Minnesota becomes first state to criminalise prediction markets
- Governor Tim Walz signed Senate File 4760 on 18 May, making Minnesota the first US state to criminalise the operation of prediction markets.
- The law, set to take effect on 1 August 2026, makes it a felony to create, operate or advertise prediction market platforms in the state.
- The CFTC filed a federal lawsuit within a day of the signing, seeking a preliminary injunction to block the law before it comes into force.
Minnesota has become the first US state to formally criminalise the operation of prediction markets, after Governor Tim Walz signed Senate File 4760 into law on 18 May as part of an omnibus public safety bill.
The legislation sets a national precedent and has drawn an immediate legal challenge from federal regulators, deepening the conflict between state governments and the Commodity Futures Trading Commission (CFTC) over who has authority to regulate event contracts.
Walz signs, CFTC responds
The bill cleared the Minnesota House by 100 votes to 32 and passed the Senate 57-9. Unlike previous state efforts, which relied on cease-and-desist letters from gaming regulators or attorneys general, the new law goes further: it makes it a felony to create, operate or advertise prediction market platforms within the state.
It also authorises cease-and-desist orders and court enforcement actions tied to the new prohibitions.
Bill sponsor Rep. Emma Greenman said:
“We as a state should decide how best and what regulations we think should attach to gambling, to protect public safety, to protect our kids.”
The CFTC filed a federal lawsuit against Minnesota within a day of the signing, naming Walz and state Attorney General Keith Ellison as defendants.
The commission is seeking a preliminary injunction to stop the law taking effect on 1 August 2026, arguing it conflicts with the federal framework established under the Commodity Exchange Act.
CFTC Chairman Michael S. Selig said:
“This Minnesota law turns lawful operators and participants in prediction markets into felons overnight. Minnesota farmers have relied on critical hedging products on weather and crop-related events for decades to mitigate their risks.
“Governor Walz chose to put special interests first and American farmers and innovators last.”
The agricultural carve-out
The version of the bill signed by Walz on 18 May included weather-related event contracts within its scope, drawing particular concern from the agricultural sector. A revised version of the bill, which exempts weather-related hedging instruments used by farmers, is expected to be signed separately.
Minnesota is one of the largest agricultural producers in the US. The CFTC argued that the original signed version of the law threatens federally regulated markets that Congress placed under commodities oversight decades ago, and that its reach is broader than any other state law the commission has challenged to date.
Industry representatives have consistently argued that event contracts are financial products subject to exclusive federal jurisdiction under the Commodity Exchange Act, not gambling products subject to state gaming laws.
A growing legal campaign
The CFTC has, according to its own filings, now filed prediction market lawsuits against five other states: Arizona, Connecticut, Illinois, New York and Wisconsin. A federal court in Arizona issued a preliminary injunction blocking that state from using gambling laws to criminally prosecute prediction market operators, though the constitutional question has not been finally resolved.
Polymarket, which according to Bloomberg was reportedly seeking investment at a $15 billion valuation as of April 2026, has been expanding its US-focused operations following a shift in enforcement posture under the Trump administration. Kalshi, its main rival, has also been at the centre of state-level enforcement disputes across multiple jurisdictions.
The Minnesota ban represents a significant escalation. Where previous state efforts focused on civil enforcement, outright criminalisation of platform operation raises the stakes for operators, banking partners and any entity involved in facilitating event contracts in the state.
The outcome of the preliminary injunction hearing will be closely watched. A federal court victory for the CFTC would reinforce the commission’s pre-emption argument; a ruling against it could encourage other states to pursue similar legislation.
With active litigation across multiple states, the question of jurisdictional authority may ultimately require resolution at appellate or Supreme Court level if circuit courts remain split.
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