CFTC Intervenes as Kalshi Sues Minnesota; Rhode Island Case

Kalshi, a U.S. prediction market firm, sued Minnesota after Gov. Tim Walz signed a law last week that bars advertising, creation, operation or facilitation of prediction-market platforms. Less than 24 hours after the statute took effect, CFTC Chair Michael Selig filed a federal complaint seeking to block state enforcement and described the measure as the “first outright ban” on prediction markets.

Kalshi filed its federal challenge on Wednesday, arguing the Minnesota law is unconstitutional because federal law preempts state regulation. The company told the court that the Commodity Exchange Act covers the “event contracts” traded on its platform and on competitors such as Polymarket, classifying those contracts as swaps subject to CFTC oversight rather than state gambling rules.

On Thursday the CFTC filed a joint motion with Kalshi to intervene in a separate Rhode Island case. Rhode Island Attorney General Peter Neronha sued Kalshi and Polymarket and asked a state court to declare that certain sports-related event contracts qualify as bets under state law. The CFTC’s proposed intervention repeats the agency’s view that federal law governs event-contract markets and displaces conflicting state prohibitions.

Federal courts have reached mixed conclusions in prior cases. Some judges rejected the argument that event contracts are swaps under the Commodity Exchange Act, while others accepted it. Those split rulings could lead to an appeal and potentially a decision by the U.S. Supreme Court.

The dispute has drawn political attention. President Donald Trump wrote on social media that it is “critically important” the CFTC have sole authority over prediction markets and added, “We want to remain at the top.” Donald Trump Jr. serves as an adviser to Kalshi and Polymarket and has invested in Polymarket through his firm, 1789 Capital.

Members of Congress have also pressed the platforms. The chair of the House Oversight and Government Reform Committee requested documents and answers from the CEOs of Kalshi and Polymarket about their procedures and any response to alleged insider trading on the platforms.

The litigation centers on three questions: whether event contracts meet the federal definition of swaps, whether the CFTC has exclusive jurisdiction over those contracts, and what authority states have to ban or regulate prediction-market activity. The outcomes in Minnesota and Rhode Island will affect how prediction markets operate in the United States.