A new legal battle is taking shape between Minnesota lawmakers and the federal government, with potentially significant implications for prediction markets. At the center is SF 4760, a bipartisan bill introduced in Minnesota that seeks to prohibit prediction market platforms from operating within the state. Opposing that effort is the Commodity Futures Trading Commission (CFTC), the federal agency that oversees derivatives and event contracts. The dispute sets the stage for a closely watched court fight that could help define the regulatory boundaries of prediction markets in the United States.
The legal fight over prediction markets is entering new territory. On May 20, 2026, the Commodity Futures Trading Commission (CFTC), led by Chairman Michael Selig, filed a lawsuit challenging a key provision of Minnesota’s SF 4760, just one day after Gov. Tim Walz signed the bill into law. The provision is set to ban prediction markets in the state beginning in August.
In its complaint, the CFTC argues that platforms such as Kalshi and Polymarket are governed by federal law and fall under its regulatory authority, citing the Supremacy Clause. The agency is seeking a court ruling that the state’s ban is preempted, unconstitutional, and invalid, as well as an injunction blocking Minnesota from enforcing the law.
Minnesota, which claims that it acted with public safety in mind, maintains that prediction markets are nothing more than illegal online sports betting platforms seeking to exploit loopholes. While it’s following in the footsteps of other jurisdictions enacting legislation, lawsuits, or, in Arizona's case, criminal charges to impose guardrails on prediction markets, Minnesota is the first state to seek an outright ban. It chose to give it teeth, as operating, creating, or advertising a prediction market in Minnesota will be charged as a felony offense, carrying up to five years in prison and a fine of $10,000.
Whether the law will be allowed to stand will be closely watched, particularly considering the variety of state responses to prediction markets.
Same Game, Different Name. Now With Insider Trading!
When is a sportsbet not a sportsbet? According to proponents and supporters of prediction markets, it’s when it’s an event contract. The U.S. Supreme Court’s decision in 2018’s Murphy v. National Collegiate Athletic Association put the regulation of gambling laws for (or outright banning of) online sportsbooks into the hands of the states. The emergence (and subsequent explosion) of prediction markets has significantly complicated matters.
Prediction markets argue that they are not the same as sportsbooks. Instead of a straight-up sports wager, so-called “event contracts” can be purchased on any available yes-or-no type of question. For example, an event contract on whether President Donald Trump would kiss someone before the end of May 31, 2026, was settled in favor of “yes,” although those who picked “no” have protested that the non-contact cheek kiss given to his wife should not have counted. Having generated almost $12.5 million in event contracts, it’s currently under review.
Foes of prediction markets are quick to argue that, regardless of what the platforms claim, their event contracts are just gambling wagers dressed up in a different name. On a legal online betting site like DraftKings or MGM, gamblers can place a bet that the New York Knicks will win their next playoff game by 6.5 points or more. On a prediction market, a trader can buy shares of “yes” to the event contract of “Will the New York Knicks win their next playoff game by more than 6.5 points?” To states concerned about illegal gambling, there is no practical difference between the two types of wagers.
There’s also been a steady stream of concern about the ease with which prediction markets are vulnerable to insider trading. With trades available on topics like when Ariana Grande’s new album will be released or what color dress Queen Latifa will wear when she hosts the 2026 American Music Awards, those in a position to know the answers hold an unfair and illegal advantage over those without access to insider knowledge. This became apparent after a U.S. soldier was charged with purchasing event contracts on when military action in Venezuela would occur, for which he had privileged information.
Why Yes, You Can Buy an Event Contract on That
Minnesota’s prediction market ban law, proposed by Rep. Emma Greenman, is part of a public safety bill that enjoyed broad bipartisan support in the Minnesota Legislature, passing 57-9 in the Minnesota Senate and 100-32 in the Minnesota House of Representatives. Designed to lessen access to gambling addiction through prediction markets, it also prohibits the use of a virtual private network (VPN) to sidestep the law’s provisions. In addition to carving out exceptions, such as allowing farmers to trade on weather futures as an amendment during the current legislative session (which is the kind of thing event contracts were originally used for), it focuses on prosecuting those making prediction market sites available, not the Minnesotans who use them.
The CFTC’s eagerness to enter the fray and seek a preliminary injunction on behalf of prediction markets, instead of letting them handle their own defense, has raised a few eyebrows. The Trump administration, and Congressional Republicans in general, have proven extremely supportive of the prediction market industry as a new source of commerce. In 2025, Trump Media & Technology Group announced “Truth Predict,” a prediction or betting marketplace that would let Truth Social users stake money on politics, sports, and economic events, developed in partnership with Crypto.com. However, specifics are still in development. Donald Trump Jr. also has a role as an investor in Polymarket and an advisor to Kalshi.
If you were hoping to bet on whether the lawsuit would be filed, you were too late; by the time anyone could have listed that market, the CFTC had already beaten you to the punch.
Related Resources
- Is it Legal To Gamble With Other People’s Money? (FindLaw’s Law and Daily Life)
- CTFC Sees Dodd-Frank Reforms Essential To Remove Future Risk (FindLaw’s Finance Law)
- NBA Players Cross the Line With Sportsbetting Using Insider Information (FindLaw’s Legally Weird)
