Federal Agencies Sue Minnesota Hours After Governor Enacts Prediction Markets Ban

TLDR

• Governor Tim Walz of Minnesota signed SF 4760, the first comprehensive state ban on prediction markets in the United States, scheduled to take effect August 1.
• Less than 24 hours after the bill was signed, the CFTC and DOJ filed suit against Minnesota, asserting federal “exclusive jurisdiction” over prediction markets.
• The CFTC contends that prediction market contracts are federally regulated “swaps” and that states may not criminalize them.
• The statute could subject banks, payment processors, media companies, and sports leagues to criminal liability.
• Minnesota has also recently enacted legislation permitting crypto custody services at banks and prohibiting crypto ATMs statewide.

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(SeaPRwire) –   Minnesota has become the first U.S. state to institute a total ban on prediction markets, and the federal government moved quickly to contest it.

LATEST: The CFTC and DOJ are suing Minnesota over a newly signed law banning prediction markets, calling it a “flagrant” incursion on federal jurisdiction. pic.twitter.com/LxZHfQRTJy

— CoinMarketCap (@CoinMarketCap) May 20, 2026

Governor Tim Walz enacted Senate File 4760 into law on Monday. Less than 24 hours afterward, the U.S. Commodity Futures Trading Commission and the Department of Justice initiated a lawsuit against Minnesota, Walz, Attorney General Keith Ellison, and Public Safety Director Jon Anglin.

The statute, effective August 1, forbids advertising, creating, operating, or facilitating prediction market platforms. It classifies event contracts—spanning sports, weather, military conflicts, and other areas—as unlawful “wagers.”

Platforms such as Kalshi and Polymarket would be directly impacted.

CFTC Claims Federal Oversight

The CFTC asserts that it holds “exclusive jurisdiction” over prediction markets under the Commodity Exchange Act. The agency maintains that these contracts are “swaps” traded on CFTC-approved exchanges and that states lack authority to prohibit them.

“This flagrant and unprecedented incursion into the Commission’s exclusive regulatory sphere must be preliminarily and permanently enjoined,” the complaint states.

The lawsuit further argues that Minnesota’s law improperly extends criminal liability to banks, payment processors, media companies, and sports leagues that partner with or advertise prediction market platforms.

The CFTC specifically referenced partnerships with Major League Baseball, the NHL, Fox, Dow Jones, and The Wall Street Journal as examples.

A spokesperson for Kalshi described the Minnesota law as “unenforceable” and a “blatant violation of the constitution and federal law.” Polymarket did not respond to requests for comment.

A Pattern of State Pushback

Minnesota is not the first state to clash with the CFTC over prediction markets. The agency has also pursued legal action against Illinois, Arizona, Connecticut, and New York regarding comparable efforts to restrict these platforms under state gambling statutes.

CFTC Chair Michael Selig, currently the agency’s sole sitting commissioner, has consistently stated that state-level bans will be challenged. As of Tuesday, President Trump had not nominated additional commissioners to complete the five-member panel.

In March, the CFTC issued a formal advisory on prediction markets and invited public comment on potential rulemaking.

Minnesota’s Mixed Crypto Approach

Minnesota has pursued divergent directions on crypto and blockchain regulation in recent weeks.

On the same day the prediction markets ban took effect, Walz also signed legislation allowing Minnesota banks and credit unions to provide virtual currency custody services, also effective August 1.

Earlier, in February, Minnesota became the second U.S. state—after Indiana—to prohibit crypto ATMs and kiosks, citing widespread fraud and scam activity targeting residents.

The CFTC’s lawsuit requests that a court both preliminarily and permanently block the Minnesota prediction markets ban before it takes effect.