Kalshi is asking a federal court to stop Minnesota from enforcing a new law that would make categories of prediction markets a felony offense. The lawsuit was filed Wednesday (May 27) in the U.S. District Court for the District of Minnesota and seeks emergency relief before the measure takes effect on August 1.
The New York company runs a federally regulated derivatives exchange where customers buy and sell event contracts tied to real-world outcomes. Kalshi maintains those contracts are overseen by the Commodity Futures Trading Commission, or CFTC, and says state officials cannot ban activity that federal regulators permit.
Named as defendants are Minnesota Attorney General Keith Ellison, Gov. Tim Walz, and Jon Anglin, who leads the state’s Alcohol and Gambling Enforcement Division. Kalshi wants the court to declare the law invalid as applied to its exchange and block enforcement of both the new measure and existing state gambling laws against the company.
Kalshi argues Minnesota felony ban violates federal law
The legal fight focuses on SF 3432, a bill Walz signed on May 26 after advancing through the Minnesota Legislature. The law creates felony penalties for operating, supporting, marketing, or advertising certain prediction market activity. Its reach extends to markets involving sports, elections, legal proceedings, public figures, wars, emergencies, popular culture, and other future events.
In the complaint, Kalshi argues Minnesota enacted a law that “impermissibly usurps the CFTC’s exclusive jurisdiction” by prohibiting event contracts traded on federally designated exchanges. The company says that once the law becomes active, it “will be deemed a felon in Minnesota for offering certain event contracts” that federal law allows.
According to the filing, the Commodity Exchange Act gives the CFTC “exclusive jurisdiction” over event contracts listed on designated contract markets. Kalshi argues Congress reserved for the federal agency the authority to determine whether specific contracts should be barred on public-interest grounds.
The company says Minnesota’s approach creates a direct conflict between state and federal authority. The complaint argues the law “purports to assert concurrent state jurisdiction over the trading of event contracts on DCMs” and would impose criminal penalties on Kalshi “for acting in accordance with federal law.”
Kalshi also points to recent court victories in similar disputes. The filing highlights a ruling from the U.S. Court of Appeals for the Third Circuit, which found that because “Congress gave the CFTC exclusive jurisdiction over trades on DCMs,” federal law overrides state attempts to regulate those transactions.
Beyond federal preemption, Kalshi challenges the law’s advertising restrictions. The company contends Minnesota cannot criminalize speech promoting products that remain lawful under federal rules. The complaint states the measure “creates distinct felonies for complying with federal law and exercising First Amendment rights.”
The lawsuit follows a separate CFTC action challenging an earlier version of Minnesota’s prediction market legislation. Kalshi argues the state continues to push into an area Congress assigned to federal oversight and warns that restricting access in Minnesota would “irreparably impair Kalshi’s viability as a 50-state derivatives exchange.”
Featured image: Kalshi / Canva
