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Minnesota Becomes First U.S. State to Ban Prediction Markets — Trump Administration Sues Within 24 Hours

Governor Tim Walz signed a felony-level ban on Kalshi, Polymarket and similar platforms on May 18. The CFTC and DOJ filed a federal preemption lawsuit on May 19, escalating the year-long state-versus-federal showdown over sports event contracts.

Category: iGaming News - USA · By Growl Games Editorial Team · Wed May 20 2026 · Updated Thu Jul 23 2026

Minnesota Becomes First U.S. State to Ban Prediction Markets — Trump Administration Sues Within 24 Hours

Table of Contents

1. What Happened

On Monday, May 18, 2026, Minnesota Governor Tim Walz signed Senate File 4760, a public safety bill that makes Minnesota the first U.S. state to outright ban prediction markets like Kalshi and Polymarket. The bill passed with bipartisan margins of 100-32 in the House and 57-9 in the Senate. Less than 24 hours later, on May 19, the Commodity Futures Trading Commission (CFTC) and the Department of Justice filed a federal lawsuit in Minnesota district court seeking to block the law before it takes effect on August 1, 2026.

2. Inside the Minnesota Law

The statute makes it a felony to create, operate, manage, control or advertisea prediction market platform inside the state. It also extends to support services such as VPNs that could be used to bypass geolocation. Banned wager categories include sports, elections, war, natural disasters, short-term weather, pop-culture events and "mention markets" — bets on what a public figure will say. A late-stage revision is set to remove the short-term weather ban in response to concerns from Minnesota's agricultural sector.

3. The Federal Counter-Strike

The CFTC's complaint, filed jointly with the DOJ, calls the ban a "flagrant and unprecedented incursion" into the agency's exclusive jurisdiction under the Commodity Exchange Act. CFTC Chairman Michael S. Selig argued the law would turn "lawful operators and participants in prediction markets into felons overnight." The agency is seeking a preliminary and permanent injunction to stop enforcement.

Minnesota Attorney General Keith Ellison said his office is reviewing the suit and will respond in court, calling prediction markets "designed to be addictive"and harmful to young people and low-income users.

4. Industry Reaction

Kalshi spokesperson Elisabeth Diana called the ban "peak hypocrisy" and compared it to "banning access to the New York Stock Exchange." Kalshi is currently valued at $22 billion after a TCV-led funding round, while Polymarket is valued at roughly $12 billion. Both platforms count Donald Trump Jr. as an adviser, a relationship that Minnesota state lawmakers cited when accusing the CFTC of political pressure.

Separately, Sporttrade announced on May 15 that it is shutting its state-licensed sportsbook operations in NJ, AZ, CO, IA and VA by June 26 and applying for CFTC Designated Contract Market status — pivoting directly into the prediction-market lane. On May 18, Kalshi joined the National Council on Problem Gambling with a $2 million, two-year commitment, an implicit acknowledgment that sports event contracts behave like gambling for many users.

Minnesota becomes the sixth state sued by the CFTC, joining Arizona, Connecticut, Illinois, New York and Wisconsin. A coalition of 41 state attorneys general has urged Congress for regulatory clarity. By one count, there are now at least 30 active court cases across the state-federal divide. The Senate Commerce Subcommittee on Consumer Protection is holding its first formal hearing — "No Sure Bets: Protecting Sports Integrity in America" — on May 20, 2026, with multiple competing federal bills in play.

6. What It Means for Sportsbooks & iGaming

Prediction markets have functionally extended sports betting into states that never legalized it. On Kalshi, more than 85% of trading volume is sports-related, and sports event contracts generated 89% of Kalshi's 2025 revenue. An estimated $3 billion to $5 billion was wagered on NFL games on Kalshi during the most recent season alone. The American Gaming Association — representing the licensed sportsbook industry — spent $730,000 lobbying on prediction markets in Q1 2026 alone, its heaviest single-quarter spend in over a year. Regulated operators like DraftKings, FanDuel, BetMGM and Fanaticssee prediction markets as a parallel, lower-tax, lower-compliance pipelineeating into their state-licensed handle — even as DraftKings Predictions and FanDuel Predicts now run on the same CFTC infrastructure.

7. Closing Quote

"This Minnesota law turns lawful operators and participants in prediction markets into felons overnight. 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."
— Michael S. Selig, Chairman, U.S. Commodity Futures Trading Commission, May 19, 2026

8. Sources

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