The Trump administration sued Minnesota on Tuesday to block a state law banning prediction markets, one day after Governor Tim Walz signed the bill into law.
The legislation, which is the first of its kind, restricts wagering on prediction markets on events including sports, assassinations, weather and mention markets. It also makes it a felony to create, operate or advertise the platforms. The law is scheduled to go into effect on Aug. 1.
On Tuesday, the Commodity Futures Trading Commission, a federal agency, filed a lawsuit in Minnesota district court arguing that the state law is a "flagrant and unprecedented incursion" into its regulatory authority. The CFTC has asserted in court battles, around the country, that it has "exclusive jurisdiction" over prediction markets.
The CFTC asked the court to issue an injunction to block the state from enforcing the law.
"This Minnesota law turns lawful operators and participants in prediction markets into felons overnight," CFTC chairman Michael Selig said in a statement.
Minnesota attorney general Keith Ellison said his office is reviewing the lawsuit and will "respond in court."
"I'm very concerned about the harms of prediction markets on Minnesotans," Ellison said in a statement. "Prediction markets are designed to be addictive and prey especially on young people and low-income folks. They help the ultra-rich get richer and the rest of us get poorer."
The regulation of prediction markets has been a contentious legal issue, pitting states and tribal nations against companies like Kalshi and Polymarket as well as the federal government.
Minnesota joins a list of Democrat-led states, including Arizona, Connecticut, Illinois and New York, that have faced legal action from the CFTC.
Minnesota allows gambling at horse races and tribal casinos. Sports betting has not been legalized in the state.
Prediction markets can operate in all 50 states.