Prediction market platform Kalshi has filed a federal lawsuit against Minnesota to block the state's new prediction market criminalization law. According to reports from Courthouse News, the company argues that Governor Tim Walz's signing of SF 3432 on May 26 represents a targeted attack on federally designated contract markets. The suit names Attorney General Keith Ellison, Governor Tim Walz, and Alcohol and Gambling Enforcement Director Jon Anglin as defendants, with the complaint filed in federal court. The lawsuit comes about a week after the CFTC separately sued Minnesota over prediction market provisions in SF 4760, creating a dual federal challenge to the state's regulatory approach. As reported by Crypto.news, the CFTC filed its motion on May 19, the day after the law was signed, arguing that the legislation violated the U.S. Constitution by criminalizing at the state level the operation of prediction markets governed by federal regulators.
The new Minnesota law starting August 1 makes it a crime to advertise and operate prediction market platforms across the state, marking a significant escalation from previous regulatory approaches. Kalshi's legal argument centers on the Commodity Exchange Act, which the company claims gives the CFTC exclusive jurisdiction over event contracts. The platform claims the law 'impermissibly usurps' that authority by banning federally designated contract market activity. In its filing, Kalshi argued the law violates the Supremacy Clause of the constitution, which says the federal Commodity Exchange Act grants the CFTC 'exclusive jurisdiction' over derivatives and swaps traded on designated contract markets (DCMs). The company specifically challenges a provision that criminalizes the marketing or advertising of prediction markets, arguing it violates the First Amendment by prohibiting advertising for federally lawful products and services.
The legal challenge comes as sports contracts now drive approximately 85% of Kalshi's business, positioning the platform at the center of every state gambling case. According to Courthouse News, the company was last valued at $22 billion in a recent funding round, making the legal exposure material. The lawsuit seeks declaratory and injunctive relief to block enforcement before the August 1 effective date. Kalshi argues that the new law would effectively 'deem the company a felon in Minnesota for offering certain event contracts on its federally authorized designated contract market (DCM) that are entirely lawful under federal law.' The company has recently won similar preliminary injunctions against enforcement attempts in New Jersey and Arizona, demonstrating its success in federal court challenges.
U.S. President Donald Trump said it was critically important that the CFTC maintain sole authority over prediction markets, echoing CFTC Chair Michael Seligl. This presidential support adds significant weight to the federal challenge against Minnesota's law. Prediction markets are facing challenges outside the U.S. and in the past week have been banned in countries including Indonesia, Spain and India, according to recent reports. The U.S. government is conducting a House of Representatives committee investigation into prediction markets, with the probe confirmed last week, adding to the mounting global scrutiny facing these platforms.
The Kalshi suit follows the CFTC's own lawsuit against Minnesota filed a week earlier, as reported by Crypto.news. The CFTC challenge framed the law as the most aggressive state move to shut down federally regulated markets. Recent state actions in Wisconsin, Nevada, and Washington have all targeted the same platforms, creating a split between court decisions that could push the question to the Supreme Court. The Minnesota lawsuit comes as prediction market litigation continues expanding across multiple states and federal courts, with Kalshi and state regulators in Arizona jointly moving to pause appellate briefing pending upcoming Ninth Circuit rulings. Rhode Island has also agreed not to pursue additional enforcement action against Kalshi while federal litigation proceeds. The White House's Office of Information and Regulatory Affairs has begun reviewing a proposed CFTC rule on prediction markets, signaling the CFTC is advancing toward a broader federal framework for event contracts.
