Prediction market platform Kalshi filed a federal lawsuit challenging Minnesota's first-in-nation law criminalizing prediction markets, days after the CFTC brought its own suit.
Kalshi has filed a federal lawsuit against Minnesota seeking to block a new law that would make it a felony to operate or advertise prediction markets in the state, joining a parallel suit already filed by the CFTC.
Prediction market platform Kalshi filed suit in federal court this week, challenging a Minnesota law signed by Governor Tim Walz earlier in May 2026. The law, set to take effect August 1, criminalizes the operation, hosting, and promotion of prediction market platforms statewide, making it the first state-level felony ban on prediction markets in the United States.
The CFTC had already filed its own challenge shortly after the law was signed, arguing it violates the Supremacy Clause of the Constitution by imposing state criminal penalties on activity regulated exclusively by federal authority under the Commodity Exchange Act. Kalshi's lawsuit echoes that federal preemption argument and adds a First Amendment challenge, contending the law unconstitutionally restricts commercial speech by criminalizing advertising.
The case sets a significant precedent for crypto-adjacent markets. Prediction platforms like Kalshi and Polymarket have grown rapidly since 2024, attracting billions in trading volume during the 2024 U.S. presidential election cycle. The industry has been pushing to establish that these markets are federally regulated derivatives, not state-level gambling products.
Kalshi has already secured preliminary injunctions blocking similar enforcement attempts in New Jersey and Arizona, building legal momentum. A federal ruling striking down Minnesota's law would reinforce that states cannot override CFTC jurisdiction over registered derivatives exchanges. The broader crypto industry is watching closely, as the outcome could influence how states approach regulation of other blockchain-based financial products.
Minnesota's law takes effect on August 1, 2026, so Kalshi will likely seek a preliminary injunction to block enforcement before that deadline. The U.S. House is also investigating whether government employees have traded on nonpublic information via prediction market platforms, which could shape federal policy in parallel. Internationally, prediction market bans have been enacted in Indonesia, Spain, and India, raising the stakes for the U.S. legal precedent.
The dual federal lawsuits from both the CFTC and Kalshi represent a coordinated challenge to state-level prediction market bans. With prior injunction victories in two other states, Kalshi enters the Minnesota fight with legal momentum, though the first-ever felony classification raises the regulatory stakes considerably.
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