Kalshi Sues Minnesota After State Enacts New Prediction Market Ban
Kalshi has sued Minnesota over a newly enacted prediction market ban. The complaint follows a separate CFTC challenge on earlier prediction market legislation signed by Gov. Tim Walz.
Kalshi has filed a federal lawsuit against Minnesota after the state enacted a second prediction market ban bill, replacing earlier prediction market provisions that had already been challenged by the Commodity Futures Trading Commission (CFTC).
The lawsuit comes about a week after the CFTC separately sued Minnesota. That complaint concerned the prediction market provisions in SF 4760, a separate bill signed by Gov. Walz earlier this month.
Walz later signed SF 3432 into law on May 26. The measure repealed and replaced portions of SF 4760 while expanding the state’s broader public safety package.
Kalshi named Minnesota Attorney General Keith Ellison, Governor Tim Walz, and Alcohol and Gambling Enforcement Division Director Jon Anglin as defendants. It seeks declaratory and injunctive relief to block the enforcement of SF 3432 before it takes effect on August 1.
As in similar lawsuits filed against other states, Kalshi argued the Commodity Exchange Act grants the CFTC “exclusive jurisdiction” over event contracts.
The company added Minnesota’s law “impermissibly usurps the CFTC’s exclusive jurisdiction by banning certain event contracts, including those traded on federally designated contract markets.”
Kalshi Says Minnesota Is Criminalizing Federally Approved Activity
Kalshi argued that the new law would effectively deem the company “a felon in Minnesota for offering certain event contracts on its federally authorized designated contract market (DCM) that are entirely lawful under federal law.”
The company argued that Minnesota is attempting to independently prohibit categories of contracts already permitted by federal regulators.
According to the complaint:
SF 3432 not only bans the trading of certain event contracts … it bans the operation of any market that offers SF 3432’s prohibited categories of event contracts.”
Kalshi described the measure as “a targeted attack on federal DCMs.”
The lawsuit also notes that Minnesota previously joined multistate amicus briefs supporting state authority over prediction markets and submitted comments to the CFTC. The briefs argue that the agency “lacks exclusive jurisdiction” over sports event contracts.
Kalshi, however, notes that multiple courts, including the Third Circuit and a federal district court in Arizona, ruled in favor of federal preemption arguments involving prediction markets and federally regulated event contracts.
The company also added a First Amendment claim, arguing that Minnesota cannot prohibit advertising for federally lawful products and services.
The complaint states:
No court has ever sustained a state’s flat bar on advertising conduct that accords with federal law.”
Kalshi Lawsuit Follows Earlier CFTC Challenge
Kalshi’s lawsuit follows the CFTC’s own legal challenge against Minnesota filed last week.
The federal regulator previously argued Minnesota’s SF 4760 represents a “flagrant and unprecedented incursion into the Commission’s exclusive regulatory sphere.” The CFTC described the measure as “the first outright ban on ‘prediction markets’ in the United States.”
The agency further argued 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 noted 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.
Related Litigation Continues Nationwide
The Minnesota lawsuit comes as prediction market litigation continues expanding across multiple states and federal courts.
In Arizona, Kalshi and state regulators jointly moved this week to pause appellate briefing pending upcoming Ninth Circuit rulings in related prediction market cases involving Kalshi, Crypto.com, and Robinhood.
The filing noted a federal court had already granted preliminary injunctive relief to the CFTC and Department of Justice against Arizona regulators. Meanwhile, the criminal case against Kalshi in the Arizona state court has been “preliminarily enjoined.”
Meanwhile, Rhode Island agreed not to pursue additional enforcement action against Kalshi and Polymarket while the federal litigation proceeds, according to a May 26 court text order entered by the U.S. District Judge Mary S. McElroy and shared by consultant Mick Bransfield on X.
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