On Tuesday, Minnesota lawmakers passed a bill that seeks to outlaw prediction market operations within the state, potentially marking the first explicit state-level ban on this rapidly expanding industry. This legislative move could lead to a legal confrontation regarding federal authority.
The provision was included in a wider public safety bill just days before the Minnesota legislature wrapped up its 2026 session, receiving approval from the House with a vote of 100-32 and the Senate at 57-9. The bill is now set to be sent to Governor Tim Walz, who is anticipated to either sign it or let it become law without his endorsement.
If the law is enacted, it will come into effect on August 1, prohibiting trades in prediction markets related to sports, politics, pop culture, and various real-world events.
Proponents of the legislation argue that prediction markets constitute a form of gambling that should be regulated at the state level. Conversely, opponents maintain that exchanges regulated at the federal level fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC).
Representative Emma Greenman from the Democratic-Farmer-Labor Party emphasized that the bill aims to uphold Minnesota's authority over gambling regulations. “This bill reinforces the right of Minnesotans to decide how we regulate gambling to ensure public safety and protect our children,” Greenman stated.
Despite being one of 11 U.S. states without legalized sports betting, Minnesota does permit tribal casinos, horse racing, a state lottery, and charitable gaming.
The impending legislation is likely to provoke lawsuits from prediction market operators or the federal government before it takes effect.
The CFTC has consistently argued that prediction markets are subject to federal oversight, claiming that state-level prohibitions infringe upon federal sovereignty.
Platforms such as Kalshi, Robinhood, and Crypto.com are already embroiled in legal disputes with various states concerning the legality of event-based contracts.
Some Republican lawmakers have criticized both the legislative process and the bill's content, suggesting that the ban would push activities underground and expose the state to expensive legal battles. “Prohibition doesn’t work. If it did, we would live in a perfect world without bad things,” Representative Nolan West commented during the debate. “Prohibiting activities merely drives them into secrecy. That’s the likely outcome here.”
West also raised concerns about Minnesota's legal authority to impose restrictions on federally regulated exchanges, stating, “This is a poor decision, primarily because we lack the authority to enact such measures. States attempting this are losing in court, which could lead to significant legal expenses for Minnesota without any real benefit.”
Prediction markets enable users to trade on the outcomes of elections, sports events, and other significant developments. Notable platforms include Kalshi and Polymarket, which critics argue resemble online sportsbooks.
Supporters of the Minnesota legislation warn that the rapid expansion of the sector could lead to increased gambling addiction and financial distress. “I worry that the swift rise in access to prediction markets will result in a surge in gambling addiction and financial losses, negatively impacting Minnesota families,” Senator John Marty expressed earlier this month. “It will severely affect the revenues of Minnesota’s regulated gambling sectors, including charitable gambling, casinos, and racetracks.”
The industry has also come under fire for concerns about insider trading and market concentration. An analysis by the Wall Street Journal revealed that 67% of profits on Polymarket were accrued by just 0.1% of accounts, while unprofitable users on Kalshi outnumbered profitable ones by nearly three to one.
Recently, a U.S. Army special forces soldier was charged with using classified information to place bets related to a mission involving Venezuelan President Nicolás Maduro. Both Kalshi and Polymarket have announced they are investigating allegations of insider trading.