Polymarket Joins CFTC and Kalshi in Federal Challenge to Minnesota’s Prediction Market Ban

Polymarket has sued Minnesota in federal court. The prediction market operator is now the third plaintiff to challenge the state’s ban after the Commodity Futures Trading Commission and Kalshi filed similar lawsuits. The exchange argues that the law is preempted by federal law and violates the First Amendment.

This follows the CFTC suit in May over an earlier proposal and Kalshi’s separate challenge a week after lawmakers passed the final measure. The stakes extend beyond one state. Operators face potential criminal liability when the law takes effect on Aug. 1.

Polymarket’s Core Legal Arguments

Polymarket argues that Congress granted the CFTC exclusive authority to regulate event contracts traded on federally regulated designated contract markets under the Commodity Exchange Act. The exchange wrote in its complaint that SF 3432 is the first law of its kind in the Nation, criminalizing federally regulated event-contract markets.

The filing mirrors much of what Kalshi and the CFTC have already advanced. It cites recent court victories secured by Kalshi. Those include the Third Circuit’s decision against New Jersey officials and a federal court ruling in Arizona that concluded that federal law likely preempts the state’s attempts to enforce its gambling laws against Kalshi’s sports event contracts.

From the supplier side this kind of regulatory overlap creates exactly the uncertainty that stalls platform integrations and market entry decisions. After eighteen years across iGaming and sportsbook operations the pattern is familiar. Operators price in the overhead but only after the courts draw a clear line.

Stronger First Amendment Emphasis

Polymarket places greater emphasis on First Amendment issues than either Kalshi or the CFTC. The company argues that SF 3432 unlawfully criminalizes prediction market advertising and marketing. It also challenges provisions that prohibit the provision of data, information, and verification services to prediction market operators.

According to the complaint those restrictions interfere with Polymarket’s ability to communicate with customers and obtain information necessary to operate federally regulated markets. The exchange devotes significant attention to the economic and informational value of prediction markets. It argues that event contracts help businesses manage risk while generating real-time probability forecasts for future events.

This angle matters. Prediction markets do more than let users bet on outcomes. They surface probabilities that inform hedging strategies across sportsbooks and beyond.

What Minnesota’s SF 3432 Actually Prohibits

Minnesota enacted SF 3432 in May as part of a broader public safety package. The law takes effect Aug. 1 and creates new criminal prohibitions targeting prediction markets. It prohibits operating, facilitating, servicing, or advertising prediction markets involving a broad range of subjects including sporting events, elections, wars, legal proceedings, events involving public figures, and popular culture outcomes.

The measure extends to entities that provide services supporting prediction markets. Examples include payment processing, geolocation services, identity verification, advertising, and certain data services. Violations can result in felony penalties.

Through SF 4760 and later SF 3432 Minnesota became the first state to enact legislation prohibiting prediction markets rather than relying solely on existing gambling laws. The legal challenges now place Minnesota at the center of a growing national dispute over whether states can restrict event contracts that are listed on CFTC-regulated exchanges.

Risks and Counterarguments in the Challenge

Any lawsuit carries risk. Minnesota could argue that its public safety framing distinguishes this from pure gambling regulation and that the law targets only intrastate activity outside CFTC jurisdiction. Courts might also view the First Amendment claims as secondary to the core preemption fight if they determine the state law does not directly regulate the federally approved contracts themselves.

The counterargument from the state would likely center on consumer protection and the prevention of unregulated wagering on sensitive events. If the federal courts ultimately side with Minnesota the precedent could embolden other states to test similar criminal bans. That would fragment the national picture further and force operators to navigate a patchwork of prohibitions even on CFTC-approved products.

At the same time the repeated citations to Kalshi’s wins in New Jersey and Arizona suggest Polymarket sees a clear judicial trend. The emphasis on advertising and data services adds a commercial layer that previous complaints touched less directly. This is not abstract constitutional theory. It is about whether operators can market their platforms and obtain the verification feeds required to run compliant markets.

The Bottom Line is that three separate plaintiffs now argue the same fundamental point. Federal authority under the Commodity Exchange Act should preempt state criminal bans on CFTC-regulated event contracts. The addition of stronger First Amendment claims and detailed economic value arguments strengthens the overall case. Operators watching this litigation should track the docket closely because the outcome will shape how prediction markets integrate with sportsbooks in the years ahead. For those evaluating regulatory exposure or partnership structures in this space our advisory services outline practical pathways grounded in current enforcement realities. Watch for early motions and any consolidation of the three cases. Clarity here could accelerate or delay broader adoption depending on which side prevails.