On Tuesday, Minnesota became the sixth state to face legal action by the CFTC on the topic of prediction markets. Following Governor Tim Walz’s signature of SF 4760, Minnesota is on pace to make overnight felons out of prediction market exchanges and their collaborators starting August 1st of this year.
In a press release published Tuesday, the CFTC stated that it is seeking a preliminary injunction to stop the new law from going into effect. “Minnesota is one of the largest agricultural producers in the United States,” said the CFTC – reminding readers of the important role commodity trading plays in the state’s economy.
“The Minnesota government has nonetheless enacted a state law criminalizing trading in many CFTC-regulated markets with a broader reach than any other state the CFTC has sued to date, including criminalizing weather-related event contracts.”
Minnesota’s new law banning prediction markets takes an extremely broad-stroke approach to punishing exchanges as well as individuals and groups who partner with them. On August 1st, anyone who operates, advertises for, provides market making services for, or collaborates with a prediction market exchange will be subject to felony criminal charges within the state of Minnesota.
CFTC chairman Michael S. Selig expressed the sweeping legislation in Tuesday’s statement. “This Minnesota law turns lawful operators and participants in prediction markets into felons overnight,” said the chairman Tuesday.
“Minnesota farmers have relied on critical hedging products on weather and crop-related events for decades to mitigate their risks. Governor Walz chose to put special interests first and American farmers and innovators last.”
Now that a state has officially passed a law that categorizes prediction markets and their collaborators as felons, there’s no “middle ground” remaining on the continuing debate surrounding exchanges. Conciliatory statements referring to how “the truth lies somewhere in the middle” no longer apply. Those who operate or work with prediction market apps are either “innovators” paving the way for a novel, federally regulated industry or “serious criminals” subject to hefty fines and imprisonment…at least in Minnesota.
The CFTC’s legal action on Tuesday marks the sixth state that has been sued by the Commodity Futures Trading Commission over prediction markets: New York, Connecticut, Arizona, Illinois, Wisconsin, and now Minnesota. The CFTC has also submitted an amicus brief in Kalshi’s suit against the executive director of the Ohio Casino Control Commission.
Minnesota SF 4760 will take effect, in its entirety, on August 1st of this year. In order to delay, postpone, or strike the portion of the new law that pertains to prediction markets, proponents of exchanges will need to rely upon a favorable District Court ruling from Minneapolis within the next ten weeks.
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