Are Prediction Markets Legal in the US? Minnesota Ban Explained

Prediction markets now face a legal fight that could reshape how U.S. users access sports, election, and event-contract markets. Minnesota has signed a law set to ban a broad range of event-contract markets, while the CFTC has sued Minnesota to block the law before it takes effect.

The clash affects Kalshi, Polymarket US, sports contracts, election markets, and anyone who assumes “CFTC-regulated” means “available everywhere.” This guide explains what Minnesota’s ban covers, why the CFTC objected, and what users should check before they place a trade.

KEY TAKEAWAYS
➤ Prediction markets can be legal through CFTC-regulated venues, but state gambling laws still create uncertainty.
➤ Minnesota’s law targets broad event markets, such as sports, elections, weather, legal actions, and pop culture.
➤ The CFTC says Minnesota cannot block federally regulated event contracts through state gambling enforcement.
➤ The CFTC’s Minnesota lawsuit could ultimately decide how far states can go against CFTC-regulated prediction markets.

Are prediction markets legal in the US?

Prediction markets are legal in some U.S. contexts, especially when offered through CFTC-regulated venues. But that does not mean every platform can offer every event contract in every state.

Minnesota’s 2026 ban tests whether state gambling laws can restrict prediction markets even when the CFTC treats event contracts as federally regulated derivatives. Until federal courts resolve the dispute, legal status depends on four factors: the platform entity, the contract category, the user’s state, and the latest court order

What did Minnesota actually ban?

Minnesota Governor Tim Walz signed SF4760 on May 18, 2026. The statute is set to take effect on Aug. 1, 2026. It defines a prediction market as a system that lets consumers place wagers on a future event outcome that the contract parties do not determine or affect.

Covered categories reach far past sports betting. The law applies to event contracts tied to sports, games of skill, elections, government actions, legal actions, and short-term weather. It also covers disasters, pop culture events, deaths, mass casualty events, and whether a person will make a particular statement.

The law also sets criminal penalties for people and businesses that operate or support prohibited prediction-market activity.

Those penalties mainly target business actors. Under the statute, a person is guilty of a felony if the person, “for consideration and as part of a business,” creates, operates, manages, controls, or facilitates a prediction market.

The law also covers data providers, verification services, payment processors, location services, settlement support, and advertisers tied to prohibited activity.

Why did the CFTC sue Minnesota?

The CFTC filed suit on May 19, 2026, less than 24 hours after the bill was signed. The agency is asking a federal court for a preliminary injunction to stop the law before it comes into effect on Aug. 1, 2026.

The federal argument rests on the Commodity Exchange Act. The CFTC says it has exclusive jurisdiction over derivatives listed on registered exchanges, and that Minnesota’s law would criminalize activity tied to event contracts offered through CFTC-regulated venues.

The CFTC also said Minnesota’s statute reaches further than prior state actions in Arizona, Connecticut, Illinois, and New York.

The agency pointed to weather-related event contracts as one example, since those markets can overlap with risk-management products. In Arizona, a federal court has already issued a preliminary injunction that blocks the state from using gambling laws to criminally prosecute prediction-market operators while litigation continues.

The CFTC is not suing only over Kalshi or Polymarket US. It is defending its claim that federally regulated event-contract markets cannot be blocked by a state-by-state patchwork of gambling rules.

The debate now reaches beyond single prediction-market platforms. The SEC has delayed several prediction-market ETF proposals while it seeks public input, which shows that regulators are also reviewing how event contracts could reach retail users through fund-style products.

What are event contracts?

An event contract is a derivative whose payoff depends on a specified event, occurrence, or value. Examples include macroeconomic data prints, corporate earnings outcomes, snowfall totals, or hurricane damage thresholds.

CFTC Regulation 40.11 sets the federal limit on what registered venues can list. The rule prohibits event contracts that reference terrorism, assassination, war, gaming, or activity that is unlawful under any state or federal law, or activity that the CFTC determines is contrary to the public interest.

The line between a “gaming” event contract and a regulated derivative is right at the core of the dispute. Platforms say sports and election markets price probabilities and serve hedging functions. State officials say the same products look and act like sports bets that should be under state gambling licenses.

For deeper context on how event contracts price outcomes, see BeInCrypto’s prediction markets explainer.

Prediction markets vs. sports betting

Prediction markets and sports betting can look similar when both involve sports outcomes. The legal dispute is about how they should be treated: platforms say these are regulated event contracts, while states say some products work like sports bets. The table below shows the main difference.

Feature	Prediction markets	Sports betting
Product label	Event contract or derivative	Wager or bet
Main regulator claim	CFTC oversight of registered derivatives venues	State gambling commission oversight
Price format	Contract prices imply probability	Odds, spreads, parlays, props
Platform defense	Users trade regulated financial contracts	Sports markets resemble sportsbook products
State concern	CFTC status may bypass state rules	Licenses, age limits, taxes, and consumer protections apply
Core dispute	Is it a derivative, a wager, or both?	Does federal law block state gambling enforcement?

That difference is now part of a broader state-level challenge. In April 2026, New York AG Letitia James joined 37 other attorneys general in an amicus brief that backs Massachusetts’ case against Kalshi. The states argue that sports event contracts should not avoid state gambling laws just because a platform calls them swaps.

Sports leagues are also becoming part of the oversight debate. In May 2026, the CFTC and NHL signed an agreement to share information and coordinate on integrity risks tied to professional hockey event contracts on CFTC-regulated exchanges.

While that does not settle the state-law fight, it does show why sports prediction markets now draw attention from regulators, leagues, and state officials at the same time.

Why does the exact platform entity matter?

Both Kalshi and Polymarket US appear on the CFTC’s list of designated contract markets, but they are not interchangeable.

The CFTC designated KalshiEX LLC as a DCM on Nov. 3, 2020. Similarly, QCX LLC, now operating under the assumed name Polymarket US, received its DCM designation on Jul. 9, 2025.

The exact entity affects which rules, protections, access limits, and risks may apply. For instance, Polymarket.com has a separate offshore history and a different access route from Polymarket US. That’s why you should always assess the legal entity behind the platform, not just the brand name.

Check	Why it matters
Exact legal entity	“Polymarket US” is not the same as every Polymarket-related access route.
State availability	A platform may restrict states after a court ruling or regulator action.
Contract category	Sports, elections, weather, and legal-event contracts face different scrutiny.
Settlement rules	Disputed outcomes can affect payout timing and final results.
Age and eligibility	State gambling rules and CFTC venue rules may set different thresholds.
Withdrawal access	Active legal disputes can affect funding rails and timing.

For background on Polymarket’s earlier crypto-native structure, see BeInCrypto’s Polymarket guide.

What risks do prediction-market users face?

A bad prediction is only one way users can lose out. In 2026, the bigger issue is that a legal dispute can change platform access, contract availability, or withdrawal options with little notice.

For instance, a platform may block users in a state or remove a contract after a court order or regulator action. Some markets may also face more scrutiny than others, especially sports, election, weather, or legal-event contracts. Additionally, users also need to check the exact platform entity, since a familiar brand name may not tell the full legal story.

There is still the basic trading risks, though. After all, an incorrect binary position can result in the loss of the full amount paid. Users may also face tax duties, record requirements, and fewer consumer protections than they would expect from a licensed sportsbook.

Market-integrity risk can rise when an event outcome depends on insider, government, or nonpublic information.

In April 2026, the CFTC alleged that an active-duty U.S. Army service member used classified nonpublic information to trade on Polymarket.com and profit from Maduro-related event contracts. The agency described the case as its first insider case tied to event contracts.

So, what’s the legal status of prediction markets in the U.S.?

To summarize, prediction markets can be legal in the U.S. when offered through CFTC-regulated venues, but the answer is not settled nationwide as of May 2026. Minnesota’s ban, the CFTC lawsuit, and the multi-state amicus coalition behind Massachusetts show that legality depends on the platform, contract type, user location, and the latest court order.

“CFTC-regulated” does not automatically mean “available everywhere,” and a state ban does not automatically mean a federal court will let it stand. The Aug. 1, 2026, effective date in Minnesota and the federal injunction request are the next markers worth watching.

Meanwhile, the safest approach for you as a trader would be to check the exact entity behind the platform, whether that contract category is available in your state, and whether any court order could change access.

Frequently asked questions