Kalshi has initiated legal action against the state of Minnesota following the implementation of a new ban on prediction markets. This lawsuit comes on the heels of a previous challenge by the Commodity Futures Trading Commission (CFTC) regarding earlier prediction market legislation endorsed by Governor Tim Walz.
The federal lawsuit was filed after Minnesota enacted a second ban on prediction markets, which replaces earlier provisions that were already under scrutiny by the CFTC. This legal move follows a separate lawsuit from the CFTC, which addressed the prediction market aspects of SF 4760, a bill signed by Governor Walz earlier this month.
On May 26, Walz signed SF 3432 into law, which not only repealed parts of SF 4760 but also expanded the state’s public safety measures. Kalshi has named key figures in Minnesota's government, including Attorney General Keith Ellison, Governor Tim Walz, and Jon Anglin, the Director of the Alcohol and Gambling Enforcement Division, as defendants in this case. The company is seeking both declaratory and injunctive relief to prevent the enforcement of SF 3432 before its scheduled implementation on August 1.
In its arguments, Kalshi contends that the Commodity Exchange Act bestows the CFTC with “exclusive jurisdiction” over event contracts. The company claims that Minnesota’s legislation unlawfully infringes on this jurisdiction by prohibiting specific event contracts, including those traded on federally recognized contract markets.
Kalshi further asserts that the new law would classify it as a “felon in Minnesota” for offering event contracts that are legal under federal law on its federally authorized designated contract market (DCM). The complaint emphasizes that Minnesota is trying to impose restrictions on contract categories that federal regulators have already approved.
According to the lawsuit, SF 3432 not only prohibits trading in certain event contracts but also bans any market from operating if it offers these prohibited categories. Kalshi has labeled this legislation as a “targeted attack on federal DCMs.”
The lawsuit also highlights that Minnesota has previously supported multistate amicus briefs advocating for state authority over prediction markets and has made submissions to the CFTC arguing that the agency lacks exclusive jurisdiction over sports event contracts. However, Kalshi points out that several courts, including the Third Circuit and a federal district court in Arizona, have sided with federal preemption arguments regarding prediction markets and federally regulated event contracts.
Additionally, Kalshi has included a First Amendment claim, asserting that Minnesota cannot ban advertising for products and services that are legal under federal law. The complaint notes, “No court has ever upheld a state’s outright prohibition on advertising conduct that complies with federal law.”
This lawsuit follows the CFTC's own legal actions against Minnesota, which were filed last week. The federal agency has previously stated that Minnesota's SF 4760 represents a significant violation of the Commission’s exclusive regulatory authority, describing it as “the first outright ban on prediction markets in the United States.” The CFTC has expressed concerns that Minnesota's law could criminalize traditional derivatives markets, which include established hedging and risk management products related to weather and agriculture.
The complaint mentions that federally regulated exchanges like the Chicago Board of Trade and the Chicago Mercantile Exchange have been offering weather and crop-related derivatives since the early 1990s.