Polymarket follows Kalshi, Trump in suit against Minnesota’s prediction market ban

MINNEAPOLIS (CN) — The domestic division of the world’s largest prediction market sued Minnesota over its increasingly polarizing ban on prediction markets in the state.

Polymarket filed the suit in Minnesota federal court late Wednesday through its American corporate arm Polymarket US, which operates under the exclusive jurisdiction of the federal government while its global counterpart completely bans U.S. residents from its main exchange.

Minnesota’s bill, SF 3432, is the first such law outright banning prediction markets like Kalshi and Polymarket from operating within a state.

Differing its services from traditional “wagers” or “bets,” Polymarket frames its products as “event contracts,” which legally qualify as swaps under the federal Commodity Exchange Act. While traditional betting has fixed odds set by a bookmaker, contract prices on Polymarket change dynamically in real time based on supply and demand, and are often used for economic risk management, according to the platform.

Minnesota’s ban, which takes effect in August, makes it a felony to create, operate, manage or control a prediction market platform, and forces these platforms to leave the state or face charges — authority Polymarket, and the government, say falls under the Commodity Futures Trading Commission, not Minnesota.

“The threat to Polymarket US is immediate,” the prediction market says in its 42-page complaint. “When it goes into effect in less than two months, Polymarket US will face a credible threat of imminent criminal prosecution, forcing it either to cease lawful and constitutionally protected conduct or risk felony criminal liability.”

In its suit against Minnesota Attorney General Keith Ellison, Minnesota Governor Tim Walz and Gambling Enforcement Director Jon Anglin, Polymarket notes Congress has long granted the CFTC “exclusive jurisdiction” over financial “event contracts” bought and sold on a fully licensed, federally approved and regulated digital exchange — making Minnesota’s law a clear state overreach of federal authority.

“Even a meritless state enforcement action would immediately disrupt Polymarket US’s federally authorized operations, fragment a national market, reduce liquidity, jeopardize critical banking and commercial relationships, undermine user trust and harm Minnesota residents,” Polymarket says in the complaint.

Aside from preemption claims, Polymarket argues Minnesota’s ban is a direct attack on the market’s First Amendment right to “broadcast” advertising about its services, including real-time prices of their own event contracts to Minnesotans that reflect valuable public forecasting data about key events.

In the complaint, Polymarket outlines several instances of its market accurately predicting future events, including Zohran Mamdani’s mayoral victory, the outcome of sports games and future shifts in taxation, spending and policy before federal elections.

“Polymarket US’s event-contract markets rely on accurate, real-time pricing and risk information,” the prediction market says in the complaint. “When a state restricts access to truthful information, no one benefits: not those the state regulates, and not the citizens of that state.”

Defined in Minnesota’s statute, prediction markets are markets that allow consumers to place a wager on the future outcome of a specified event such as sports, elections, government action and the weather. In essence, these markets allow consumers to bet on almost anything.

Before SF 3432 was enacted, Minnesota defined “bet” to exclude “contracts for purchase or sale at a future date of securities or other commodities.” The law shrunk that definition to cover only physical commodities like corn or oil, leaving non-physical, event-based contracts like election results or economic indicators subject to the state ban.

“A hardware store in Saint Paul might purchase an event contract predicting that the city will have a particularly dry year,” Polymarket says in the complaint. “If the weather turns out as the owner predicted, the payout from the contract could offset the owner’s loss of income from replacement gutters.”

The Trump administration’s May lawsuit against Minnesota contends banning prediction markets harms vital economic sectors like agriculture. According to the government, farmers heavily rely on federally supervised weather and crop event contracts as hedging tools to mitigate seasonal business risks.

Minnesota is not the first state to take a swing at regulating prediction markets, but it is the first to enact a ban against all prediction markets and contracts, unlike other states that have largely attempted to enforce existing gambling laws against sports-related contracts. Nevada and Massachusetts have won court-ordered injunctions against Kalshi, but the ban in Massachusetts is on hold pending appeal.

The federal government has sued five other states that attempted to use existing state laws to regulate or halt prediction markets, and platforms like Kalshi and Polymarket have also launched independent suits against such action.

Kalshi — the largest federally regulated prediction market in the country — filed a lawsuit against Minnesota last week over its ban. Now consolidated with the federal government’s parallel lawsuit, the joint case is heading toward a preliminary injunction hearing on July 1.

It is likely Polymarket’s suit will be combined as well.

While the Minnesota Attorney General’s Office did not immediately respond to a request for comment Thursday, Ellison told Courthouse News in an email in May his office is “very concerned” about the harms of prediction markets on Minnesotans — adding they are designed to be addictive and prey on young and low-income people.

Polymarket and Kalshi did not respond to initial requests for comment.