The Commodity Futures Trading Commission (CFTC) has initiated legal action against Minnesota regarding the state's recent prohibition on prediction markets. The CFTC contends that this law unlawfully criminalizes federally regulated event contracts, which are essential for farmers and commercial hedgers, particularly in weather and crop-related markets.
The lawsuit targets SF 4760, which was signed into law by Governor Tim Walz on May 18. The CFTC claims this legislation marks the first outright ban on prediction markets in the United States, representing a significant overreach into the Commission's regulatory authority.
CFTC Chairman Michael Selig expressed strong disapproval of the new law, stating that it prioritizes special interests over the needs of American farmers and innovators. He emphasized that the law would make trading event contracts a felony in Minnesota, thereby harming farmers who have depended on these contracts for many years.
The CFTC argues that Minnesota's law contradicts the Commodity Exchange Act (CEA), which grants the agency exclusive jurisdiction over swaps and event contracts traded on federally regulated exchanges.
Additionally, the new law, SF 4760, broadly defines prediction markets as systems for wagering on future events, including sports, elections, and public health crises. It criminalizes the creation and operation of these markets for business purposes, impacting not just the markets themselves but also associated services like payment processors and data verification providers.
The CFTC warns that this legislation could jeopardize traditional derivatives markets, particularly those linked to agricultural and weather-related products, which have been offered by federally regulated exchanges since the 1990s. Under the new law, such contracts could be deemed as wagers, exposing federally regulated exchanges to potential criminal liability.
The provisions of this law are set to take effect on August 1, 2026, further complicating the landscape for prediction markets in Minnesota.