CFTC sues Minnesota and Gov. Walz to block nation's first state prediction market ban
The Commodity Futures Trading Commission sued Minnesota and Governor Tim Walz on Tuesday, May 19, to block a new state law that would make prediction market operators felons starting August 1, 2026. The CFTC called the legislation the most aggressive move by any state to shut down federally regulated prediction markets and is seeking a preliminary injunction before the statute takes effect. The law, signed by Walz roughly 24 hours before the lawsuit, threatens to expose exchanges, payment providers, media partners, and sports leagues to criminal liability. The suit escalates an ongoing federal-state conflict over which level of government has authority to oversee event contracts tied to sports, politics, and economics. CFTC Chair Mike Selig had previously pledged to keep suing states that attempt to regulate the sector, asserting exclusive federal jurisdiction over exchange-based prediction markets.
Kalshi and Polymarket now face a binary outcome by August 1: either the federal injunction freezes Minnesota's felony statute, or they must geofence the state's 5.7 million residents and sever ties with any local payment or media partners to avoid criminal exposure for their operators.
Brings Minnesota alongside Rhode Island and Ohio as the fourth jurisdiction where Kalshi and the CFTC have paired federal preemption claims, after Kalshi sued Ohio alone last October without agency backing.