Minnesota's new law cracks down on prediction markets: operating or advertising is a felony! CFTC and the Department of Justice file suit alleging overreach: states have no authority to criminalize

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Minnesota Governor Tim Walz signed SF 4760, making the state the first in the U.S. to explicitly ban prediction markets, classifying both "operating and advertising" prediction markets as felonies. Yet in under 24 hours, the CFTC and the Department of Justice jointly sued the State of Minnesota and several officials, arguing that prediction markets are derivatives under exclusive federal jurisdiction and that states have no authority to ban them via criminal means. (Background: Trump administration backs Polymarket and Kalshi! U.S. DOJ and CFTC sue Arizona and two other states, igniting prediction market jurisdiction war) (Background: Minnesota allows "credit unions" to offer cryptocurrency custody services, so the public no longer has to fear hackers when buying coins) After the issuance of America's first comprehensive prediction market ban, what followed was a head-on counterstrike by the federal government in less than a day. The U.S. Commodity Futures Trading Commission (CFTC) and the Department of Justice (DOJ) jointly sued the State of Minnesota, Governor Tim Walz, and several state officials on the 19th. The complaint pointed directly: Minnesota's newly effective SF 4760 is "the first law in the U.S. to completely ban prediction markets," and this ban encroaches upon the federal government's exclusive jurisdiction over derivatives, constituting an unconstitutional overreach. Governor Walz signed SF 4760 on Monday, with the new law set to officially take effect on August 1. Under the law, operating, advertising, or providing prediction market services within the State of Minnesota — whether predicting sports outcomes, weather trends, company valuations, or even government developments — constitutes a felony. CFTC: Prediction markets are federally approved derivatives, states have no authority to criminalize The core argument of the CFTC and DOJ in the complaint is clear: contracts traded on prediction markets are "swap contracts" under the framework of the Commodity Exchange Act (CEA), listed on CFTC-approved exchanges. Federal law has already established a complete regulatory system for this, and states may not separately legislate to ban or criminalize it. The complaint states: "Such a blatant, unprecedented intrusion into the Commission's exclusive regulatory domain must be enjoined preliminarily and permanently." The broad scope of criminal liability under SF 4760 has also alarmed federal regulators: the new law targets not only prediction market platforms themselves, but also media organizations that advertise for them, banks and payment institutions that process payments, and sports leagues that provide game data — all of which could potentially face criminal prosecution. The CFTC specifically pointed out in the complaint that Kalshi and Polymarket have established data or advertising partnerships with institutions including Major League Baseball (MLB), NHL, Fox, Dow Jones, and The Wall Street Journal. Under Minnesota's new law, all these partnerships fall into a legal gray area. Federal vs. state jurisdiction war continues to escalate Minnesota is not an isolated case. The CFTC has successively sued multiple states that have attempted to shut down prediction market platforms on the grounds of "violating state gambling laws," including Illinois, Arizona, Connecticut, and Wisconsin. Meanwhile, a coalition of 38 state attorneys general has expressed support for Massachusetts in seeking an injunction in the Kalshi-related case; Polymarket has also proactively sued Massachusetts. The battle lines of this jurisdictional tug-of-war continue to spread outward. On the CFTC side, new Chairman Mike Selig has spent most of this year reorganizing the agency's regulatory stance on "event contracts." In March of this year, the CFTC issued a formal policy notice and launched a public comment period to pave the way for subsequent rulemaking. The overall tone is to incorporate prediction markets into a legalized federal framework, rather than leaving each state to fend for itself.

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