Kalshi sues Minnesota to block first US felony ban on prediction markets
CFTC-registered prediction market platform Kalshi filed a federal lawsuit against Minnesota to block SF4760, a first-in-the-nation state law that criminalizes prediction markets with felony penalties for operators and users, set to take effect August 1, 2026. The complaint, filed in federal district court on Thursday, May 28, argues the statute is preempted by the Commodity Exchange Act and adds a constitutional challenge under the dormant Commerce Clause. The CFTC filed its own separate lawsuit against Minnesota in April 2026 making parallel preemption claims. Kalshi separately filed a motion in June 2026 asking a federal judge to freeze enforcement, arguing irreparable harm if the ban takes effect during litigation. The dual federal actions mark the most significant state-preemption test for regulated prediction markets as the industry expands beyond sports and politics into commodities and financial indexes, with legal observers suggesting the disputes may ultimately reach the US Supreme Court.
Kalshi must now litigate on two fronts—federal court against Minnesota's felony statute and Dane County against Wisconsin's parallel injunction push—draining legal resources ahead of the August 1 effective date.
Any loss on preemption would invite copycat felony bans from the four other states already mid-investigation, while a win would cement CFTC exclusivity and freeze state criminalization efforts nationwide.
Joins the CFTC's separate Minnesota suit and dueling Rhode Island litigation as the fourth cluster of simultaneous state-federal preemption fights, after Ohio last October and tribal cases last month, testing whether Kalshi can outrun state gambling classifications.