The federal government sued Minnesota on Tuesday to block a newly signed state law that would make operating or assisting a prediction market a felony, escalating an intensifying national legal fight over the boundaries between state gambling enforcement and federally regulated event contracts.
- The CFTC sued Minnesota less than 24 hours after Gov. Tim Walz signed a sweeping prediction market ban into law.
- Minnesota’s statute would criminalize operating, facilitating, or advertising many prediction market activities, including weather-related contracts.
- The lawsuit expands a growing federal-state legal battle over whether prediction markets fall under commodities law or state gambling authority.
The Commodity Futures Trading Commission lawsuit came less than 24 hours after Minnesota Gov. Tim Walz signed the prediction market ban legislation, which was included as part of a wide-ranging public safety bill. The CFTC is seeking a preliminary injunction before the law takes effect Aug. 1, arguing the measure unlawfully criminalizes federally regulated markets overseen by the commission.
In a statement announcing the suit, CFTC chairman Michael Selig said the Minnesota law “turns lawful operators and participants in prediction markets into felons overnight” and warned it could disrupt weather and agricultural hedging products used by farmers.
“Minnesota farmers have relied on critical hedging products on weather and crop-related events for decades to mitigate their risks,” Selig wrote. “Governor Walz chose to put special interests first and American farmers and innovators last.”
The commission statement described the Minnesota statute as the broadest state-level prediction market prohibition challenged by the agency to date, particularly because of its inclusion of weather-related contracts. Minnesota is among the nation’s largest agricultural producers, and the CFTC argued the law threatens markets that Congress placed under federal commodities oversight decades ago.
Prediction market bill details
The legislation dramatically expands Minnesota’s gambling prohibition statutes to specifically target prediction market sites and related services.
Under the legislation, a person could face felony liability for creating or operating a prediction market platform, facilitating transactions, processing payments, providing geolocation services, or supplying data used to settle contracts. The law also criminalizes advertising or marketing products that promote prohibited prediction market transactions.
Its definition of “prediction market” is sweeping. The statute covers contracts tied to athletic events, esports, games of skill, elections, legal proceedings, public health crises, natural disasters, terrorism, mass casualty events, weather conditions, entertainment outcomes, and individual statements.
Minnesota is one of 11 states with no legal form of sports betting. An effort to legalize retail and mobile sportsbooks gained little traction during the state’s 2026 legislative session.
Another angle to Minnesota trying to ban prediction markets via legislation is that it's a knock on the argument that PMs may catalyze OSB/iGaming legalization.
— Geoff Zochodne (@GeoffZochodne) May 19, 2026
MN has neither, and lawmakers had both a PM ban and OSB legalization bill before them. They chose only the former.
Minnesota lawmakers also amended existing state law governing commodities contracts, carving out prediction market contracts from otherwise exempt futures-style agreements. The legislation further authorizes cease-and-desist orders and court enforcement actions tied to the new prohibitions.
Unlike some prior state efforts focused primarily on sports event contracts, Minnesota’s law reaches well beyond sports-related prediction markets. The bill expressly targets contracts involving short-term weather events and elections while extending potential criminal exposure to service providers and technology intermediaries.
Several Minnesota lawmakers opposed the prediction market ban language, which was added to the wide-ranging public safety bill late in the legislative session. Opponents of the ban argued it would hurt Minnesotans using the platform already and projected it would spark a long and potentially expensive legal conflict.
CFTC battle expands
The lawsuit adds Minnesota to a growing list of states involved in litigation against federally regulated prediction market platforms and the commission itself. The CFTC noted Tuesday it has already filed lawsuits against Arizona, Connecticut, Illinois, and New York over state attempts to use gambling laws against operators.
The federal regulator has argued the Minnesota law directly conflicts with federal commodities law and intrudes into an area Congress reserved for federal oversight through the Commodity Exchange Act. A federal judge in Arizona recently granted a preliminary injunction blocking that state from pursuing criminal enforcement actions against certain prediction market activities while litigation proceeds.
The broader conflict has accelerated over the past year, dominating prediction market news as platforms offering event contracts tied to elections and sports have expanded rapidly following court decisions and regulatory shifts that opened new pathways for federally regulated exchanges.
State regulators and commercial gaming stakeholders have increasingly argued those contracts function as unlicensed sports betting or gambling products operating outside state tax and licensing frameworks. Prediction market operators and supporters, meanwhile, contend the products fall squarely within federal commodities jurisdiction.
With multiple federal cases now pending across several states and appellate courts already weighing related jurisdictional disputes, Minnesota’s law is likely to intensify pressure for a broader judicial resolution over whether prediction markets are primarily financial instruments governed by federal commodities law or gambling products subject to state enforcement authority.
