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The US Commodity Futures Trading Commission (CFTC) has sued Minnesota to block what the regulator called the first outright state ban on prediction markets, opening a legal fight over whether states can prohibit event-contract markets overseen at the federal level.
In a lawsuit filed May 19 in federal court, the regulator asked for an injunction blocking Minnesota’s new law before it takes effect on Aug. 1. The filing came less than 24 hours after Governor Tim Walz signed Senate File 4760, legislation that prohibits operating, promoting, advertising, or facilitating prediction markets in the state and classifies many event contracts as unlawful wagers.
CFTC Chair Michael Selig said the law would turn lawful prediction-market operators and participants into felons despite operating in markets overseen by the federal regulator.
At the center of the dispute is whether states can prohibit event contracts that the CFTC considers federally regulated derivatives, even when those contracts cover areas such as weather, economic indicators, and business events.
The CFTC argues that many event contracts traded on approved exchanges qualify as derivatives regulated under the Commodity Exchange Act. According to the lawsuit, Congress granted the agency exclusive authority over those products, preventing individual states from banning or criminalizing them.
The regulator also pointed to Minnesota’s role as a major agricultural state, saying weather-related contracts have long been used by farmers to manage exposure to changing crop and weather conditions. The lawsuit claims the new law reaches further than previous state actions by targeting markets that fall within established federal oversight.
Minnesota lawmakers took a different view when drafting the legislation.
The law identifies contracts tied to outcomes such as sporting events, military conflicts, weather events, elections, and other real-world developments as wagers that can be prohibited under state law. Beginning Aug. 1, 2026, entities involved in creating, operating, advertising, providing data for, or processing payments linked to such markets could face criminal liability.
Minnesota officials have argued that prediction markets resemble gambling products and can expose consumers to financial harm. Minnesota Attorney General Keith Ellison said his office was reviewing the lawsuit and would respond through the courts.
ICYMI: Minnesota Tim Walz has signed the public safety bill that includes provisions banning prediction markets in the state, the first legislative act to explicitly ban these platforms; the bill, scheduled to take effect Aug. 1, is set to be challenged by PMs and/or the CFTC
— Ryan Butler (@ButlerBets) May 19, 2026
The Minnesota case arrives amid a wider legal campaign by the CFTC to defend prediction-market operators against state enforcement efforts.
The agency has already challenged actions in Arizona, Connecticut, Illinois, and New York. Earlier this year, a federal court issued a preliminary injunction preventing Arizona from pursuing criminal enforcement against prediction market operators while litigation continues.
That history gives the Minnesota dispute significance beyond a single state. If the court agrees with the CFTC’s position, it could reinforce federal authority over event-contract markets nationwide. If Minnesota prevails, other states may seek broader restrictions on prediction-market activity.
The regulator is seeking a preliminary injunction before the law takes effect on Aug. 1, 2026, arguing that exchanges and event contracts operating under federal oversight would otherwise face criminal penalties under Minnesota’s new rules.
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