Kalshi and Polymarket Sue Minnesota Over Prediction Markets Ban

Kalshi and Polymarket sued Minnesota to block its new ban on prediction markets.

Minnesota Governor Tim Walz signed Senate File 3432 on May 26, 2026. The law makes it a felony to operate or facilitate prediction markets in Minnesota starting August 1, 2026. Prediction markets let participants bet on future events such as elections or economic data. These markets are currently regulated federally by the Commodity Futures Trading Commission (CFTC).

On May 28, 2026, Kalshi challenged Minnesota’s ban with a federal lawsuit. Kalshi argues the state law is preempted by federal regulation because the CFTC oversees these activities as financial contracts, not gambling. Kalshi also claims the ban violates the First Amendment as it restricts speech tied to lawful financial instruments. Polymarket filed a similar suit on June 5, 2026, raising comparable points.

The CFTC sued Minnesota in May 2026 as well, asserting the law unlawfully interferes with its exclusive regulatory authority over prediction markets. The cases hinge on the legal concept of "federal preemption," which means federal law can override conflicting state laws. The lawsuits also raise First Amendment questions about protecting financial market speech.

Minnesota Attorney General Keith Ellison emphasized concerns over consumer risks and illicit gambling linked to prediction markets. Other states, including Nevada, have also pursued enforcement actions against unlicensed prediction markets, reflecting differing regulatory responses nationwide.

This litigation spotlights the growing tension between federal oversight and state-level restrictions in financial technology innovation. Legal and compliance professionals should track the case closely, as its outcome may define how prediction markets are regulated across jurisdictions and influence obligations for market operators and tech providers.