# Kalshi Sues Minnesota Over Law Criminalizing Prediction Markets — Legal Battle Escalates
Prediction market platform Kalshi has filed a federal lawsuit against the state of Minnesota over a new law that criminalizes operating, hosting, or promoting prediction markets across the state starting August 1.
The lawsuit, filed in federal court, follows a separate motion by the Commodity Futures Trading Commission (CFTC) filed on May 19 — the day after Governor Tim Walz signed the legislation — arguing the law violates the U.S. Constitution.
## The Law and Why It Matters
Minnesota’s new measure makes it a crime to “operate, host, or promote” a prediction market platform within state borders. Violators could face criminal penalties, effectively banning platforms like Kalshi and Polymarket from doing business with Minnesota residents.
The law reflects a growing backlash against prediction markets, which have exploded in popularity — Kalshi’s average weekly trading volume surged from $300 million to $3 billion between September and March alone. But their rapid growth has attracted regulatory scrutiny and legislative pushback both in the U.S. and abroad.
## Kalshi’s Legal Argument
In its filing, Kalshi argued the Minnesota law violates the Supremacy Clause of the U.S. Constitution, which establishes that federal law takes precedence over state legislation. Specifically, Kalshi contends the Commodity Exchange Act (CEA) grants the CFTC “exclusive jurisdiction” over derivatives and swaps traded on designated contract markets.
The platform also challenged the provision that criminalizes the marketing or advertising of prediction markets, arguing it violates the First Amendment’s protection of commercial speech.
## Trump and CFTC Back Federal Control
The legal battle has drawn attention at the highest levels. On Wednesday, President Donald Trump said it was “critically important” that the CFTC maintain sole authority over prediction markets, siding with CFTC Chair Michael Selig.
The White House’s Office of Information and Regulatory Affairs has also begun reviewing a proposed CFTC rule on prediction markets, signaling the agency is advancing toward a broader federal framework for event contracts — including those tied to elections, gaming, and sports.
## Previous Wins for Kalshi
Kalshi has already won similar preliminary injunctions against enforcement attempts in New Jersey and Arizona, establishing a legal track record that Minnesota’s law may struggle to overcome. Those rulings found that state-level attempts to regulate prediction markets conflicted with federal authority under the CEA.
## International Backlash
The legal battle is part of a broader global pushback against prediction markets. In the past week alone:
– **Indonesia** banned prediction market platforms
– **Spain** outlawed access to election-related event contracts
– **India** moved to block prediction market operations
Meanwhile, the U.S. House of Representatives has opened an investigation into whether government employees are trading on non-public information through platforms like Kalshi and Polymarket. The congressional probe, confirmed last week, is examining potential insider trading risks in the rapidly growing sector.
## What’s at Stake
Prediction markets allow users to bet on the outcome of future events — from election results to interest rate decisions to sports championships. Proponents argue they provide valuable forecasting data and serve as an efficient information aggregation tool. Critics contend they resemble gambling and raise concerns about market manipulation and insider trading.
The Minnesota case could set an important precedent for whether states can regulate prediction markets independently of the CFTC. A ruling in Kalshi’s favor would likely reinforce federal primacy over these markets, while a state victory could trigger a wave of similar legislation across the country.
## FAQ
**What exactly is Kalshi suing Minnesota over?**
Kalshi is challenging a Minnesota law that criminalizes operating prediction market platforms in the state, arguing it conflicts with federal law and violates the First Amendment.
**Has Kalshi won similar cases before?**
Yes. Kalshi won preliminary injunctions against enforcement attempts in both New Jersey and Arizona, with courts finding that state regulation conflicted with the CFTC’s exclusive jurisdiction under the Commodity Exchange Act.
**Are prediction markets legal in the United States?**
Federally, prediction markets operating as designated contract markets under CFTC oversight — like Kalshi — are legal. However, several states have attempted to restrict or ban them, leading to ongoing legal battles.
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*Sources: CoinDesk, Kalshi Federal Lawsuit Filing, Courthouse News Service*
