Polymarket Sues Minnesota in Escalating Prediction Markets Battle
Polymarket is suing the state of Minnesota over its ban on prediction markets. The move comes just days after Polymarket rival, Kalshi, launched a similar lawsuit.
The pair joined the CFTC (Commodity Futures Trading Commission) in challenging Minnesota over the use of its regulatory powers. Altogether, it marks a growing escalation in the tit-for-tit battle for control over prediction markets.
At a Glance:
- Polymarket argues Minnesota breaking the First Amendment
- Prediction market giant joins CFTC and Kalshi in a three-way action
- Minnesota passed SF 3432 in May, banning online prediction markets
- Both Polymarket and Kalshi argue prediction markets should be federally regulated
New SF 3432 bill comes under fire from Polymarket
Minnesota had already taken steps in May to ban prediction markets by passing SF 4760. That followed an April motion, SF 4511, targeting what it sees as “illegal” gambling platforms.
Finally, Minnesota doubled down with SF 3432 at the end of May.
The sweeping crime prevention bill is wide-ranging and covers enhancements to Capitol safety and victim support networks. The bill also outlaws online prediction markets like Polymarket and Kalshi.
The new law invoked the ire of Kalshi, which sued the state of Minnesota earlier this week. The CFTC, the regulatory body that currently oversees prediction markets, joined the pack.
Federal regulation vs. state oversight
The battle between Minnesota and the prediction markets focuses on who regulates the platforms.
Following the Commodity Exchange Act (CEA), it’s the CFTC’s job to regulate platforms available online in the U.S. The CFTC argues that prediction markets are similar to derivatives platforms and should be treated as such.
However, several states have cried foul, arguing that prediction markets are virtually identical to online sportsbooks. Therefore, like online sports betting sites, they should be regulated and taxed by the state.
SF 3432 ‘violates’ First Amendment, says Polymarket
The new public safety bill takes effect in Minnesota on Aug. 1. However, Polymarket is already claiming the new rules violate the Constitution.
The law essentially blocks platforms like Polymarket and Kalshi from advertising their services. They would also be prevented from using event data, a key component of how traders price and assess markets.
Interestingly, Polymarket offers a cheeky prediction market on whether Gov. Tim Walz will be charged by 2027.
You can purchase shares on whether a state or federal jurisdiction formally charges the governor before Dec. 31. Over $110,000 has already been traded on the market.
Prediction markets busy in 2026 with a string of lawsuits
The prediction market industry has had a turbulent year so far. There has been a string of back-and-forth battles between state regulators and the CFTC.
Some states, such as Arizona, have issued cease-and-desist letters to prediction market platforms. The providers have fought back with lawsuits, warning states to lay off.
US Senate has its say in first committee meeting
Predictably, the fight has reached the U.S. Senate. Last month, the Subcommittee on Consumer Protection convened to discuss the future of prediction markets.
There were differing opinions. Subcommittee chair Marsha Blackburn argued that “there are real concerns that they [prediction markets] function much like traditional sports betting without the enforcement of state regulators and attorneys general.”
Rep. Patrick T. McHenry (R-NC) countered, pushing the operators’ argument that in a prediction market, “participants trade with one another while the platform earns transaction fees for facilitating the market.”
Undoubtedly, there will be more lawsuits and more challenges as the industry continues to develop.
