CFTC sues Minnesota to block nation's first felony prediction market ban
The Commodity Futures Trading Commission sued Minnesota on Tuesday, May 19, to block a new state law that threatens to expose prediction market exchanges, payment providers, media partners, and sports leagues to criminal liability. The agency called the legislation the most aggressive move by any state to shut down federally regulated prediction markets. The ban is scheduled to take effect in August 2026. The lawsuit pits federal regulatory authority against state-level prohibitions on event-contract platforms.
The CFTC's suit against Minnesota tees up a direct federal-state collision over who governs event contracts. Minnesota's felony ban survives, Kalshi and Polymarket face a domino risk: every state legislature could criminalize their operations rather than regulate them. The platforms are already stretched across Michigan, Illinois, Kentucky, and New Mexico, each demanding separate legal firepower and potential geofencing.
A federal court ruling that CFTC registration does not preempt state criminal law would blow apart the preemption shield both platforms have leaned on. The August effective date forces a compressed timeline; a preliminary injunction denial would leave operators scrambling to exit Minnesota traders or risk felony liability. Congress is watching too — the outcome will shape whether the CFTC keeps sole jurisdiction or shares it with fifty state gambling regimes.