The Commodity Futures Trading Commission (CFTC) announced on Tuesday that it is filing a lawsuit to block the Minnesota government from banning prediction markets within the state.
The move comes after Governor Tim Walz signed a law, beginning in August 1, that would make it a crime to operate, host, or promote a prediction market platform, effectively restricting companies like Kalshi and Polymarket from doing business in the state.
Ban turns lawful companies into felons overnight, says CFTC chairman
The CFTC argues that federally regulated prediction markets fall under exclusive federal oversight, meaning states cannot impose separate gambling bans or restrictions. The agency says a uniform national framework is needed to avoid conflicting state rules, protect market integrity and ensure regulated event contracts operate consistently across the country.
In its press release announcing the lawsuit, 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.”
In response, Minnesota Attorney General Keith Ellison, said: “Prediction markets are designed to be addictive and prey especially on young people and low-income folks. They help the ultra-rich get richer and the rest of us get poorer.”
Minnesota is the latest state to challenge prediction market companies, joining a widening legal fight over whether the platforms amount to unlicensed gambling. Nevada regulators previously moved to restrict Kalshi’s sports-event contracts, while Arizona prosecutors filed criminal charges accusing the company of operating an illegal gambling business before a federal judge temporarily blocked enforcement.
However, Nevada remains the only state with an active court-backed ban blocking Kalshi from offering event contracts.
Prediction market companies hit back against “terrible idea”
Both Polymarket and Kalshi have responded strongly to the lawsuit. Elisabeth Diana, a spokesperson for Kalshi, said: “Outside of this ban being unenforceable, it’s also a terrible idea for the citizens of Minnesota because it reduces competition and drives activity offshore.”
A Polymarket spokesperson added that the lawsuit “runs counter to the federal government’s established framework for regulating prediction markets.”
Earlier in the month, both operators had surpassed $150 billion in combined lifetime trading volume, though the sector’s seven-month streak of rapid monthly growth has slowed, according to data from Crypto news site The Block.
Polymarket’s active traders fell to about 643,000 in April from more than 733,000 in March, while trading volume declined across both platforms. Meanwhile, Kalshi raised $1 billion in a funding round led by Coatue Management that valued the company at $22 billion, The New York Times reported. Kalshi said its annualized trading volume reached $178 billion, while institutional trading volume has grown 800% over the past six months.
In March this year, the American Gaming Association (AGA) released a report suggesting prediction markets are costing more than $600 million in tax revenue from wagers placed on unregulated prediction markets.
Anti-prediction market ad blitz in DC underway
The prediction market sector is fighting on multiple fronts after an anti-industry advertising campaign launched throughout the Capitol.
A group called FairPredicts launched an ad campaign Wednesday targeting Kalshi ahead of a Senate hearing on gambling and prediction markets. The campaign featured ads in Washington Metro stations, on mobile trucks and across social media designed to resemble Kalshi’s own marketing.
One ad accused Kalshi of misleading users by claiming it is not “the house,” arguing the company profits when traders lose. Recent lawsuits have similarly alleged Kalshi Trading LLC acts like a traditional sportsbook house by providing market liquidity. Kalshi spokesperson Elisabeth Diana rejected the comparison, saying market makers are standard in financial markets and account for about 7% or less of trading volume on the platform.
She told The Hill: “Like any financial market, including the stock market, market makers are industry standard because they help bootstrap liquidity. But on most liquid markets, institutional market makers are not a large percent of volume. On Kalshi, it’s about 7 percent or lower.”
The campaign was timed to coincide with a senate hearing on prediction markets held on Wednesday, where industry figures were quizzed by lawmakers, including Texan politician Ted Cruz.
