The Commodity Futures Trading Commission (CFTC) sued Minnesota on Tuesday to block a new state law that would make prediction-market activity a felony, escalating a growing fight over whether states can treat federally regulated event contracts as gambling.
The agency is asking a federal court to temporarily block the law before it takes effect on August 1, 2026, arguing that Minnesota is trying to override a decades-old federal derivatives framework while targeting weather-related contracts traded on CFTC-regulated markets.
CFTC says Minnesota law threatens federal oversight
The lawsuit is the latest effort by the federal commodities regulator to defend its authority over prediction markets, which allow users to trade contracts tied to the outcome of future events, including elections, economic data, weather, sports and other measurable developments.
Minnesota’s law, signed by Governor Tim Walz, would criminalize operating or assisting in the operation of prediction markets. The CFTC said the measure could expose lawful market operators, participants and service providers to felony prosecution even when they are involved in markets overseen by the federal agency.
The regulator said the case is especially significant because Minnesota is one of the largest agricultural producers in the United States, and warned that the law could affect weather and crop-related contracts that farmers and other commercial users rely on to manage risk, placing a state-level criminal ban over products the agency says fall within its jurisdiction.
CFTC warns law could turn market users into felons
CFTC Chairman Michael S. Selig warned that Minnesota’s law would abruptly turn federally regulated market activity into criminal conduct.
Selig said the measure would make lawful prediction-market operators and participants “felons overnight,” while noting that Minnesota farmers have long used weather and crop-related hedging tools to reduce exposure to unpredictable conditions. He also accused Walz of putting “special interests first” and “American farmers and innovators last.”
States clash with CFTC as prediction markets grow
The Minnesota case adds to a widening series of disputes between the CFTC and states seeking to apply gambling laws to prediction-market platforms.
The agency has already filed lawsuits against Connecticut, Illinois and New York, and has submitted briefs in cases before the Sixth and Ninth Circuits and the Supreme Judicial Court of Massachusetts.
In Arizona, the CFTC recently secured a court order blocking the state from using gambling laws to criminally prosecute prediction-market operators.
The broader fight has intensified as prediction markets have expanded in popularity and drawn greater scrutiny from state gaming regulators.
For the CFTC, the Minnesota lawsuit is another attempt to draw a clear boundary around its role in regulating event contracts.
For states, the litigation raises a larger question over how far gambling laws can reach as prediction markets increasingly resemble consumer betting products.