Kalshi sues Minnesota over prediction market ban

Kalshi filed a federal lawsuit against Minnesota asking a judge to block enforcement of SF 3432, a law signed by Gov. Tim Walz on May 26 that bans certain event contracts and is set to take effect Aug. 1. The firm named Walz, Attorney General Keith Ellison and Alcohol and Gambling Enforcement Division Director Jon Anglin as defendants.

The company seeks declaratory and injunctive relief to prevent state officials from enforcing the statute. In its complaint Kalshi argues the Commodity Exchange Act gives the Commodity Futures Trading Commission exclusive authority over event contracts and that Minnesota’s statute “impermissibly usurps the CFTC’s exclusive jurisdiction by banning certain event contracts, including those traded on federally designated contract markets.”

Kalshi says the law would not only bar trading in specified contracts but would also prohibit “the operation of any market that offers SF 3432’s prohibited categories of event contracts.” The complaint states the statute would make Kalshi “a felon in Minnesota for offering certain event contracts on its federally authorized designated contract market (DCM) that are entirely lawful under federal law.”

The filing raises a First Amendment claim as well, arguing the state cannot ban advertising for products and services that federal regulators permit. The complaint says, “No court has ever sustained a state’s flat bar on advertising conduct that accords with federal law.”

The lawsuit follows a separate legal challenge by the CFTC last week over prediction market language in an earlier bill, SF 4760. The agency urged a federal court to block that provision, calling it “a flagrant and unprecedented incursion into the Commission’s exclusive regulatory sphere” and describing it as “the first outright ban on ‘prediction markets’ in the United States.” The CFTC warned those provisions could sweep in long-established derivatives tied to weather and agricultural risks.

Minnesota has argued in filings and multistate amicus briefs that the CFTC does not have exclusive jurisdiction over some types of event contracts, including sports-related markets. Kalshi’s complaint cites federal rulings, including decisions from the Third Circuit and a federal district court in Arizona, that have favored federal preemption in similar disputes.

The legal fight over prediction markets has expanded to several states. In Arizona, Kalshi and state regulators asked a court to pause appellate briefing while the Ninth Circuit considers related cases involving multiple platforms. A federal court granted preliminary injunctive relief to the CFTC and the Department of Justice against Arizona regulators, and a state criminal case in Arizona has been preliminarily enjoined.

In Rhode Island, state officials agreed to hold off on enforcement against Kalshi and Polymarket while federal litigation proceeds, and Polymarket has removed the state lawsuit to federal court.

Kalshi’s Minnesota complaint asks the court to rule before SF 3432 takes effect on Aug. 1 so the company can continue to operate markets that federal regulators have authorized. The litigation will determine whether states can ban categories of event contracts that are traded on federally regulated exchanges.