UMVA has learned that a heated battle is brewing between federal regulators and the state of Minnesota over a new law that aims to crack down on prediction markets.
The Commodity Futures Trading Commission has filed a lawsuit in federal court, seeking to block the Minnesota law, which would make operating or helping run certain prediction markets a felony. The agency argues that Congress gave it sole authority over derivatives markets decades ago, and that Minnesota cannot override that system through state criminal law.
The lawsuit, filed on Tuesday, names Minnesota Governor Tim Walz, Attorney General Keith Ellison, and other state officials as defendants. The CFTC wants the court to stop the measure before it takes effect on August 1.
Minnesota lawmakers added the prediction market language to the state's public safety bill earlier this year. The statute defines a prediction market as a system allowing consumers to place a wager on the future outcome of a specified event, including elections, weather, sporting events, and government actions.
Federal regulators say the law reaches far beyond traditional gambling restrictions, and would criminalize not only exchanges offering event contracts, but also payment processors, service providers, and others connected to those markets.
The CFTC and the Justice Department have also filed a request for a preliminary injunction, seeking to pause enforcement while the litigation moves forward. The agency warns that the Minnesota law could affect weather and agricultural hedging products used by farmers.
CFTC Chairman Michael S. Selig said in a statement that the Minnesota law turns lawful operators and participants in prediction markets into felons overnight. He accused Governor Walz of putting special interests first and American farmers and innovators last.
The lawsuit is part of a wider campaign by federal regulators to push back against state gambling enforcement efforts targeting prediction market operators. The case has significant implications for the future of event-contract trading in the United States.
