Minnesota Gov. Tim Walz has signed the nation’s first law banning online prediction market sites from operating in the state, targeting popular services such as Kalshi and Polymarket. The law, which takes effect in August, makes it a crime to host or advertise a prediction market and extends the prohibition to services that could help users evade the ban, including virtual private networks.
The statute defines a prediction market as a system that lets consumers place wagers on future outcomes — examples cited by lawmakers include sports, elections, weather, live entertainment, a public figure’s word choice and international events. Companies that continue to offer access to Minnesota residents could face felony charges, effectively forcing the biggest platforms to stop serving people in the state or leave entirely.
Rep. Emma Greenman, the Democrat who introduced the measure, said Minnesota needs to decide how to regulate gambling to protect public safety and children. The law does include narrow carve-outs for event contracts used as insurance against ‘‘harm or loss sustained’’ and for the purchase of securities and other commodities.
Minnesota’s move comes amid a broader clash over who should regulate prediction markets: states or the federal government. The Commodity Futures Trading Commission (CFTC) has argued it has exclusive jurisdiction over these platforms and has filed federal lawsuits against five states, including Arizona, Wisconsin and New York, seeking to block state attempts to rein them in. Dozens of other suits have been filed around the country; one Nevada case led Kalshi to pause sports betting there after a judge concluded the product was indistinguishable from state-regulated sports gambling.
Experts and industry observers expect legal challenges to Minnesota’s ban. Melinda Roth, a law professor who studies the sector, said states are trying a range of tactics to go after prediction market companies but noted those platforms have become mainstream and ‘‘too big to fail’’ in some respects, making it difficult to reverse their expansion.
Industry spokespeople criticized the law. A Kalshi spokesperson called a state-level ban ‘‘a blatant violation’’ of federal law and likened it to trying to ban a major stock exchange, arguing that removing regulated competition will drive users offshore. A Polymarket representative said the ban conflicts with the federal regulatory framework the companies contend should govern event contracts.
The law arrives against a backdrop in which prediction markets have rapidly grown despite legal uncertainty. Trading on these apps is heavily weighted toward sports: on Kalshi more than 85% of trading volume has been tied to sporting events, and many users place complex, high-risk wagers. Across platforms, bettors are putting billions of dollars into trades each week. That scale has heightened concerns about insider trading, manipulation incentives that could affect real-world events, and other market abuses.
Minnesota already allows tribal-owned casinos, but online gambling and sports betting remain illegal in the state. Prediction market operators have relied on a federal classification of their products as ‘‘event contracts’’ rather than gambling overseen by state gaming authorities to offer sports-related markets in jurisdictions that prohibit sports betting.
Lawmakers in several other states have introduced bills aimed at restricting or banning prediction markets; Hawaii and North Carolina have proposed statewide bans. The dispute over regulation — state bans versus CFTC oversight — is likely to play out in court in the months ahead as companies, federal regulators and state officials press competing legal theories about jurisdiction and the permissible scope of these novel markets.