Minnesota Could Be Next Stop for CFTC in Prediction Market Legal Fights

• The CFTC is actively pursuing litigation against states suing prediction markets
• There’s speculation Minnesota is on the watch list
• Minnesota is pushing through anti-prediction markets legislation

Federal regulators are dialing up the pressure on states that restrict prediction markets—and Minnesota appears to be the next target in the Commodities Futures Trading Commission (CFTC)’s growing legal crosshairs.

An unidentified source with knowledge of the matter told Semafor that CFTC Chairman Michael Selig is staying abreast of states’ efforts to bar or limit prediction markets and Minnesota is believed to be one he’s eyeballing. The CFTC is the federal regulator responsible for overseeing prediction markets.

To date, the commission has sued Arizona, Connecticut, Illinois, New York and Wisconsin in an effort to assert what it believes is its exclusive regulatory authority over exchanges offering event contracts.

States cannot circumvent the clear directive of Congress,” said Selig in a statement announcing the Wisconsin suit. “Our message to Wisconsin is the same as to New York, Arizona, and others: if you interfere with the operation of federal law in regulating financial markets, we will sue you.”

The CFTC/Minnesota rumor surfaced just two days after a federal judge in Arizona blocked that state’s criminal case against Kalshi, the largest prediction market operator.

Minnesota Not Nice?

For the prediction markets industry, the term “Minnesota nice” doesn’t apply because, in bipartisan fashion, policymakers there are pushing legislation that would substantially limit or outright ban prediction markets.

Home to 5.83 million people and a place where sports wagering isn’t legal, Minnesota is likely attractive territory to prediction markets operators. It also makes for a logical opponent to yes/no exchanges because gaming in the state runs through tribal casino operators.

National and state tribal gaming associations have consistently said prediction markets’ insistence on offering sports event contracts, which critics claim are sports betting with a different label, is an affront to state gaming laws and a threat to tribal sovereignty.

CFTC Believes It Has Regulatory Authority

The various state-level legal rifts against prediction markets largely boil down to the companies offering sports event contracts and doing so in states where they don’t have gaming licenses and in jurisdictions that don’t allow sports wagering.

The industry believes those rules aren’t applicable to it because it answers to a federal regulator — the CFTC — not state gaming boards. Court rulings have mostly favored the states, though there’s some recent momentum for the industry and it’s clear the CFTC wants what it believes is its rightful place at the regulatory table.

“Congress assigned exclusive jurisdiction over the regulation of various derivative products to the CFTC decades ago, including over event contracts traded on designated contract markets, or DCMs,” according to the commission. “Despite this, some states have attempted to assert jurisdiction to regulate prediction markets via state gambling laws.”