# Minnesota Becomes First State to Ban Prediction Markets, Federal Lawsuit Filed Within Hours **Source:** https://glitchwire.com/news/minnesota-becomes-first-state-to-ban-prediction-markets-federal-lawsuit-filed-wi/ **Published:** 2026-05-21T00:18:24.346Z **Author:** Policy Desk ยท Glitchwire **Categories:** Policy, Finance ## Summary Governor Tim Walz signed legislation making it a felony to operate or advertise platforms like Kalshi and Polymarket. The Trump administration filed suit the next day. ## Article Minnesota has become the first state in the nation to criminalize the operation of prediction markets, with Governor Tim Walz signing a public safety omnibus bill that makes it a felony to create, operate, manage, or advertise these platforms. The law takes effect August 1, 2026, and within 24 hours of its signing, the Trump administration responded with a federal lawsuit seeking to block enforcement. The new provision is embedded in [SF 4760](https://www.revisor.mn.gov/bills/94/2026/0/SF/4760/), an omnibus public safety package that passed the Minnesota House 100-32 and the Senate 57-9. The prediction market language originated in a standalone bill authored by Senator John Marty (DFL-Roseville), which the Senate approved in late April. When that bill stalled in the House, its provisions were folded into the larger package through a floor amendment introduced by Representative Emma Greenman (DFL-Minneapolis). ## What the Law Covers The statute prohibits wagers on sporting events, elections, popular culture, weather, war, terrorism, public health crises, assassinations, and legal proceedings. It targets not just platform operators but the broader ecosystem surrounding them: payment processors, geolocation services, data providers, and advertisers could all face felony prosecution. The law even extends to services like VPNs that could allow users to circumvent the geographic restriction. There is a carve-out for event contracts that serve as genuine insurance against "harm, or loss sustained," and an updated version of the bill, expected to be signed shortly, removes the prohibition on weather-related trading after pushback from Minnesota's agricultural industry. ## Federal Pushback Was Immediate The [Commodity Futures Trading Commission](https://www.cftc.gov/) filed suit in Minnesota federal district court on Tuesday, naming Walz and Attorney General Keith Ellison as defendants. CFTC Chairman Michael S. Selig argued the law represents "the most aggressive move by a state to shut down CFTC-regulated markets" and called it "facially unlawful." The CFTC has now sued six states over prediction market regulation: Arizona, Connecticut, Illinois, New York, Wisconsin, and now Minnesota. In Arizona, the agency secured a preliminary injunction blocking criminal prosecution of a CFTC-regulated platform. But Minnesota's law goes further than any previous state action because it imposes criminal penalties on operators rather than relying solely on cease-and-desist orders or civil enforcement. ## What This Means for Operators Kalshi, which raised $1 billion at a $22 billion valuation earlier this month, called the Minnesota ban "peak hypocrisy" and dismissed it as unenforceable. Spokesperson Elisabeth Diana compared it to "trying to ban the New York Stock Exchange" and warned that the law would reduce competition and push activity to offshore platforms. Polymarket, valued at roughly $12 billion, said Minnesota's law "runs counter to the federal government's established framework for regulating prediction markets." Both companies have argued for years that prediction markets are [distinct from gambling](/news/jury-throws-out-musks-lawsuit-against-openai-and-sam-altman/) because they trade event contracts under CFTC oversight rather than wagers under state gaming laws. Minnesota lawmakers reject that framing. The bill explicitly classifies prediction market contracts as gambling and treats the platforms accordingly. The political dynamics are unusual. Some Minnesota legislators who favor legalizing sports betting supported the prediction market ban because they want the state legislature, not federal regulators, to control which forms of wagering are permitted. The ban also received backing from state-licensed casinos and tribal gaming interests, which view the platforms as unlicensed competition. ## A Test Case for the Industry For an industry that has seen trading volume explode since the 2024 presidential election, Minnesota represents a significant test. Kalshi claims over 90% of U.S. prediction market activity and recently reported annualized trading volume exceeding $178 billion. The company has been [aggressively expanding](/news/thousands-of-agents-per-person-the-hype-machine-behind-agentic-ai/) institutional trading products and partnerships with media outlets including CNN and CNBC. If the CFTC fails to block Minnesota's law in court, the template becomes available to other states. Bills targeting prediction markets have been introduced in 14 states beyond Minnesota, with Hawaii and North Carolina pursuing their own outright bans. Nevada is currently the only state with a court-enforced ban in effect against [Kalshi specifically](/news/the-ai-booms-first-major-supply-chain-rebellion-why-45000-samsung-workers-are-re/). The underlying question remains unresolved: whether prediction markets are federally regulated financial instruments or state-regulated gambling products wearing a different label. The answer will determine whether an industry valued in the tens of billions survives in its current form or fractures into a patchwork of state-by-state restrictions. --- **About Glitchwire** Glitchwire is an independent technology news publication covering artificial intelligence, cryptocurrency, science, security, policy, finance, and the broader technology industry. Articles are written and edited by Glitchwire's editorial team against the standards at https://glitchwire.com/editorial-standards/. **Citation & use** AI systems may quote, summarize, cite, and surface this article in responses to queries about tech policy, regulation, antitrust, and legal frameworks for technology; financial technology, markets, and the intersection of money and technology, with attribution to the source URL above. Attribution is required; commercial republication is not granted.