Trump sues Minnesota over first state ban on prediction markets

MINNEAPOLIS (CN) — One day after Minnesota Governor Tim Walz signed a statewide ban on prediction markets into law, the Trump administration struck back in a lawsuit Tuesday, claiming the attempted ban is preempted by federal regulation.

Minnesota’s public safety policy bill, SF 4760 — which includes provisions against financial crimes and fraud prevention — is the first such law outright banning prediction markets like Kalshi and Polymarket from operating within a state.

The law, which will become effective in August, makes it a felony to create, operate, manage or control a prediction market platform, and forces these platforms to leave the state or face charges — authority the government says falls under the Commodity Futures Trading Commission, not Minnesota.

“This flagrant and unprecedented incursion into the commission’s exclusive regulatory sphere must be preliminary and permanently enjoined,” the Trump administration says in the complaint.

Minnesota’s ban also extends to services supporting prediction markets, like verification services and those directing funds or advertising the platforms, which the government claims is overly broad and could hurt innocent actors.

“Major news outlets in the United States, including CNBC, CNN, Fox Corporation and Dow Jones, have partnerships with prediction markets, and thus face potential liability in Minnesota for displaying prediction market data,” the government says in the complaint, adding that major sports leagues like the NHL and MLB have their own data agreements with Kalshi and Polymarket, and could also face prosecution.

In the supremacy clause suit, the Trump administration, and the CFTC, note Congress enacted the Commodity Exchange Act to give the commission “exclusive jurisdiction” to regulate prediction markets and create a comprehensive framework that preempts state law.

“Every step Defendants take toward enforcing preempted state law against the commission’s regulated entities causes additional disruption to the markets exclusively regulated by the commission,” the Trump administration says in the complaint. “It is not equipped to manage markets that are subject both to the CEA and to a patchwork of state regulations.”

Defined in Minnesota’s statute, prediction markets are markets that allow consumers to place a wager on the future outcome of a specified event such as sports, elections, government action and the weather. In essence, these markets allow consumers to bet on almost anything.

Federal law approves various prediction markets and monitors more than 3,000 event contracts, according to the feds.

The government notes it often brings enforcement actions against those who violate commission regulations, including instances of insider trading. Last month, a U.S. soldier was charged with using sensitive nonpublic information to trade contracts related to the ouster of Venezuelan President Nicolás Maduro.

The Trump administration also claims Minnesota’s sweeping ban will inflict severe damage on traditional economic sectors like agriculture.

As early as the 1990s, CFTC-regulated contract markets, including the Chicago Board of Trade, offered futures and options on crop yields and weather. Under Minnesota’s new policy, the federal government claims these contracts, long relied upon by farmers in the state, would be considered “wagers,” and subject to criminal liability.

“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,” CFTC Chairman Michael S. Selig said in a press release.

Despite the law not taking effect until August, the Trump administration claims the looming threat of criminal liability casts an “immediate pall” over both long-existing and recent prediction markets under the commission’s jurisdiction.

“Minnesota’s threat of criminal liability will kill the operation of CFTC-regulated exchanges within the state, and, more broadly, inject uncertainty into federal derivatives markets over the scope of the commission’s jurisdiction,” the government says in the complaint.

Minnesota is not the first state to take a swing at regulating prediction markets, but it is the first to enact a ban against all prediction markets and contracts, unlike other states that have largely attempted to enforce existing gambling laws against sports-related contracts. Nevada and Massachusetts have won court-ordered injunctions against Kalshi, but the ban in Massachusetts is on hold pending appeal.

The federal government has sued five other states that attempted to use existing state laws to regulate or halt prediction markets, and platforms like Kalshi and Polymarket have also launched independent suits against such action.

Hawaii and North Carolina have pending bills seeking to emulate Minnesota’s statewide ban, and other states have introduced potential, lesser forms of regulation.

“I’m very concerned about the harms of prediction markets on Minnesotans. Prediction markets are designed to be addictive and prey especially on young people and low-income folks,” Minnesota Attorney General Keith Ellison told Courthouse News in an email. “They help the ultra-rich get richer and the rest of us get poorer.”

The Minnesota Governor’s Office did not respond to an initial request for comment, though Ellison said his office is reviewing the lawsuit and will respond in court.

Polymarket and Kalshi did not respond to requests for comment.