Opening
Kalshi filed a lawsuit against Minnesota state officials on Wednesday in the U.S. District Court of the District of Minnesota, challenging a law signed by Governor Tim Walz that prohibits prediction market operations in the state effective August 1. The complaint names Attorney General Keith Ellison, Governor Walz, and other government officials as defendants, accusing them of violating the Supremacy Clause, which establishes federal law supremacy over state law in jurisdictional disputes. The lawsuit follows Governor Walz signing the law earlier this month, after which the Commodity Futures Trading Commission and the Department of Justice sued the state and Walz less than 24 hours later. Kalshi argues the law threatens its viability as a 50-state derivatives exchange and would require costly technological solutions to restrict Minnesota access. The legal action occurs amid escalating federal-state conflicts over prediction market regulation, with the CFTC asserting exclusive jurisdiction over these platforms while states claim violations of local gaming and gambling laws, particularly those related to sports betting.
Legal Claims Against Minnesota
In Wednesday's complaint, Kalshi argued that the new law brands the prediction market platform "as a felon in the eyes of Minnesota." According to the complaint, "Shutting down Kalshi's ability to offer event contracts in Minnesota would irreparably impair Kalshi's viability as a 50-state derivatives exchange, and require it to implement complex and costly technological solutions to limit access to Kalshi's offerings in Minnesota---costs that would not be recoverable when Kalshi ultimately prevails in the Action." Kalshi is asking the court for a temporary restraining order and an injunction to block Minnesota state officials from enforcing the new law. Governor Walz's office did not immediately respond to a request for comment.
Regulatory Jurisdiction Dispute
The CFTC, under Chair Michael Selig, has stated that prediction markets fall under the "exclusive jurisdiction" of the agency. Over the past few months, the agency sued five states, including Wisconsin, Illinois, Arizona, Connecticut, and New York over their attempts to restrict prediction market platforms. In Wednesday's complaint, Kalshi made similar arguments to the CFTC position, asserting that the federal agency has jurisdiction over prediction markets, not states. States have argued that prediction market platforms are violating local gaming and gambling laws, particularly those related to sports betting. Prediction markets allow people to bet on the outcomes of real-world events, such as elections, sports, and controversial issues related to war.
Broader State Conflicts
Last week, Rhode Island state officials filed lawsuits against Kalshi and Polymarket for conducting sports gambling unlawfully. On Thursday, the CFTC filed its own lawsuit against Rhode Island. "CFTC-registered exchanges have faced an onslaught of lawsuits seeking to limit Americans' access to event contracts and undermine the CFTC's sole regulatory jurisdiction over prediction markets," said CFTC Chair Selig in a statement. "This power grab ignores the law and decades of precedent."
FAQ
When does Minnesota's prediction market ban take effect?
The law signed by Governor Tim Walz prohibiting prediction market activities across Minnesota has an effective date of August 1.
What is Kalshi asking the court to do?
Kalshi is asking the court for a temporary restraining order and an injunction to block Minnesota state officials from enforcing the new law.
How many other states has the CFTC sued over prediction market restrictions?
Over the past few months, the CFTC sued five states over their attempts to restrict prediction market platforms: Wisconsin, Illinois, Arizona, Connecticut, and New York.
