Minnesota Tests State Power Over Prediction Markets

Minnesota passes the first state ban

Minnesota became the first state to pass a law banning the prediction-market platforms Kalshi and Polymarket. The bipartisan measure moved forward after State Rep. Emma Greenman, a Democrat, heard concerns from teachers about underage users downloading the apps.

Greenman also viewed the platforms as another route to sports betting, which Minnesota has not legalized. Prediction markets let users put money on the outcomes of events, including interest-rate decisions and sports championships.

The law went further than actions in about 20 other states, which had tried to apply existing sports-betting or gambling laws to the platforms. Minnesota instead enacted a new prohibition aimed at prediction markets.

Federal lawsuit puts enforcement on hold

The Commodity Futures Trading Commission, Kalshi and Polymarket sued after the law passed. A federal judge temporarily paused enforcement, allowing the legal challenge to proceed before the state can apply the ban.

The central question is whether federal oversight prevents states from regulating or banning these markets. The CFTC oversees prediction markets and argues that they are financial exchanges operating across state lines, rather than businesses subject to differing state gambling laws. Kalshi has also argued that regulation belongs at the federal level.

Minnesota maintains that states have authority to address gambling, public-health and public-safety concerns within their borders. Separate developments have added to the dispute: Washington and Nevada temporarily stopped Kalshi from operating, and a federal appeals court ruled in August that states could regulate prediction markets.

The Minnesota case now places the state’s ban within a broader conflict over where federal authority ends and state authority begins.