Minnesota Gov. Tim Walz signed the nation's first law banning prediction market sites from operating in the state, with the measure set to take effect in August 2026. The law makes it a crime to host or advertise a prediction market in Minnesota, with violators facing possible felony charges.

The statute defines a prediction market as a system that allows consumers to place a wager on a future outcome, such as sports, elections, live entertainment, someone's word choice, or world affairs. Its prohibition extends to services supporting prediction markets, including virtual private networks that could allow consumers to disguise their location and circumvent the ban. The law includes exemptions for event contracts used as insurance policies for harm or loss, and for the purchase of securities and other commodities.

"We as a state should decide how best and what regulations we think should attach to gambling, to protect public safety, to protect our kids," said Minnesota state Rep. Emma Greenman. Online gambling and sports betting are illegal in Minnesota, where tribal-owned casinos operate.

The Commodity Futures Trading Commission filed a federal lawsuit seeking to block the Minnesota law before it takes effect, arguing that the prediction market industry should be regulated exclusively by federal officials. The agency asserts it has exclusive jurisdiction over prediction markets, which the federal government regulates as event contracts rather than as gambling.

"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," said CFTC Chairman Michael Selig. Agricultural industry participants have historically used weather futures trading as a hedge against storms and other inclement weather affecting harvests. An updated version of the bill, expected to pass on Saturday, will allow trading on weather events in Minnesota.

"It will be hard to put that genie back in the bottle," said Melinda Roth, a professor at Washington and Lee University School of Law. More than 20 lawsuits have been filed challenging state or federal oversight of the prediction market industry. The CFTC has filed federal lawsuits against five states, including Arizona, Wisconsin, and New York, seeking to override state regulators' efforts to regulate prediction market betting sites.

Prediction markets have enabled people in U.S. states where sports betting is prohibited to access sports betting. On Kalshi, more than 85% of trading activity is related to sporting events, and some trades are parlays, which are high-risk wagers requiring multiple outcomes to occur. A Nevada judge ruled that Kalshi's sports betting offerings were indistinguishable from state-regulated sports gambling, and the company paused its sports betting operations in Nevada following the ruling.

Seven other states have introduced bills to crack down on the prediction market industry, according to the National Conference of State Legislators. Hawaii and North Carolina have pending bills seeking to ban the industry statewide.