Minnesota becomes first state to ban prediction markets

Source: Hacker News

Steve Karnowski/Associated Press

Minnesota’s prediction‑market ban

Minnesota Gov. Tim Walz has signed the nation’s first law banning prediction‑market sites from operating in the state. In response, the Trump administration has sued (CFTC press release), setting up a legal battle over what is the most far‑reaching crackdown on services such as Kalshi and Polymarket.

States are increasingly confronting the Trump administration over how to regulate an industry that allows people to bet on virtually anything (NPR explanation).

Details of the Minnesota law

• The law makes it a crime to host or advertise a prediction market, defined as a system that lets consumers wager on a future outcome—sports, elections, live entertainment, someone’s word choice, or world affairs.
• The prohibition also covers services that could help users disguise their location (e.g., virtual private networks).
• It takes effect in August; sites that do not leave the state could face felony charges.

“We as a state should decide how best and what regulations we think should attach to gambling, to protect public safety, to protect our kids,” said Minnesota Rep. Emma Greenman, the Democrat who introduced the measure.

• Carve‑out: The law includes an exemption for event contracts that serve as insurance policies for “harm, or loss sustained,” and for the purchase of securities and other commodities.
• Updated version: An amendment (reported by MPR News) will allow trading on weather—an exception secured after pushback from the agricultural industry, which relies on weather‑related hedging products. The amendment is expected to pass on Saturday.

Political and legal response

The Commodity Futures Trading Commission (CFTC) has filed a lawsuit seeking to block the law before it takes effect, arguing that the prediction‑market industry should be regulated exclusively by federal officials.

“This Minnesota law turns lawful operators and participants in prediction markets into felons overnight,” said CFTC Chairman Michael Selig. “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.”

Industry reaction

“The states are using any tactic they can to go after the prediction‑market companies,” said Melinda Roth, professor at Washington and Lee University School of Law. “But they’ve embarked on a ‘too big to fail’ strategy and have become quite mainstream. It will be hard to put that genie back in the bottle.”

Experts note that the cloud of legal uncertainty has not slowed the rapid growth of prediction‑market apps.

Ongoing legal battles

• More than 20 lawsuits have already been filed over whether states or the federal government should oversee the industry (NPR coverage).
• In Nevada, a judge found Kalshi’s sports‑betting offering “indistinguishable” from state‑regulated sports gambling, prompting Kalshi to pause its sports betting in the state.
• The CFTC has filed federal lawsuits (NPR report) against five states—including Arizona, Wisconsin, and New York—aiming to override state attempts to rein in betting sites.
• The CFTC argues it has exclusive jurisdiction over prediction markets, though former CFTC members and legal experts contend that bets on topics such as “words President Trump might say during a press conference” or whether Ricky Martin will appear at the Super Bowl lie far outside its traditional scope.

Kalshi spokeswoman Elisabeth Diana called the ban a “blatant violation” of the law:

“Minnesota banning prediction markets is like trying to ban the New York Stock Exchange,” Diana added, noting that the ban “actively harms users because it reduces competition and drives activity offshore.”

A Polymarket spokesman told NPR that Minnesota’s ban runs counter to the federal government’s “established framework” for regulating prediction markets.

Broader context

• Bills targeting the prediction‑market industry have been introduced in seven other states, according to the National Conference of State Legislators (NCSL tracking). Hawaii and North Carolina have pending statewide bans.
• Tribal‑owned casinos operate in Minnesota, but online gambling and sports betting remain illegal in the state.
• Prediction markets like Kalshi and Polymarket have provided access to sports betting for residents of states where such activity is prohibited, because the Trump administration classifies the sites as offering “event contracts” rather than traditional gambling.
• On Kalshi, more than 85 % of trading activity is related to sporting events, including “parlays” that combine multiple outcomes (points scored, fouls, passes, etc.) (source).
• Companies face ongoing scrutiny over potential insider trading (NPR) and the risk that markets could create perverse incentives for people to manipulate real‑world outcomes (NPR).

Minnesota Public Radio News reporters Dana Ferguson and Peter Cox contributed reporting to this story.