Kalshi Sues Minnesota Over Attempt to Criminalize Prediction Markets
Kalshi is suing Minnesota over its attempts to criminalize prediction markets in the state.
The prediction market giant filed a federal lawsuit at the end of May against the state of Minnesota. It argues that online prediction markets are federally regulated by the CFTC, not by individual states.
At a Glance:
- Kalshi joins CFTC in suing Minnesota over its regulatory move
- Prediction market launches federal suit against the state
- Minnesota wants to outlaw prediction markets under state gaming law
- SF4760 due to take effect in Minnesota on Aug. 1
- CFTC had already sued Minnesota last month
Kalshi joins CFTC on the Minnesota trail
The Kalshi lawsuit aims to block a state gaming bill set to take effect on Aug. 1.
Minnesota moved forward with SF 4511 in April in a bid to combat what it sees as illegal prediction markets muscling in on their territory.
Under the law, Minnesota would prohibit prediction markets from accepting trades within state borders.
However, the Commodity Futures Trading Commission has already weighed in with a lawsuit against Minnesota. It argues that Gov. Tim Walz is overstepping the mark and turning “lawful operators in prediction markets into felons overnight.”
Prediction markets vs. online sportsbooks: the battle for regulation
Prediction markets have been around for a few years. However, they have grown in popularity over the past 12 to 24 months and certainly since Polymarket re-entered the U.S. market.
The difference between prediction markets and online sportsbooks is that traders (not gamblers) set the price. You can purchase shares in a sports or political outcome, then get paid out if you’re right.
Currently, prediction markets are federally regulated by the CFTC, which trumps state regulators. Some states are crying foul and argue that they should be regulated like online sportsbooks that allow gambling.
CFTC sets trend with parallel lawsuit
That Kalshi and CFTC are doubling down on the legal challenge shows how serious they are about taking on the states.
The CFTC and the platforms argue that they operate like derivative platforms, not sportsbooks.
Several U.S. states have issued cease-and-desist letters to Kalshi and other prediction markets this year. However, the CFTC is fighting back, including suing Wisconsin over its attempts to regulate the industry.
Trump backs CFTC
In addition, the CFTC is getting backing straight from the top in the form of Donald Trump.
The POTUS posted on his Truth Social platform last week in support of the CFTC.
He argued that the CFTC had “exclusive authority” over prediction markets, away from state oversight.
The White House certainly has a wider interest in prediction markets. Donald Trump Jr. is an investor in Polymarket, an industry leader.
Minnesota targets other 'illegal gambling'
Minnesota isn’t just targeting prediction markets that it feels should be licensed in-state.
Last month, Minnesota advanced a bill to ban sweepstakes casinos, which it says amount to illegal gambling.
Bill SB 4474 will ban all dual-currency casinos that use Sweeps Coins and Gold Coins. Minnesota doesn’t allow online casinos, unlike New Jersey and Connecticut.
However, the state was forced to move things along after a series of cease-and-desist letters were effectively ignored.
