Kalshi Sues Minnesota Over Prediction Market Ban, Citing Federal Authority

Prediction market platform Kalshi has filed a federal lawsuit challenging a new Minnesota law that would criminalize the operation, hosting, and promotion of prediction markets within the state beginning Aug. 1. The legal action marks the latest chapter in the growing debate over the regulation of prediction markets in the United States.

The lawsuit follows a motion submitted by the Commodity Futures Trading Commission (CFTC) on May 19, one day after Minnesota Governor Tim Walz signed the legislation into law. The federal regulator argued that the measure conflicts with the U.S. Constitution because it seeks to impose state-level penalties on prediction markets that are regulated under federal law.

In its complaint, Kalshi contends that the Minnesota law violates the Constitution’s Supremacy Clause. The company argues that the Commodity Exchange Act (CEA) grants the CFTC exclusive jurisdiction over derivatives and swaps traded on designated contract markets (DCMs), preventing states from enforcing conflicting regulations against federally regulated prediction market platforms.

Kalshi also challenged provisions that would criminalize the advertising and promotion of prediction markets. According to the company, those restrictions infringe on First Amendment protections related to commercial speech and marketing activities.

The legal dispute comes as federal officials continue to debate oversight of prediction markets. On Wednesday, U.S. President Donald Trump emphasized the importance of maintaining the CFTC’s sole authority over the sector, echoing comments made by CFTC Chair Michael Seligl regarding federal regulatory control.

Kalshi has recently secured similar preliminary injunctions in legal battles involving New Jersey and Arizona, strengthening its position against state-level enforcement efforts targeting prediction market operators.

Meanwhile, prediction markets face increasing regulatory scrutiny worldwide. Several countries, including Indonesia, Spain, and India, have recently moved to ban or restrict such platforms. In the United States, a House of Representatives committee has also confirmed an ongoing investigation into prediction markets, highlighting growing interest from lawmakers and regulators as the industry continues to expand.