Why It Matters
The growing prediction market industry, which has expanded rapidly since 2024, now faces its first outright state prohibition — setting up a legal showdown between state lawmakers and federal regulators over who has authority to govern online betting platforms. The outcome could shape how states across the country, including those weighing similar restrictions, approach the fast-growing sector.
What Happened
Minnesota Gov. Tim Walz signed legislation on Monday, May 18, making the state the first in the nation to formally prohibit prediction markets — online platforms that allow users to place bets on the outcomes of real-world events, from elections to weather disasters to celebrity resignations.
The ban was included in a broader public safety bill, identified as SF4760, which cleared the state House by a 100-32 margin and the Senate 57-9. The measure takes effect August 1.
Within one day of the signing, the federal Commodity Futures Trading Commission filed suit to block the law, arguing that prediction markets operate as federally regulated financial contracts and fall outside state jurisdiction. CFTC Commissioner Michael Selig stated that the Minnesota law “turns lawful operators and participants in prediction markets into felons overnight.”
By the Numbers
- 100-32 — House vote approving the broader public safety bill containing the prediction market ban
- 57-9 — Senate margin in favor of the bill
- $22 billion — reported valuation of Kalshi, one of the largest prediction market platforms
- $12 billion — valuation of Polymarket, a competing platform making a domestic comeback under the Trump administration
- 30+ — total active legal cases nationally involving states, federal regulators, and prediction market platforms
The Federal-State Conflict
The CFTC has already sued five other states over similar efforts to restrict prediction market activity, and it has taken a markedly more permissive stance toward the platforms under the Trump administration. Polymarket, which ran into regulatory trouble under the Biden administration in 2022, has since resumed domestic operations.
Donald Trump Jr. serves as an adviser to both Kalshi and Polymarket, and President Trump’s media company launched its own prediction market product last year, though it has since scaled back that effort.
The platforms argue their products are commodity-style financial instruments — not gambling — and thus subject only to federal oversight, particularly following a 2018 Supreme Court ruling that handed states authority over sports betting specifically. Kalshi currently operates in all 50 states, including Utah and Hawaii, which ban gambling outright.
Kalshi spokesperson Elisabeth Diana criticized the Minnesota law, calling it “peak hypocrisy” and warning that restrictions would “push them to offshore, unsafe markets.”
Why Some Sports Betting Supporters Backed the Ban
Notably, several Minnesota legislators who support legalizing traditional sports betting voted for the prediction market ban. Their argument: the Legislature should maintain control over what forms of gambling are authorized in the state. Sen. Jordan Rasmusson, R-Fergus Falls, a co-author of the prediction market restriction, said lawmakers should “be able to debate and look at what forms of gambling we want to legalize.”
Sen. Matt Klein, DFL-Mendota Heights, who had previously pushed to legalize sports betting, was also an author on the ban — despite recently being fined by Kalshi itself for placing a $50 bet on his own primary election race. Klein acknowledged the incident “points to the need for clearer rules and regulations.”
Insider Trading Concerns
The platforms have drawn scrutiny beyond just jurisdictional disputes. In April, the CFTC alleged that a U.S. Army soldier used classified information from a military operation to profit roughly $400,000 on Polymarket bets tied to Venezuelan President Nicolás Maduro. The U.S. Senate unanimously passed a resolution barring its members and staff from trading on these platforms; the House has not followed suit.
Other states are navigating similar terrain. Oregon voters recently pushed back against tax increases tied to transportation funding, reflecting a broader pattern of state-level resistance to top-down regulatory expansion — a sentiment echoed in the Minnesota debate over who should control gambling policy.
What’s Next
Minnesota’s law is set to take effect August 1, though the CFTC lawsuit may seek an injunction to block it before then. A revised version of the bill is also expected to be signed soon, removing the ban on weather-event betting that drew specific objections from the CFTC. Nevada remains the only state with a court-ordered ban currently in force against a prediction market platform, and the broader legal fight is expected to play out in federal courts for months, if not years.
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