On May 19, the U.S. Commodity Futures Trading Commission (CFTC) filed a lawsuit against the state of Minnesota to prevent a new state law banning the operation and advertisement of prediction markets from going into effect in early August of this year. The law garnered strong bipartisan support in the Minnesota legislature amid rising concerns over the impact of prediction markets on children, public trust, election integrity, and national security. The outcome of this case could establish significant legal precedent as states across the country follow Minnesota’s lead in enacting measures against the prediction market industry.

Prediction market Kalshi followed on the heels of the CFTC by filing a suit of their own against the state of Minnesota. Both claim that the Minnesota law is a “clear violation of the Supremacy Clause with respect to the regulation of event contracts.” Additionally, the plaintiffs contend that the state of Minnesota is encroaching on the “exclusive jurisdiction” of the CFTC per the Commodities Exchange Act of 1936, which established the CFTC.

Kalshi, Polymarket, and other such prediction markets rose to prominence in the wake of the Supreme Court’s 2018 decision Murphy v. National Collegiate Athletic Association, which returned the issue of sports betting to the states. Justice Samuel Alito, writing the majority opinion, argued that the issue of sports betting fell under the purview of the states according to the 10th Amendment of the Bill of Rights. Kalshi was founded the same year as the Supreme Court decision, followed two years later by Polymarket.

Although these prediction markets were initially launched as avenues for online sports gambling, they quickly devolved into forums for financial speculation over future events such as what the next day’s temperature would be, how the finale of a TV show would end, or when the next natural disaster would occur. Recent headlines have borne testimony to the dangerous levels these predictions can reach. One U.S. Special operative was charged for using his knowledge of classified materials to bet on the U.S.’s January 2026 capture of Venezuelan autocrat Nicholás Maduro. Meanwhile, campaign staffers across the nation have admitted to profiteering from using unreleased polling data to bet on elections. “The most I’ve made is thousands,” one staffer told NPR.

As prediction markets continue to evolve beyond mere sports betting, regulation has become increasingly difficult due to the disembodied digital nature of the industry. At a casino, age and identity verification, data security, and responsible gaming are easier to ensure than in a pocket casino, where anyone can place bets on anything from anywhere.

Furthermore, prediction markets like Kalshi use the language of financial investment, such as “trading” and “event contracts,” to obscure the fact that what they facilitate is speculative gambling. Prediction markets are especially dangerous because they can notify users of trades and target them with algorithms trained on personal data to suggest “event contracts” that would appeal most to them.

Jonathan Cohen, the Sports Betting Policy Lead at the American Institute for Boys and Men, sat down with Gambling Insider on the eve of the bill’s passing in early May.

“With sports gambling, everyone knows you’re gambling, right? It’s called sports gambling, and you’re gambling on sports. … But someone who fits the Kalshi dream model: ‘Oh, I’m interested in Taylor Swift. I know a lot about Taylor Swift. I’m gonna try to leverage my knowledge about Taylor Swift to make money.’ They might not even realize that what they’re doing is hitting the same parts of the brain as gambling, especially if they’re doing it on a brokerage app, and it looks like investing. All of a sudden, we’ve not tricked them, but someone has started doing a gambling-like thing without realizing. … At least with sports gambling, everyone’s aware: this is gambling. Whether that’s good or not, that doesn’t matter. But that’s a somewhat different danger posed by prediction markets.”

Minnesota state Rep. Emma Greenman, who first introduced the ban as part of a bill in the Minnesota House, outlined the need for this law: “Banning these shady financial markets that have led to an explosion of gambling that’s unregulated is just one of the ways I think we have been trying to protect Minnesota's authority, to protect public safety, to protect public health.”

Chairman Michael S. Selig, on the other hand, had this to say in the brief announcing the CFTC’s lawsuit back in mid-May: “This Minnesota law turns lawful operators and participants in prediction markets into felons overnight. … Minnesota farmers have relied on critical hedging products on weather and crop-related events for decades to mitigate their risks. Governor Walz chose to put special interests first and American farmers and innovators last.”

Despite Chairman Selig’s claim that it is the Minnesota governor who is putting special interests first, Minnesota lawmakers continue to argue that the bill was conceived out of concern for the health of the state’s youth and the integrity of their public trust. Although it remains to be seen whether the court will rule in favor of Minnesota’s 10th Amendment rights or the CFTC’s jurisdiction under the CEA, one thing is certain: the result of this case will shape legislation on prediction markets for the entire nation in the years and decades to come.

Jonathan Dunn serves as an intern at Family Research Council.