Minnesota Becomes First US State to Criminalize Prediction Markets; CFTC Sues to Block the Law
Governor Tim Walz signed SF 4760 on May 19, 2026, making it a felony for prediction market operators to serve Minnesota residents starting August 1. The CFTC filed suit in federal district court the next day, arguing the law is preempted by the Commodity Exchange Act.
On May 19, 2026, Minnesota Governor Tim Walz signed SF 4760, an omnibus public-safety bill that absorbed the standalone prediction-market ban originally introduced as SF 4511. The statute makes it a felony to operate an event-contract platform inside Minnesota starting August 1, 2026, and reaches markets on athletic events, elections, weather, war, terrorism, public health crises, court cases, deaths, assassinations, entertainment, statements by named individuals, and dice or card games. Agricultural weather hedging and traditional securities and commodities are explicitly carved out. Operating a VPN or other service that facilitates Minnesota residents accessing a banned platform is separately prohibited. Minnesota is the first US state to enact a felony-level criminal ban on prediction markets, and the breadth of the statute (operators, facilitators, and the markets themselves) goes well beyond the civil challenges previously brought by other state attorneys general.
On May 20, less than 24 hours after the signing, the Commodity Futures Trading Commission filed suit in the US District Court for the District of Minnesota, seeking a preliminary injunction to block the law before its August 1 effective date. The complaint argues that the Commodity Exchange Act gives the CFTC exclusive jurisdiction over derivatives listed on a Designated Contract Market, and that state gaming laws cannot criminalize conduct on a federally licensed exchange any more than they could ban S&P 500 futures. CFTC Chairman Michael Selig was unusually direct in the agency's statement: "This Minnesota law turns lawful operators and participants in prediction markets into felons overnight." The framing matters because Selig is asking the court not just to enjoin the statute but to treat the question as a clean federal-supremacy issue rather than a closer call on traditional state gambling powers.
Kalshi's response, posted on X within an hour of Walz's signature, compared the ban to "trying to ban the New York Stock Exchange." Polymarket has not issued a public statement. Both platforms remain accessible in Minnesota today, along with Robinhood (which routes orders through Kalshi and its own MIAXdx DCM, both covered by the ban), Manifold, and PredictIt. None of the operators has publicly committed to a post-August-1 plan, which is itself a signal: a clear "we will continue serving Minnesota residents" statement would be a useful talking point in the federal litigation, and its absence suggests legal counsel is keeping options open while the court considers the preliminary injunction motion.
The Minnesota fight is the cleanest preemption test the industry has faced. Kalshi won a federal court ruling against the CFTC itself in 2025 over the agency's attempt to block sports contracts; this time the agency is on Kalshi's side of the same argument, applied to a state instead of a federal counterparty. Minnesota Attorney General Keith Ellison will argue that SF 4760 is a gambling statute, not a securities statute, and that the state's traditional police power over wagering survives the CFTC's licensing authority. If the District of Minnesota rules for the CFTC, the case heads to the Eighth Circuit and likely the Supreme Court, but every other state legislature with a pending bill (Massachusetts and New Jersey both have similar measures in committee) gets a signal to wait. If Minnesota wins even at the preliminary-injunction stage, expect a wave of copycat bans before the November midterm cycle. For Minnesota residents holding open positions, the practical question is whether to wind down before August 1 or trust the federal court to step in; we cover that decision in detail on our Minnesota state page.
Operators mentioned in this article
CFTC-regulated Kalshi
First fully CFTC-regulated US event-contract exchange.
Crypto / On-chain Polymarket
USDC-settled on Polygon. Largest prediction market by volume.
Broker (Embedded Contracts) Robinhood
Consumer brokerage offering embedded event contracts. Fastest-growing retail prediction market platform in the US.
Recent updates
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Robinhood Derivatives has agreed to stop offering new sports event contracts to Michigan customers by September 9 and close all outstanding positions by October 9, under a court-approved stipulation signed by US District Judge Paul Maloney on September 4. Michigan agreed not to enforce state gambling laws against Robinhood while the company complies. The deal preserves Robinhood's CEA preemption argument and keeps multiple Sixth Circuit appeals — involving Robinhood, Polymarket, Coinbase, and Kalshi — on track. Legal Sports Report called the agreement a potential 'blueprint' for how platforms and states might reach interim accommodations during the ongoing litigation.
Kalshi Seeks Ninth Circuit En Banc Rehearing While Robinhood Files Separate SCOTUS Petition
Kalshi filed a petition for en banc rehearing at the Ninth Circuit on September 9, asking the full 11-judge court to overturn the August 28 3-0 panel ruling that Nevada can regulate its sports contracts as gambling. Simultaneously, Robinhood filed its own separate certiorari petition with the Supreme Court challenging the same Ninth Circuit ruling. The two platforms are pursuing parallel legal strategies from the same defeat: Kalshi seeking a better ruling at the Ninth Circuit first; Robinhood going directly to SCOTUS. New Jersey has already filed a SCOTUS petition from the Third Circuit's April ruling. There are now two separate cert petitions before the Supreme Court on the prediction market question.