Polymarket Follows Kalshi, CFTC With Lawsuit Against Minnesota
(The exchange became the third plaintiff to challenge Minnesota’s prediction market ban after the CFTC and Kalshi filed similar lawsuits.)
Polymarket has sued Minnesota in federal court, becoming the third plaintiff to challenge the state’s prediction market ban after the Commodity Futures Trading Commission (CFTC) and Kalshi. The prediction market operator argues that the law is preempted by federal law and violates the First Amendment.
The CFTC sued Minnesota in May over SF 4760, an earlier proposal banning prediction markets. A week later, after lawmakers enacted the successor measure, SF 3432, Kalshi filed a separate challenge.
Like those cases, Polymarket argues that Congress granted the CFTC exclusive authority to regulate event contracts traded on federally regulated designated contract markets under the Commodity Exchange Act (CEA).
The exchange argued that the law would expose federally regulated prediction market operators to criminal liability when it takes effect on Aug. 1.
SF 3432 is the first law of its kind in the Nation, criminalizing federally regulated event-contract markets,” Polymarket wrote in its complaint.
Polymarket Expands On Arguments Raised By Kalshi And The CFTC
Much of Polymarket’s complaint mirrors arguments already advanced by Kalshi and the CFTC.
Polymarket’s filing repeatedly cites recent court victories secured by Kalshi. Those include the Third Circuit’s decision against New Jersey officials and a federal court ruling in Arizona that concluded that federal law likely preempts the state’s attempts to enforce its gambling laws against Kalshi’s sports event contracts.
However, Polymarket places greater emphasis on First Amendment issues than either Kalshi or the CFTC.
The company argues that SF 3432 unlawfully criminalizes prediction market advertising and marketing. It also challenges provisions that prohibit the provision of data, information, and verification services to prediction market operators.
According to the complaint, those restrictions interfere with Polymarket’s ability to communicate with customers and obtain information necessary to operate federally regulated markets.
The exchange also devotes significant attention to the economic and informational value of prediction markets. It argues that event contracts help businesses manage risk while generating real-time probability forecasts for future events.
What Minnesota’s SF 3432 Does
Minnesota enacted SF 3432 in May as part of a broader public safety package. The law takes effect Aug. 1 and creates new criminal prohibitions targeting prediction markets.
The measure prohibits operating, facilitating, servicing, or advertising prediction markets involving a broad range of subjects. Those include sporting events, elections, wars, legal proceedings, events involving public figures, and popular culture outcomes.
The law extends to entities that provide services supporting prediction markets. Examples include payment processing, geolocation services, identity verification, advertising, and certain data services.
Violations can result in felony penalties.
Through SF 4760 and later SF 3432, Minnesota became the first state to enact legislation prohibiting prediction markets rather than relying solely on existing gambling laws.
The legal challenges now place Minnesota at the center of a growing national dispute over whether states can restrict event contracts that are listed on CFTC-regulated exchanges.
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