Federal government sues states over prediction market restrictions
Federal government sues states over prediction market regulation, deepening the federal-state jurisdictional clash.
Event / Politics
US Prediction Market Regulation
Federal court halts Minnesota's prediction market ban, affirming CFTC's exclusive regulatory authority over prediction markets and escalating dispute between federal and state governments over regulatory jurisdiction.
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2026-08-14 to 2026-11-11 · UTC publication dates
Coverage begins 29 Jul, 00:48 UTC
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What happened
Multiple states pursuing legal action against prediction markets
Beyond Minnesota, Arizona, Connecticut, Illinois, New Jersey, Massachusetts, and Wisconsin are pursuing legal measures to restrict or ban prediction markets. The CFTC has countersued each of these states, arguing it has exclusive jurisdiction under the Commodity Exchange Act.
Minnesota becomes first state to ban prediction markets
Minnesota passed legislation in May becoming the first state in the nation to ban prediction market platforms such as Kalshi and Polymarket. The law was set to take effect on August 1 and would have criminalized the creation, operation, or administration of prediction markets and related activities.
Federal government sues multiple states over prediction market regulation
In April, the federal government sued Connecticut, Arizona, and Illinois challenging their efforts to regulate or ban prediction market operators. New York separately sued Coinbase and Gemini, which are prediction market platforms. These lawsuits represent a broader conflict between federal and state authority over prediction markets.
CFTC begins rulemaking on event contracts
The Commodity Futures Trading Commission initiated a rulemaking process to determine which types of event contracts it would consider contrary to the public interest and therefore bar from being listed on prediction markets it regulates.
States dispute federal authority over prediction markets
State officials argue that the vast majority of activity on prediction market platforms constitutes sports betting, which states are empowered to regulate under gambling laws. They contend this is fundamentally different from commodities and futures contracts historically regulated by the CFTC. Minnesota Attorney General Keith Ellison characterized prediction markets as gambling and stated the state has the right to prohibit predatory gambling.
States lost $1.2 billion in tax revenue from prediction markets
The American Gaming Association estimates that states have lost more than $1.2 billion in tax revenue from wagers since prediction markets began offering sports event contracts, representing significant lost state revenue from an unregulated industry.
CFTC claims exclusive jurisdiction over prediction markets
The U.S. Commodity Futures Trading Commission and prediction market operators Kalshi and Polymarket argue that federal law gives the CFTC exclusive jurisdiction to regulate event-contract transactions. The CFTC contends that prediction market contracts qualify as swaps under the Commodity Exchange Act, placing them under federal regulatory authority rather than state gambling laws.
CFTC chairman declares agency will oppose state prediction market bans
In February, CFTC Chairman Mike Selig declared that the agency will no longer tolerate state efforts to regulate or ban prediction markets, stating the agency will intervene to protect its exclusive jurisdiction over federally regulated markets.
Federal judge blocks Minnesota's prediction market ban
U.S. District Judge Katherine Menendez issued a preliminary injunction temporarily blocking Minnesota's law banning prediction markets, scheduled to take effect on August 1. The judge found that the U.S. Commodity Futures Trading Commission, Kalshi, and Polymarket were likely to succeed in their legal challenge and that enforcing the law would cause irreparable harm to the operators. The law would have made it a crime to create, operate, or administer prediction markets.
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2 alternative perspectives
Federal court blocks Minnesota's prediction market ban amid regulatory clash
Federal court blocks Minnesota's prediction market ban as CFTC asserts exclusive jurisdiction.