The Commodity Futures Trading Commission has filed a federal lawsuit against Minnesota in an effort to prevent the state from enforcing a newly enacted law that would criminalize the operation and promotion of prediction markets. The legal action seeks a preliminary injunction to stop the measure from taking effect on August 1, 2026, escalating an ongoing dispute between federal regulators and state authorities over control of derivatives trading frameworks.
The law, signed by Governor Tim Walz, makes Minnesota the first state to explicitly outlaw the operation, hosting, or promotion of prediction markets. It also allows state authorities to issue cease-and-desist orders and classifies violations, including advertising such platforms, as a felony. The legislation covers event contracts tied to areas such as sports, elections, war, weather, and pop culture.
Federal regulators argue the statute extends far beyond state authority and conflicts with the Commodity Futures Trading Commission’s exclusive jurisdiction over derivatives markets under the Commodity Exchange Act. The agency contends that Minnesota’s approach undermines a regulatory system established by Congress more than five decades ago and represents the most far-reaching attempt by a state to restrict federally regulated markets to date.
Federal Authority and Legal Challenge
Court filings state that the CFTC is pursuing both injunctive and declaratory relief in the US District Court for the District of Minnesota. The agency is also naming state officials, including Governor Tim Walz and Attorney General Keith Ellison, as part of its legal challenge. The commission argues that the law’s restrictions on operating and advertising prediction markets are “facially unlawful and unenforceable.”
The regulator has emphasized that similar legal battles have emerged across multiple states, including Arizona, Connecticut, Illinois, Wisconsin, and New York. In one recent case, a federal court in Arizona issued a preliminary injunction preventing enforcement of gambling laws against prediction market operators, reinforcing the CFTC’s position on federal preemption.
The agency has also taken legal action alongside the Department of Justice in several jurisdictions, arguing that state-level efforts to restrict prediction markets interfere with its exclusive regulatory authority. It maintains that Congress intended a unified national framework for commodity derivatives markets to avoid fragmented state oversight.
Farmers Cited in Regulatory Argument
A key part of the CFTC’s case centres on agricultural risk management. Minnesota, a major agricultural state, is highlighted for farmers’ use of prediction markets to hedge against weather and crop risks.
“This Minnesota law turns lawful operators and participants in prediction markets into felons overnight,” said CFTC Chairman Michael S. Selig. “Minnesota farmers have relied on critical hedging products on weather and crop-related events for decades to mitigate their risks. Governor Walz chose to put special interests first and American farmers and innovators last.”
The commission warns restricting access could disrupt price discovery and hedging tools used by producers. It also argues enforcement would cause irreparable harm to federal authority under the Supremacy Clause.
The case adds to wider litigation involving operators including Kalshi, Polymarket, Coinbase, Crypto.com, and Robinhood, as federal regulators continue seeking rulings affirming exclusive jurisdiction over prediction markets.
Source:
“CFTC Sues Minnesota to Block State Law”, cftc.gov, May 19, 2026
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