A federal judge has ruled that Minnesota's law making prediction markets a crime probably runs afoul of the federal Commodity Exchange Act. The decision, handed down in the U.S. District Court for Minnesota, marks a significant legal setback for state efforts to ban betting on event outcomes like elections and sports.
The Ruling
The judge found that the state statute, which criminalizes operating or participating in prediction markets, is likely preempted by the Commodity Exchange Act. That federal law gives the Commodity Futures Trading Commission authority over derivatives and futures contracts, including those tied to political or sporting events. The ruling suggests Minnesota cannot simply outlaw what the CFTC oversees.
While the judge did not issue a final injunction, the opinion strongly signals that the state's law is on shaky constitutional ground. The case is still ongoing, but the preliminary ruling gives a clear picture of where the court stands.
What the Law Says
Minnesota's statute, passed in 2023, made it a crime to operate a prediction market or place bets on the outcome of elections, awards shows, or sports events. Supporters argued it protected consumers from gambling-like risks. But the judge noted that the Commodity Exchange Act already regulates such contracts, and states cannot simply override federal authority.
The ruling does not legalize prediction markets in Minnesota overnight. It only blocks enforcement of the state law while the legal challenge proceeds. The CFTC has its own rules on event contracts, and those remain in effect.
Prediction markets have grown in popularity, with platforms like PredictIt and Kalshi allowing users to bet on everything from election winners to interest rate moves. Supporters say they provide valuable data and hedging tools. Critics call them unregulated gambling. The Minnesota case is one of the first to test whether states can ban them outright.
The judge's reasoning could influence other states considering similar bans. If the Commodity Exchange Act preempts state law on prediction markets, then state-level prohibitions may be unenforceable nationwide. That would leave the CFTC as the primary regulator.
The next step in the case is a hearing on a permanent injunction. Until then, the legal status of prediction markets in Minnesota remains uncertain. The state could appeal, or the legislature could rewrite the law to try to avoid preemption. For now, the judge's opinion is a clear warning: federal law likely wins this fight.
