CFTC Sues Minnesota to Block Felony Ban on Prediction Markets

The U.S. Commodity Futures Trading Commission (CFTC) has sued the state of Minnesota to halt a newly enacted law that would make certain prediction market activity a criminal felony, escalating a growing federal-state fight over how event contracts should be classified and regulated. In a press release, the CFTC said Chairman Michael S. Selig filed the lawsuit seeking to block legislation signed by Governor Tim Walz. The statute would make it a felony to create, operate, manage, assist, or advertise prediction markets linked to areas including sports, elections, weather, disasters, and pop culture. The law targets trading and operating event contracts, which the CFTC says fall under its jurisdiction. Selig called the measure the most aggressive state crackdown to date, arguing it would turn "lawful operators and participants in prediction markets into felons overnight" and effectively shut down markets regulated at the federal level. Minnesota lawmakers have framed the statute as a consumer protection effort aimed at reducing gambling-related harm. The CFTC argues Minnesota's approach is unconstitutional because it intrudes on the agency's exclusive authority under the Commodity Exchange Act. Under that framework, the CFTC maintains that states cannot independently criminalize activities already governed federally. While the Minnesota law includes limited carve-outs for traditional agricultural hedging, the agency says it broadly criminalizes platforms and users and would undermine federally regulated markets, including tools used by farmers. The CFTC is seeking a preliminary injunction to stop enforcement before the law takes effect. Selig said Governor Walz "chose to put special interests first and American farmers and innovators last." The case also has implications for crypto-linked prediction products. Platforms such as Polymarket and Kalshi list event contracts tied to cryptocurrency prices, blockchain developments, and related outcomes. Other firms, including Robinhood, Coinbase, and Crypto.com, have faced parallel state enforcement actions. Market participants say a Minnesota victory could disrupt liquidity and user access across crypto-related prediction markets, while a CFTC win would reinforce expectations of a clearer national framework. Beyond crypto, the lawsuit reflects a broader pattern of federal preemption disputes. The CFTC pointed to earlier clashes involving Arizona, Wisconsin, Connecticut, Illinois, and New York. If the agency prevails, observers say it could deter states from reclassifying federally regulated event contracts under gambling or public safety statutes, reduce the risk of fragmented state-by-state enforcement, and strengthen confidence in a unified national regulatory regime. The dispute underscores the CFTC's longstanding position that Congress granted it sole authority over these derivatives markets more than 50 years ago, preempting state gambling or public-safety laws. Related: CFTC Sues NY to Block Gambling Law on Prediction Platforms Disclaimer: The information presented in this article is for informational and educational purposes only and does not constitute financial advice. Coin Edition is not responsible for any losses incurred from the use of content, products, or services mentioned. Readers should exercise caution before taking any action related to the company.