CFTC Sues Minnesota Over a New State Prediction Market Felony Law 

• CFTC sued Minnesota over a new law making prediction market activity a felony.
• CFTC Chair called Minnesota’s prediction market law the most aggressive state crackdown yet.
• The case signals ongoing federal-state clashes over classifying and regulating event contracts.

According to the Commodity Futures Trading Commission’s (CFTC) press release, the CFTC chairman, Michael S. Selig, filed a lawsuit against Minnesota to block a new state law, signed by Governor Tim Walz, that would make operating or assisting in the operation of a prediction market a criminal felony. 

The legislation makes trading or operating event contracts a felony, directly challenging CFTC authority. Minnesota claims it protects citizens from gambling risks, while the CFTC argues it harms farmers and undermines federal markets.

Selig stated that the law turns “lawful operators and participants in prediction markets into felons overnight” and represents the most aggressive state attempt to shut down CFTC-regulated markets. 

Why the CFTC Is Challenging Minnesota’s Prediction Market Felony Law

The CFTC filed the lawsuit because it considers Minnesota’s statute an unconstitutional overreach that intrudes on the agency’s exclusive federal jurisdiction under the Commodity Exchange Act. The Minnesota law would make it a felony to create, operate, manage, assist, or advertise prediction markets tied to areas such as sports, elections, weather, disasters, and pop culture. 

Under the Commodity Exchange Act, the CFTC holds exclusive authority to regulate event contracts and prediction markets, meaning states are not permitted to independently criminalize activities already governed at the federal level. Hence, the agency contends that Minnesota’s statute directly conflicts with this framework as it prohibits state participation in federally regulated markets.

Notably, the law includes limited carve-outs for traditional agricultural hedging but broadly criminalizes platforms and users, aiming to protect residents from what lawmakers call addictive betting disguised as financial products. 

Selig stated that Governor Walz “chose to put special interests first and American farmers and innovators last,” as the CFTC seeks a preliminary injunction to stop enforcement before the law takes effect.

What’s the Impact on Crypto, Prediction Markets and Federal Oversight?

For the crypto sector, the stakes are high because prediction platforms such as Polymarket and Kalsh handle event contracts on cryptocurrency prices, blockchain developments, and related outcomes, while others (including Robinhood, Coinbase, and Crypto.com) have faced parallel state enforcement actions. 

Industry observers note that a win for Minnesota could disrupt liquidity and user access across crypto-linked prediction products, while a CFTC victory would bolster confidence in a clear national framework.

Beyond the crypto sector, the case also reinforces a broader pattern of federal preemption disputes across the United States, following earlier actions involving Arizona, Wisconsin, Connecticut, Illinois, and New York.

If the CFTC prevails, the outcome could discourage states from reclassifying federally regulated event contracts under gambling or public safety laws. Industry observers said the outcome may also reduce the likelihood of fragmented state-by-state enforcement regimes and strengthen confidence in a more unified national regulatory framework.

Overall, the case strengthens the CFTC’s long-standing position that Congress granted it sole authority over these derivatives markets more than 50 years ago, preempting state gambling or public-safety laws. 

Related: CFTC Sues NY to Block Gambling Law on Prediction Platforms