Minnesota ban prompts Kalshi lawsuit; New York seeks licensing

Minnesota Gov. Tim Walz signed SF 3432 this week, enacting a statewide prohibition on prediction markets. The measure repealed and replaced portions of SF 4760 that had been enacted earlier this month. Within a day of signing, prediction market operator Kalshi filed a federal lawsuit challenging the new law.

Kalshi’s complaint argues the state cannot regulate or prohibit event contracts that are subject to federal oversight and asks a federal court to block enforcement of SF 3432. The Commodity Futures Trading Commission filed a separate lawsuit against Minnesota last week that challenged provisions in the earlier SF 4760 statute. The two federal suits raise parallel legal challenges to the state statute.

In Albany, Assemblymember John McDonald III introduced A11521, a bill to license and regulate prediction market platforms under the New York Department of Financial Services. The proposal would require operators to obtain a state license and to maintain anti-money laundering programs, consumer protection policies and internal controls intended to preserve market integrity. The bill would give regulators authority to suspend or revoke licenses, impose civil penalties and order restitution for consumers.

A11521 is the second prediction market-focused bill filed in New York this year. An earlier proposal from Assemblymember Clyde Vanel would have barred operators from offering sports betting contracts to New York residents; that measure has not advanced.

Legislative activity on gambling has narrowed in many states as sessions near adjournment, with attention concentrating on targeted regulatory proposals and procedural measures. Prediction markets have emerged as a contested topic because they intersect state gambling statutes and federal regulation of commodity and derivatives contracts.

Other recent state actions include Connecticut Gov. Ned Lamont signing SB 296 to expand criminal penalties for sports betting manipulation and to increase authority over unlicensed operators. Louisiana’s legislature passed HB 513 to authorize name, image and likeness payments for high school athletes while banning deals tied to casinos or sports betting. New York Gov. Kathy Hochul signed S9009, directing a study of video lottery terminal vendor fees and commercial casino tax rates.

The Minnesota litigation and New York licensing proposal follow an ongoing dispute over where regulatory authority over prediction markets belongs and which rules apply to event contracts. Federal and state legal proceedings are underway and will determine whether state bans and licensing regimes can be enforced alongside federal oversight.