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
An Independent Integrity Body Found 7 Betting Irregularities at the World Cup. FIFA Said There Were None. The Clash Centers on Polymarket.
The Group of Copenhagen — the Council of Europe's independent match manipulation watchdog — raised seven yellow notices for potential betting irregularities during the 2026 World Cup, in direct contradiction to FIFA's own Integrity Task Force, which published an all-clear on Tuesday. The most troubling finding involves Polymarket: the platform opened a market on July 2 asking whether Folarin Balogun would play against Belgium — the same day Balogun received a red card and three days before FIFA publicly confirmed his ban was suspended. No equivalent markets were opened for any of the other 14 red cards shown at the tournament.
After Yesterday's Hearing, Congress Looks Ready to Legislate on Prediction Markets — Not Just Watch
The House Agriculture Subcommittee held a two-hour hearing on July 22 examining sports event contracts, with witnesses from the American Gaming Association, tribal gaming, and both sides of the CFTC authority debate. Subcommittee Chair Dusty Johnson said Congress 'cannot afford to be silent' and signaled there is 'work for them to do.' Witnesses urged members to advance H.R. 7840, the Event Contract Enforcement Act, which would ban sports event contracts outright. The hearing adds a third front to a fight that is already being waged simultaneously in ten state courts and at the CFTC.
Bloomberg Found $200 Million in Suspicious Wagers on Kalshi and Polymarket. An Army Sergeant Has Already Been Indicted.
A Bloomberg investigation identified approximately $200 million in wagers on Kalshi and Polymarket between January and June 2026 displaying characteristics associated with potential insider trading — concentrated in geopolitical event markets. A federal indictment unsealed in April charged US Army Master Sergeant Gannon Ken Van Dyke with using classified information about Operation Absolute Resolve, the operation that captured Venezuelan President Nicolás Maduro, to generate $409,000 in profit. 57% of wallets with unusually successful returns were created within 24 hours of placing bets. The House Oversight Committee has launched a formal investigation.