color: var(color-red-500)

by

Kalshi Sues Minnesota to Block First US Felony Ban on Prediction Markets

Kalshi, a platform for prediction markets, is suing the state of Minnesota over a new law. This law would make it a felony to run or advertise these types of markets, and Kalshi believes it’s an overreach that will impact the growing industry. The lawsuit is part of a larger national debate about how prediction markets should be regulated.

  • Key Takeaways:

  • Kalshi sued the state of Minnesota on May 28 to block SF4760, a felony ban set to take effect August 1, 2026.
  • The CFTC filed its own suit against Minnesota within 24 hours of the bill’s May 18 signing.
  • More than a dozen states have moved against Kalshi; the case could decide who regulates the sector.

Minnesota’s First-in-Nation Felony Ban

Kalshi, a federally regulated prediction market where users trade contracts on the outcome of real-world events, asked a federal court to strike down Minnesota’s SF4760, a law it says would criminalize its business in the state. Governor Tim Walz signed the measure on May 18, and it is set to take effect on August 1, 2026, making Minnesota the first U.S. state to treat the operation and advertising of prediction markets as a felony.

The lawsuit, filed on May 28, argues the ban cannot stand because prediction markets are not gambling products but federally regulated derivatives. Kalshi contends that Minnesota is attempting to outlaw an activity that Congress placed under exclusive federal oversight.

Kalshi’s central argument is that a state law interferes with the power of the Commodity Futures Trading Commission (CFTC), the federal agency overseeing derivatives trading. Kalshi believes its contracts are legally considered ‘swaps’ under federal law, which gives the CFTC sole authority over them. Therefore, the state can’t simply label them as gambling to bypass that federal control.

The company argues the ban breaks the First Amendment by preventing them from advertising a legal financial service. They believe Minnesota’s law improperly interferes with federal authority and unfairly restricts their right to advertise.

The CFTC Joins the Fight

Kalshi is not litigating alone. The CFTC filed its own federal lawsuit against Minnesota less than 24 hours after Walz signed the bill, asking a court for a preliminary injunction to stop the law from taking effect before the dispute is resolved. The agency argues that Congress granted it exclusive oversight of event contracts and that state gambling statutes cannot displace that authority.

Image source: CFTC

A ruling against Minnesota would reinforce the position that prediction markets answer to Washington, not state capitals; a ruling for the state could embolden dozens of others weighing similar bans.

Minnesota is only the latest battleground as Kalshi and its rivals have faced a wave of state-level pushback over the past year, with regulators and courts split on whether their contracts are legitimate derivatives or thinly disguised betting. Bitcoin.com News has reported that Washington State sued Kalshi over alleged illegal online betting, while Arizona challenged the platform’s federal status with unlicensed gambling charges.

The CFTC has mirrored Kalshi’s courtroom strategy elsewhere, suing New York and Wisconsin over comparable restrictions. The fight has also drawn in other crypto-linked firms, with Coinbase suing three states as the federal-versus-gambling clash widened, and 38 attorneys general backing a Massachusetts lawsuit against Kalshi.

Outcomes have varied as a Nevada court ruled that Kalshi’s event contracts align with state gambling laws, even as New Jersey lost a bid to shut down the platform’s sports contracts on appeal.

What Comes Next

Now that August 1st is almost here, the first key step is whether a court will temporarily stop Minnesota from enforcing its new law, as requested by the CFTC. If the court grants this pause, it would give Kalshi more time to operate in the state while the legal issues are resolved.

That said, the deeper issue is unlikely to be settled in a single ruling, and until an appeals court (or Congress) draws a clear line between federally regulated event contracts and state-governed gambling, prediction market operators will keep fighting the same battle state by state, with Minnesota now at the front of the line.

Read More

2026-05-31 00:57