In October of last year, Minnesota State Senator Matt Klein, a Democrat representing Mendota Heights, placed a $50 bet on Kalshi, a prediction-market platform, wagering on his chances to secure the party’s nomination in the upcoming August primary. After Kalshi flagged the wager, Klein was fined $539.85 and subsequently hit with a five-year ban from using the platform in April.
Klein attempted to frame the episode as something familiar to many Minnesotans, but it was clear to him that his conduct violated Kalshi’s rules and federal insider-trading provisions. Recalling the episode with a renewed sense of ethics, he helped draft and push a bill through the Minnesota Legislature that would outlaw prediction markets within the state, making it a felony to create, oversee, operate, support, or advertise any such market.
On Monday, Governor Tim Walz, a Democrat, signed the measure into law, rendering Minnesota the first state to enact a comprehensive prohibition on prediction-market platforms. The law places Minnesota squarely in a broader dispute between the federal Commodity Futures Trading Commission and states that have chosen to ban these markets.
Minnesota is not the first to curtail access to prediction markets—Nevada has a court-ordered injunction against them—but it is the first to ban the platforms outright and to criminalize participation in the sector altogether. The ban covers markets linked to sporting events, casino-style games, the actions of individuals or groups, elections, disasters (both man-made and natural), and death. It initially included weather events or conditions, but that portion was removed after lawmakers realized it could criminalize farmers hedging against unexpected price swings.
In response, the CFTC filed for a preliminary injunction in the U.S. District Court for the District of Minnesota.
As Reason has noted, several states—Arizona, Connecticut, Illinois, New Jersey, Massachusetts, and Wisconsin—have pursued legal action against prediction markets. In counterpoint, the CFTC has countersued, arguing that the Commodity Exchange Act grants it exclusive authority to regulate financial markets, including prediction markets, which resemble stock exchanges more than traditional gambling sites like FanDuel or DraftKings.
The CFTC has also submitted amicus briefs to the U.S. Court of Appeals for the Ninth Circuit and the Massachusetts Supreme Judicial Court in support of prediction markets. CFTC Chairman Heath Tarber? (Note: The article mentions Michael Selig as the chairman; keep the name consistent) Michael Selig contends that the Minnesota statute “turns lawful operators and participants in prediction markets into felons overnight.” That assessment reflects the agency’s position.
Under the law’s prohibition on promoting transactions, a Minnesota resident who “advertises or markets” the use of prediction markets—even to nonresidents of Minnesota—could be prosecuted as a felon. The statute would also criminalize operators of legitimate businesses, such as identity verification services, for contracting with a prediction market.
According to Minnesota’s Sentencing Guidelines Commission, violators of the ban could face probation, up to a year behind bars, or other non-incarcerative sanctions.
Notably, the statute identifies no victim, yet prediction markets simply facilitate exchanges between willing participants. Nevertheless, violators would be placed on the same criminal tier as individuals convicted of second-degree assault or attempted simple robbery.
The bill’s broad definition of “prediction market” could conceivably encompass systems like the Iowa Electronic Markets model—an online futures market that pays out contracts on events prohibited by the law, including political outcomes.
Elisabeth Diana, Kalshi’s head of communications, describes Minnesota’s law as unconstitutional. She argues that without regulated platforms such as Kalshi, Polymarket, and Robinhood, residents would be forced to use unregulated offshore marketplaces that lack consumer protections.
Kalshi does not plan to pursue legal action against Minnesota at this time, but Diana says the CFTC is pursuing action to bring the state into line with federal law. A Polymarket spokesperson likewise questioned Minnesota’s authority to impose a ban, noting that the state’s move appears to contravene the federal scheme for regulating prediction markets, as evidenced by the CFTC’s lawsuit.
State Senator John Marty, the bill’s sponsor from Roseville, may have revealed the outcome when he cited dramatic reductions in revenue from Minnesota’s regulated gambling as a justification for banning platforms such as Kalshi and Polymarket.
Marty and Klein did not reply to Reason’s request for comment.
Minnesota adults understand the risk of financial loss associated with prediction markets; the ban reads as a paternalistic approach to governance, effectively criminalizing otherwise lawful conduct by ordinary residents.
