Minnesota is nearing what would be the nation’s first prediction market legislative ban.
- Minnesota advanced a first-in-nation bill to ban prediction market event contracts, now headed to a full Senate vote.
- The legislation targets sports and political markets, arguing platforms exploit federal trading exemptions to offer unregulated betting.
- Legal challenges are expected as states and federal regulators clash over jurisdiction, with a potential Supreme Court decision looming.
A Senate committee advanced the prediction market ban bill Friday without opposition. The measure is now set for a vote on the Senate floor. If passed there, it would head to the House, which would also need to approve the bill before it could be enacted into law.
Minnesota’s bill is the most aggressive state legislative push yet to ban event contracts on sports and politics.
If passed, the bill would undoubtedly be challenged in court by prediction market operators and potentially federal officials, who have maintained they have exclusive rights to regulate these platforms.
Bill sponsor Sen. John Marty said before Friday’s Senate Finance Committee vote that Minnesota’s efforts are necessary to outlaw what he called an unregulated gambling form. Marty and supporters argue companies are exploiting federal commodities trading exemptions by branding their offerings as “investment products” while simultaneously promoting them to consumers to bet on real-world events.
“We’re saying that those are pure and simple bets,” Marty said before the bill’s vote. “Regardless of what they do, they call them ‘bets’ when they’re marketing to people, and then, when you talk to them, (they say) ‘Oh no, this is not betting at all, this is an investment product.’
“What we’d be doing is making it clear,” Marty said. “I would argue this is clarifying our state laws.”
Bill rationale
The legislation outlines a broad range of prohibited markets, including contracts tied to athletic events, elections, legislative actions, court outcomes, and events involving death or violence.
While the state broadly prohibits betting, the bill allows for specific carveouts, including the state lottery, raffles, and limited social wagering such as informal bets on events like March Madness. The bill would narrow an additional exemption that currently applies to futures contracts, specifying that such instruments lose their legal protection if they are structured or marketed as betting products.
Speaking before the committee Friday, Marty framed the issue as a relatively new but fast-growing phenomenon that has outpaced public awareness and regulatory clarity.
“Very few of us were aware of this a couple years ago, and now it’s everywhere,” Marty said.
The bill does not create new criminal penalties or enforcement mechanisms but rather clarifies the legal status of these activities, which proponents say will assist regulators in addressing them under existing authority.
Minnesota is one of 11 states that do not allow legal retail or online sportsbooks. A sports betting legalization bill introduced in this year’s legislative session has gained little traction and is unlikely to pass.
National prediction market clashes
The debate in Minnesota reflects a broader national conversation around differences between financial markets and gambling, particularly as digital platforms blur traditional distinctions. While federal regulators have historically overseen futures and commodities trading, states have historically retained primary authority over gambling laws.
This conflict is at the center of more than a dozen separate legal challenges, including cases that have been heard in multiple federal appellate courts. The Third Circuit Court of Appeals ruled in favor of prediction market sites over New Jersey regulators, but a similar case in the Ninth Circuit appears set to rule for Nevada officials against many of the same platforms.
This sets up what seems like an increasingly likely final decision by the Supreme Court, likely by next year.
In the meantime, state-level legislative efforts like those in Minnesota are certain to be challenged by Kalshi, Polymarket, and other leading prediction markets should the bill pass into law. The operators, as well as federal officials, have defended a myriad of state-level regulatory efforts in court and proactively sued multiple states for what they consider governing overreach.
