Prediction market platform Kalshi has filed a lawsuit in the U.S. District Court for the District of Minnesota seeking to block the state's impending ban on prediction markets. The company argues that such event trading contracts fall under the exclusive jurisdiction of the U.S. Commodity Futures Trading Commission (CFTC), and the state government has no authority to directly prohibit the platform from operating locally.
The new law will take effect on August 1.
This lawsuit comes after Minnesota Governor Tim Walz signed legislation that, under the current arrangement, would take effect on August 1, prohibiting prediction market platforms from operating within the state.
In its lawsuit, Kalshi named Walz, State Attorney General Keith Ellison, and other state officials as defendants. The company argues that state law conflicts with the federal regulatory framework and violates the federal primacy principle of the U.S. Constitution.
Kalshi claims to be subject to exclusive CFTC oversight.
Kalshi argues that prediction markets are essentially event-driven contract trading under federal regulation and should not be treated as gambling or betting businesses by the state government. The company also states that Minnesota's approach, which portrays a federally regulated platform as engaging in illegal activities, is unfounded.
In response to this issue, several U.S. states have been tightening their stance on prediction market platforms in recent months. Some state governments believe that these products are similar to sports betting and therefore should be included in state-level gambling regulations.
The divide between federal and state governments is widening.
However, the CFTC's position has consistently been that prediction markets are federally regulated derivatives products and should be regulated by the agency, not by state gambling laws. The disagreement between the federal and state governments regarding this regulatory boundary is widening.
According to reports, legal actions concerning restrictions on the operation of prediction market platforms have been initiated in the past few months in Wisconsin, Illinois, Arizona, Connecticut, New York, and Rhode Island.
Kalshi has also applied to the court for a temporary restraining order and a preliminary injunction, hoping to prevent Minnesota officials from enforcing the new law during the trial. The outcome of this case will affect a larger question: can the state government restrict federally regulated event trading exchanges, or will regulatory power over such platforms continue to remain at the federal level?
