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The federal government has sued Minnesota over a new law that bans residents from using betting platforms where people can wager on things like sports results and economic events.
Minnesota is the first state to ban prediction market platforms such as Kalshi and Polymarket.
Governor Tim Walz signed the law on Monday after it received support from both Republicans and Democrats as part of a public safety bill.
Commodity Futures Trading Commission has <a href="https://www.cftc.gov/PressRoom/PressReleases/9233-26" rel="noopener noreferrer nofollow">filed a lawsuit seeking to block Minnesota’s law</a> from taking effect on August 1.
The agency is asking the court for an order to prevent the state from enforcing the ban.
Kalshi and Polymarket are both regulated by the U.S. federal government through the Commodity Futures Trading Commission, which <a href="https://www.cftc.gov/PressRoom/PressReleases/9234-26" rel="noopener noreferrer nofollow">oversees them to help prevent issues</a> like market manipulation and insider trading.
These betting platforms have grown rapidly in recent years, with the two biggest processing billions of dollars in trades each week.
Major financial firms are also getting involved: Robinhood now lets users buy Kalshi contracts through its app, while Intercontinental Exchange invested about $2 billion in Polymarket last year.
Commodity Futures Trading Commission Chair Michael Selig said Minnesota’s law wrongly criminalizes legal prediction market platforms and their users.
He argued the state is interfering in a market that is regulated by the federal government.
Selig pointed to farmers as victims of the ban. “Minnesota farmers have relied on critical hedging products on weather and crop-related events for decades to mitigate their risks,” he explained.
He accused state officials of choosing “special interests first and American farmers and innovators last.”
<figure class="wp-caption alignnone"><img src="https://www.cryptopolitan.com/wp-content/uploads/2026/05/CFTC-Chairman-Mike-Selig-criticized-Minnesota-Governor-Walz-for-outlawing-prediction-markets.png" alt="CFTC Chairman Mike Selig criticized Minnesota Governor Walz for outlawing prediction markets" width="597" height="363">
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 CFTC Chairman Mike Selig criticized Minnesota Governor Walz for outlawing prediction markets Source: <a href="https://x.com/ChairmanSelig/status/2056777187085222192" rel="noopener noreferrer nofollow">@ChairmanSelig</a>
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Minnesota lawmakers hold a different opinion.
They argue these platforms are a way to bypass state gambling laws.
Keith Ellison is reviewing the federal case but has raised concerns about their impact, warning that <a href="https://www.cryptopolitan.com/markets-pricing-spacex-openai-anthropic/" rel="noopener noreferrer nofollow">prediction markets can be especially harmful</a> to young and low-income groups and may concentrate wealth among already wealthy users.
For the CFTC, the legal battle is nothing new.
Due to comparable state efforts that target prediction markets, the agency has previously filed lawsuits in Wisconsin, Illinois, Arizona, Connecticut, and New York.
<h3 id="wall-street-tackles-insider-trading-concerns">Wall Street tackles insider trading concerns</h3>
Wall Street institutions are battling their own issues while government attorneys fight in court.
Recently, JPMorgan Chase gave its 320,000 employees instructions on how to use these platforms.
A review of an <a href="https://www.barrons.com/articles/jpmorgan-kalshi-polymarket-prediction-markets-rules-9f871a65" rel="noopener noreferrer nofollow">internal memo by Barron’s</a> shows that staff are not banned from using prediction markets.
Instead, the document advises JPMorgan Chase employees to act carefully and avoid any trades that could involve non-public or insider information.
It also notes that employees are allowed to place trades without getting prior compliance approval, which differs from most banks where trading usually requires advance clearance.
Because platforms like Kalshi and Polymarket now provide contracts on precisely these kinds of occurrences, these limitations are important.
Some even offer wagers on the potential successor to Jamie Dimon as JPMorgan Chase’s CEO.
With a new cooperation policy that supersedes previous rules and makes clear how self-reporting is evaluated, the <a href="https://www.cftc.gov/PressRoom/PressReleases/9234-26" rel="noopener noreferrer nofollow">CFTC has also bolstered its enforcement strategy.</a>
The revised regulations allow businesses or individuals to completely avoid enforcement action if they voluntarily reveal malfeasance, fully cooperate, rectify problems, and compensate harmed parties.
Penalties can still be lowered for those who cooperate only partially.
According to CFTC authorities, the regulation is intended to increase transparency, promote compliance, and combat fraud and insider trading.
<h3 id="compliance-firms-build-monitoring-tools">Compliance firms build monitoring tools</h3>
Compliance companies are building new tools to help firms keep track of employee activity.
On May 20, 2026, <a href="https://www.prnewswire.com/news-releases/hadrius-expands-trade-surveillance-capabilities-to-include-prediction-market-activity-302777051.html#:~:text=NEW%20YORK%2C%20May%2020%2C%202026,to%20its%20Trade%20Surveillance%20module." rel="noopener noreferrer nofollow">Hadrius announced it’s adding prediction market monitoring</a> to its Trade Surveillance system.
Compliance teams can monitor employee trades on Polymarket and Kalshi in addition to stocks, options, and cryptocurrency in one location thanks to the software.
Som Mohapatra, who co-founded Hadrius, said compliance teams want better ways to monitor these activities.
Thomas Stewart, the company’s CEO, noted that “compliance requirements and market activity continue to evolve.”
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Trump administration defends prediction markets as JPMorgan and Hadrius rush to police traders

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