Key facts
- Minnesota passed a law banning prediction markets like Kalshi and Polymarket.
- The law defines prediction markets as systems allowing wagers on future outcomes.
- The Commodity Futures Trading Commission (CFTC) sued Minnesota, arguing federal regulators have exclusive jurisdiction.
- A federal judge issued a preliminary injunction blocking the Minnesota law.
- Proponents of the ban view prediction markets as unregulated and dangerous gambling.
- Prediction market companies argue their platforms are financial markets regulated by federal law.
A federal judge has blocked a new Minnesota law that would have banned prediction markets like Kalshi and Polymarket, preventing it from taking effect on August 1st. The ruling comes amid a legal dispute over whether state or federal regulators have jurisdiction over these platforms.
The law, signed by Minnesota Governor Tim Walz, defined prediction markets as systems allowing consumers to wager on future outcomes, including sports, elections, and world affairs. It also prohibited services that could help users disguise their location to circumvent the ban. Proponents, like State Senator John Marty, argued that these markets are essentially unregulated and dangerous gambling, akin to sports betting, which Minnesota has not legalized.
However, the Commodity Futures Trading Commission (CFTC) filed a lawsuit seeking to block the law, with CFTC Chairman Michael Selig stating that the law turns lawful operators and participants into felons overnight. The CFTC and prediction market companies like Kalshi and Polymarket contend that their platforms are financial markets subject to exclusive federal regulation.
Kalshi and Polymarket issued statements appreciating the court's decision, asserting that prediction markets on CFTC-registered exchanges are governed by federal law. The legal battle highlights a broader conflict between states and federal agencies over the regulation of emerging financial platforms.