CFTC and Kalshi Sue Minnesota Over Prediction Market Ban

A major legal battle over the regulation of prediction markets is escalating, with federal authorities and industry platforms filing lawsuits against state governments. The conflict centers on whether these platforms, which allow users to trade contracts on future events, are gambling operations subject to state control or financial derivatives under exclusive federal jurisdiction.

The U.S. Commodity Futures Trading Commission (CFTC) and the prediction market platform Kalshi have filed separate lawsuits against Minnesota following Governor Tim Walz signing a bill that bans operating such platforms. The law, set to take effect August 1, makes facilitating prediction markets a felony. CFTC Chairman Michael Selig filed suit less than 24 hours after the bill was signed, alleging Minnesota enacted the first outright state ban on prediction markets. Kalshi subsequently filed a federal lawsuit challenging the law on constitutional grounds.

Both the CFTC and Kalshi argue that event contracts on prediction market platforms are swaps traded on federally designated contract markets and fall under the CFTC's exclusive jurisdiction via the Commodity Exchange Act. They contend that federal...