Trump Administration Sues Minnesota Over Its Ban on Prediction Markets, Claiming It Will Harm Farmers

The Trump administration is suing to block Minnesota’s first-in-the-nation ban on prediction markets, arguing that it will harm farmers.On Monday, Minnesota Governor Tim Walz signed legislation banning prediction markets in the state. The law bans bets related to elections, sporting events, and popular culture; it also bans advertising for the bets. Prediction market platforms such as Kalshi and Polymarket have sidestepped many states’ restrictions on sports betting by offering “event contracts,” which usually rely on “yes” or “no” outcomes linked to a certain events. However, on Tuesday, the Commodity Futures Trading Commission, often referred to as the CFTC, sued to block Minnesota’s law.The chairman of the CFTC, Michael Selig, said the law “would make operating or assisting in the operation of a prediction market a criminal felony.”Mr. Selig argued that the federal government, not the states, is responsible for regulating prediction markets as they fall under the CFTC’s jurisdiction under the Commodity Exchange Act, which mandates event contracts, a type of derivative that pays off based on the outcome of an occurrence, like a weather event. Minnesota is one of the nation’s largest agricultural producers. Mr. Selig claimed that the law would negatively impact farmers. “This Minnesota law turns lawful operators and participants in prediction markets into felons overnight,” he said. “Minnesota farmers have relied on critical hedging products for 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.”The state representative who authored the bill, John Marty, told the Minnesota Reformer that lawmakers will pass a revision to clarify that the law does not prevent farmers from making bets on weather-related contracts.The popularity of Kalshi and Polymarket has raised concerns that they are addictive and detrimental to young people or low-income users. The attorney general of Minnesota, Keith Ellison, said in a statement, “I’m very concerned about the harms of prediction markets on Minnesotans.”“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,” he added. A working paper from the Federal Reserve Bank of New York warned of the financial impacts of sports betting, finding that in areas where such bets are legal, delinquencies rose by 0.3 percent. But among individuals who participated in sports betting in those areas, delinquency rates rose by 10 percent. The study highlighted concerns about the impacts of Polymarket and Kalshi, which have become major platforms for sports betting, in part because they let people make wagers on sports even in states where it is illegal to do so under state law. A spokeswoman for Kalshi, Elisabeth Diana, called Minnesota’s ban “peak hypocrisy.”“Minnesota banning all prediction markets while its government collects millions each year from slot machines, poker games, roulette tables, and dozens of casino games,” Ms. Diana said in a statement. “Does anyone believe that casinos are safe and well-regulated, but CFTC-registered exchanges and clearinghouses are not?”Many watchdogs have raised concerns that people are using prediction markets to benefit from insider trading. Last month, federal prosecutors unsealed an indictment against an Army Special Forces soldier, Gannon Ken Van Dyke, accusing him of using insider knowledge to make more than $400,000 by placing a bet on Polymarket about when Venezuela’s president, Nicolás Maduro, would be removed from power. Mr. Van Dyke pleaded not guilty. The CFTC has sued five other states over their efforts to regulate prediction markets. Earlier this month, the trading commission proposed amending the Commodity Exchange Act to further specify event contracts prohibited in public trading, including war, gaming, terrorism, assassination, and activity that is unlawful under any federal or state law are contrary to the public interest and therefore may not be listed for trading or accepted for clearing through a regulated entity.

Trump Administration Sues Minnesota Over Its Ban on Prediction Markets, Claiming It Will Harm Farmers

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