UMVA has learned that Kalshi, the New York‑based derivatives exchange, has filed a high‑stakes lawsuit against Minnesota, seeking to halt a new state law that would brand certain prediction markets as felonies.
On May 27, the company filed its complaint in the U.S. District Court for the District of Minnesota, demanding emergency relief before the law takes effect on August 1. Kalshi argues that the measure unlawfully intrudes on federal jurisdiction, threatening to turn its legally sanctioned event contracts into criminal offenses.
The heart of the battle lies in Senate File 3432, signed by the governor on May 26. The bill imposes felony penalties on anyone who operates, supports, markets, or advertises prediction markets covering sports, elections, legal proceedings, wars, and even pop culture. Kalshi contends that the law usurps the Commodity Futures Trading Commission’s exclusive authority over event contracts listed on federally regulated platforms.
Kalshi’s complaint claims that once the law becomes active, the company would be deemed a felon simply for offering contracts that federal law explicitly permits. The company points to the Commodity Exchange Act, which grants the CFTC sole jurisdiction over trades on designated contract markets, and argues that Congress reserved the power to bar specific contracts for public‑interest reasons.
The lawsuit also challenges Minnesota’s advertising restrictions, arguing that the state cannot criminalize speech that promotes products lawfully offered under federal regulations. Kalshi’s lawyers argue that the new law creates a chilling effect on First Amendment rights while simultaneously imposing criminal penalties for compliance with federal law.
Kalshi cites recent victories in similar disputes, including a ruling by the U.S. Court of Appeals for the Third Circuit that affirmed federal preemption over state attempts to regulate trades on designated contract markets. The company warns that if Minnesota’s law is enforced, it could irreparably damage Kalshi’s viability as a 50‑state derivatives exchange.
In a dramatic move, Kalshi has named Minnesota Attorney General Keith Ellison, Governor Tim Walz, and Jon Anglin, head of the state’s Alcohol and Gambling Enforcement Division, as defendants. The company seeks a declaration that the law is invalid as applied to its exchange, along with a halt to enforcement of both the new measure and existing state gambling statutes against it.
UMVA’s exclusive reporting reveals that this legal showdown could reshape the balance between state regulation and federal oversight in the rapidly evolving world of prediction markets. The outcome of this case will reverberate across the financial industry, setting a precedent for how states may or may not interfere with federally sanctioned derivatives trading.
