Minnesota Bans Prediction Markets as CFTC Sues Ahead of Aug. 1

Minnesota’s Governor Tim Walz signed the first outright ban on prediction markets in the US, starting Aug. 1. One day later, the CFTC sued Minnesota and asked the court for a preliminary injunction to block the ban before it takes effect. CFTC Chair Michael Selig said the law could turn “lawful” prediction market operators and participants into felons overnight. The regulator argues the ban conflicts with federal derivatives authority under the Commodity Exchange Act, because many event contracts (including weather- and outcome-based markets) may be regulated as derivatives. The ban targets platforms that let users trade future outcomes such as sports, elections and weather. Minnesota Attorney General Keith Ellison is reviewing the case. The lawsuit also raises concerns that liability could extend beyond operators to areas like advertising and data/payment-related participants tied to prediction platforms. For traders, the key issue is legal uncertainty at the state level. Even if the dispute is not coin-specific, it can pressure onshore demand for crypto-linked “event contract” products and add a regulatory risk premium—especially for offerings designed like derivatives—until courts decide whether states can treat prediction markets as illegal wagering or whether federal law limits enforcement.