Minnesota Blocked from Imposing Prediction Market Ban
Minnesota’s war on prediction markets has hit a roadblock after a federal judge ruled against its new state law.
Minnesota was aiming to become the first state to outright ban prediction markets, such as Polymarket and Kalshi. Its SF 4511 bill had progresses rapidly through the state legislature.
If passed, the bill would make operating an online prediction market a felony offense. However, those plans have been derailed, at least temporarily, by the courts.
At a Glance:
- Federal court rules SF 4511 is unlawful
- Judge declares federal law precedes state governance
- Ban on Kalshi and others would have been a first for the U.S.
- Minnesota attorney-general says fight will continue
- Minnesota also pursuing sweepstakes casino in wider crackdown
Minnesota aimed for prediction market first
Minnesota had moved forward with a prediction market ban earlier this month. In addition to a crackdown on prediction markets like Polymarket and Kalshi, the law would open the discussion on legalizing sports betting.
Under SF 4511, running a prediction market site – which lawmakers compared to unlicensed sportsbooks – a felony offense.
Minnesota senator John Marty stated earlier this month: “We’re saying no, these are bets, sports bets, bets on politics, things that are currently illegal.”
Understandably, Kalshi and Polymarket were pleased with the temporary injunction. Kalshi spokesperson, Elisabeth Diana, said:
“Today’s decision makes it clear: states cannot ban things that they don't have jurisdiction over.”
Prediction markets vs online sportsbooks: the battleground
The boom in prediction market sites is causing headaches in states like Minnesota and others. The prediction sites maintain they are acting like share dealing platforms, not unlike financial derivatives websites.
Plus, prediction markets have backup on a federal level from the CFTC, which regulates them. They are also protected under the Commodity Exchange Act.
Some states this year have challenged this position, claiming they accept trades that are no different from sports betting wagers.
Unlike online sportsbooks which use a centralized odds-making system, prediction markets are determined by users. You can buy contracts on sports, entertainment, or politics, then sell your shares later.
Minnesota still has sweeps in its sights
Minnesota’s move against prediction markets is part of a wider campaign against what it sees as unlawful gambling.
In May, Minnesota targeted sweepstakes casinos with SB 4474, which would essentially outlaw all “dual-currency” gambling in the state.
Despite the state issuing cease-and-desist letters, similar to those hitting prediction markets, operators continued. The new law aims to specifically combat operators, game suppliers, and even media affiliates.
Nevada moves forward with Kalshi ban
Other states continue with their own fights against prediction markets. In June, Nevada extended a state ban on prediction markets to include Kalshi.
Ruling, Judge Jason Woodbury declared prediction markets were “indistinguishable” from online sports betting.
Kalshi has largely complied with the injunction in Nevada and will now geofence around the state. Traders in The Silver State can no longer access certain event contracts on Kalshi, including sports and politics.
