CFTC fights Minnesota prediction markets felony restrictions

The Commodity Futures Trading Commission asked a federal judge to block a Minnesota law that makes operating or helping run certain prediction markets a felony. The lawsuit argues that Congress granted the CFTC sole authority over derivatives markets and that Minnesota cannot override that federal framework through state criminal law. The agency seeks a court order preventing the measure from taking effect August 1. Minnesota lawmakers added prediction market language to a public safety bill earlier this year, defining prediction markets as systems that let consumers wager on future outcomes of specified events such as elections, weather, sports, and government actions. The complaint says the law would criminalize more than exchanges, including payment processors and service providers, by banning anyone from intentionally facilitating operation or providing supportive services. The CFTC and the Justice Department requested a preliminary injunction to pause enforcement during the case.

"The Commodity Futures Trading Commission (CFTC) is asking a federal judge to block a new Minnesota law that would make operating or helping run certain prediction markets a felony, opening another front in the growing fight between states and federal regulators over event-contract trading."

"The lawsuit, filed Tuesday (May 19) in federal court, argues that Congress gave the CFTC sole authority over derivatives markets decades ago and that Minnesota cannot override that system through state criminal law. The agency wants the court to stop the measure before it takes effect August 1."

"Federal regulators say the law reaches far beyond traditional gambling restrictions. According to the complaint, it would criminalize not only exchanges offering event contracts, but also payment processors, service providers, and others connected to those markets. The statute bans anyone from "intentionally facilitat[ing] the operation of a prediction market," including businesses handling payments or "provid[ing] supportive services to a prediction market.""

"The CFTC and the Justice Department also filed a request for a preliminary injunction seeking to pause enforcement while the litigation moves forward. "Plaintiffs bring this action to halt Defendants' efforts to criminalize the operation of derivatives markets governed by federal law," the complaint states."

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