The attorneys general of California and Minnesota are contesting the Commodity Futures Trading Commission’s (CFTC) method of regulating prediction markets. They assert that the federal agency lacks the necessary tools to address gambling-related issues, including addiction and its societal repercussions.
Keith Ellison, the Attorney General of Minnesota, expressed to Bloomberg that state authorities are better equipped to handle gambling risks since they already operate regulatory frameworks aimed at mitigating its broader social effects.
“We have a comprehensive system in place, whereas the CFTC does not,” Ellison remarked, highlighting Minnesota’s established gambling regulations.
This discussion arises amid a growing legal and regulatory struggle surrounding prediction markets, which have surged in popularity over the last year and a half. These platforms enable users to place bets on various outcomes, from sporting events like the World Cup to political contests, including the 2028 Democratic presidential nomination.
The CFTC claims it holds “exclusive jurisdiction” over these prediction market platforms, leading to a jurisdictional conflict with states that believe gambling oversight should remain under their control.
California Attorney General Rob Bonta characterized this disagreement as a “classic states rights” matter, criticizing the federal regulator’s classification of sports-related prediction markets as derivatives. He argued that the agency is attempting to force a mismatched regulatory framework onto these markets.
Bonta also indicated that this legal battle might eventually escalate to the U.S. Supreme Court if federal appellate courts produce conflicting decisions. “We might see a split in the circuits, and such splits can lead to a case reaching the U.S. Supreme Court,” he noted.
The situation has become more contentious following the CFTC's lawsuit against Minnesota last month, which came after the state enacted a pioneering law prohibiting prediction markets like Kalshi and Polymarket.
CFTC Chairman Michael Selig remarked that Minnesota’s legislation “transforms lawful operators and participants in prediction markets into felons overnight.”
Meanwhile, the agency is pushing forward with new regulations that would permit most sports-related prediction markets while imposing restrictions on bets related to war and terrorism, despite ongoing legal challenges.