the social impact of prediction markets, saying, “Prediction markets are designed to be addictive and prey especially on young people and low-income folks. They help the ultra-rich get richer, and the rest of us get poorer.”
Lawmakers in Minnesota argue the ban is necessary to protect residents from exploitation and to prevent gambling from spreading under the guise of financial contracts.
The law, set to take effect August 1, 2026, empowers state regulators to issue cease‑and‑desist orders and seek injunctions against operators.
What comes next?
The CFTC is seeking both preliminary and permanent injunctions to block Minnesota from enforcing SF 4760. The Commission says the law creates immediate uncertainty for exchanges and participants, undermining federal regulation and threatening market stability.
The case now moves to the US District Court for the District of Minnesota, where judges will weigh whether federal authority over derivatives markets overrides the state’s attempt to criminalize prediction trading.
