CFTC Sues Minnesota Over Prediction Market Ban, Calling Law “Most Aggressive” State Crackdown Yet

The Commodity Futures Trading Commission (CFTC) and the U.S. government have sued Minnesota over the state’s newly enacted prediction market ban. The plaintiffs argue that the law attempts to criminalize federally regulated event contracts and represents a “flagrant and unprecedented incursion into the Commission’s exclusive regulatory sphere.”

The complaint challenges SF 4760, signed by Gov. Tim Walz on May 18. The CFTC described the measure as “the first outright ban on ‘prediction markets’ in the United States.” The lawsuit seeks declaratory and injunctive relief against the state, Walz, Attorney General Keith Ellison, and Minnesota gambling regulators.

CFTC Chairman Michael Selig sharply criticized the legislation in a statement posted on X.

Governor Walz and Minnesota are putting special interests first, and American farmers and innovators last,” Selig wrote.

“Minnesota’s new law would make it a felony to trade event contracts in the state, hurting Minnesota farmers who have relied on weather and crop-related event contracts for decades.”

“This law is the most aggressive move by a state to shut down @CFTC-regulated markets and undermine our authority, and we’re taking action to protect federal market oversight.”

The CFTC argues the law directly conflicts with the Commodity Exchange Act (CEA). The lawsuit argues the CEA gives the agency “exclusive jurisdiction” over swaps and event contracts traded on federally regulated exchanges.

Minnesota’s Law Targets Broad Range of Prediction Market Activity

SF 4760 creates a new “Prediction Markets” section under Minnesota law. It broadly defines prediction markets as systems that allow wagers on future events.

It covers markets tied to sports, elections, government actions, weather, public health crises, wars, assassinations, popular culture, and other future events.

Under the bill, creating, operating, or intentionally facilitating a prediction market “for consideration and as part of a business” is a felony.

The legislation also targets the broader ecosystem around prediction markets. That includes payment processors, geolocation providers, data and verification services, and advertisers.

In addition, the bill modifies Minnesota gambling law. It clarifies that commodity and securities contracts are exempt from gambling statutes “except as provided in section 609.7615,” the new section prohibiting prediction markets.

The provisions take effect Aug. 1, 2026.

CFTC Says Minnesota’s Law Threatens Traditional Derivatives Markets

A major theme of the complaint is the CFTC’s argument that Minnesota’s law could criminalize traditional derivatives markets. Those include longstanding hedging and risk-management products tied to weather and agricultural markets.

The complaint notes that federally regulated exchanges, such as the Chicago Board of Trade and the Chicago Mercantile Exchange, have offered weather and crop-related derivatives since the early 1990s. Examples include contracts tied to crop yields and temperature volatility.

The CFTC argues that, under Minnesota’s language, these contracts would be classified as “wagers.” Additionally, federally regulated exchanges could be subject to criminal liability for offering them.

The complaint also highlights the law’s potential impact on election contracts, government-action markets, and economic-event contracts tied to reports such as inflation or unemployment data.

The agency additionally argues the law could expose media companies, sports leagues, payment providers, banks, and data firms to potential liability for interacting with prediction market platforms.

The lawsuit repeatedly frames the issue as a federal preemption dispute. It argues Congress created a uniform national framework for derivatives regulation specifically to avoid conflicting state-by-state gambling enforcement.

Minnesota Also Passed Separate Election-Related Prediction Market Restrictions

Minnesota lawmakers also passed a separate prediction market-related measure this session through HF 4240.

That legislation specifically prohibits political candidates from placing wagers on elections in which they are running.

Under the bill, “Prediction market” means a system that allows consumers to place wagers on the future outcome of a federal, state, or local election.

The measure states:

A candidate is guilty of a petty misdemeanor if the candidate places a wager with a prediction market on the outcome of an election in which the candidate is running.”

Minnesota Joins Expanding Multi-State Legal Fight

Minnesota is now part of a rapidly expanding legal battle between states and the CFTC over prediction markets and event contracts.

The CFTC has now filed lawsuits against Arizona, Connecticut, Illinois, Minnesota, New York, and Wisconsin over state attempts to restrict federally regulated event contracts.

The agency has also filed amicus briefs in cases before the Massachusetts Supreme Judicial Court against Massachusetts, the U.S. Sixth Circuit Court of Appeals against Ohio, and the U.S. Ninth Circuit Court of Appeals against Nevada.

The agency has already scored a legal win in Arizona. Earlier this month, a federal judge issued a preliminary injunction against state officials.