Prediction Markets
in Minnesota

Minnesota signed SF 4760 yesterday. The CFTC sued today.

The law makes operating a prediction market in Minnesota a felony as of August 1, 2026, and reaches markets on elections, sports, weather, war, terrorism, public health, court cases, deaths, entertainment, statements by named individuals, and dice or card games. Operating a VPN-based workaround is separately prohibited. The CFTC complaint, filed in the District of Minnesota, argues the Commodity Exchange Act gives federal regulators exclusive jurisdiction over CFTC-licensed Designated Contract Markets and seeks a preliminary injunction before the August deadline.

The Minnesota law and the CFTC lawsuit set up the cleanest test yet of whether a federal Designated Contract Market license preempts a state gambling statute. Kalshi already won a parallel preemption argument against the CFTC itself in 2025 when the agency tried to block its sports contracts. This time the agency is on Kalshi's side, arguing that its own licensees cannot be criminalized by individual states.

Minnesota's counter-argument leans on the state's traditional police power over wagering. Attorney General Keith Ellison's office will argue SF 4760 is a gambling statute (not a securities statute) and falls inside an area where states have always had primary authority. The court has to decide whether event contracts on a CFTC-licensed exchange are commodity derivatives (federal) or bets dressed up as derivatives (state).

Whichever way the District of Minnesota rules, the loser appeals to the Eighth Circuit and likely to the Supreme Court. The preliminary injunction question is faster: the CFTC needs the court to pause the August 1 effective date while the underlying case is litigated, otherwise platforms have to make a real decision about Minnesota access within ten weeks of this writing.

Three reasonable approaches depending on your risk tolerance:

1. Wind down long-dated positions before August 1. If the injunction is denied and platforms exit Minnesota, you may end up holding contracts you cannot manage. Resolution-on-platform is fine; the risk is mid-trade access loss.
2. Withdraw funds before the deadline. Even if the platforms remain accessible via the CFTC's injunction, withdrawal mechanics may be disrupted in a transition window. Pull anything you do not actively need in the book.
3. Document your trading history. Export full CSV records from each platform now. If platforms exit Minnesota, post-departure access to historical statements is uncertain, and you still need them for the 2026 tax year.

Note that the law does not criminalize traders, only operators. There is no legal exposure to using a platform today, and even after August 1, the question is whether the platforms themselves can serve Minnesota residents.

Kalshi issues a 1099-MISC for net annual profits. Report on your Minnesota state return as ordinary income. Sports betting losses are subject to the 2026 OBBBA 90% deductibility cap; Kalshi prediction market losses are not subject to this cap (commodity derivatives, not sports wagers). If your activity is significant, a Minnesota CPA familiar with the federal/state interaction is worth the fee, especially given the unusual tax-year mid-cycle change in market access.