Nikolas Sargeant
TL;DR
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Gov. Tim Walz signed a law prohibiting prediction market activities, with an effective date of Aug. 1.
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Kalshi is suing Minnesota over the new law.
Prediction market platform Kalshi has filed a lawsuit against the state of Minnesota after Governor Tim Walz signed legislation that prohibits prediction market operations within the state.
The case, filed on Wednesday in the U.S. District Court for the District of Minnesota, names Attorney General Keith Ellison, Governor Tim Walz, and other state officials as defendants.
Kalshi Argues State Law Violates Federal Authority
Kalshi claims the new law violates the Supremacy Clause, which establishes that federal law takes precedence over conflicting state regulations.
The company argues that Minnesota is unlawfully attempting to regulate a market that falls under federal oversight, specifically the jurisdiction of the Commodity Futures Trading Commission (CFTC).
Earlier this month, Governor Walz signed the law banning prediction market activities, set to take effect on August 1. Within 24 hours, both the CFTC and the Department of Justice filed their own legal action against Minnesota and the governor.
Prediction markets—platforms that allow users to trade contracts on real-world outcomes such as elections, sports, and geopolitical events—have surged in popularity over the past year. Companies like Kalshi and Polymarket have reached multibillion-dollar valuations as interest in event-based trading grows.
The regulatory conflict centers on whether prediction markets fall under federal commodities law or state-level gambling regulations. The CFTC has maintained that it holds “exclusive jurisdiction” over these markets.
Over recent months, the agency has also taken legal action against several states—including Wisconsin, Illinois, Arizona, Connecticut, and New York—for attempting to restrict prediction market platforms.
Kalshi Claims “Irreparable Harm” From Ban
In its filing, Kalshi argues that Minnesota’s law effectively brands its operations as criminal activity and would significantly damage its ability to function nationwide.
The company stated that being forced to restrict access in Minnesota would create costly compliance burdens and disrupt its goal of operating as a “50-state derivatives exchange.”
Kalshi is seeking a temporary restraining order and injunction to prevent Minnesota from enforcing the law while the case proceeds.
Minnesota is not alone in challenging prediction markets. Last week, Rhode Island filed lawsuits against both Kalshi and Polymarket, alleging unlawful sports gambling activity.
In response, the CFTC also filed its own lawsuit against Rhode Island, escalating the broader jurisdictional dispute.
CFTC Defends Federal Oversight of Event Contracts
CFTC Chair Michael Selig has strongly defended the agency’s authority over prediction markets, arguing that federal law gives it sole regulatory control.
He criticized state-level enforcement efforts as an overreach, saying they represent a “power grab” that undermines established legal precedent and restricts access to federally regulated event contracts.
