Kalshi Files Lawsuit to Block Minnesota Prediction Market Ban

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Kalshi Files Lawsuit to Block Minnesota Prediction Market Ban

Crypto prediction market platform Kalshi has sued Minnesota in a bid to block the state law banning prediction markets. This follows the U.S. CFTCs lawsuit, which also seeks to block the law amid the ongoing crackdown against these prediction platforms.

Kalshi Sues Minnesota To Block Prediction Market Ban

In an X post, legal expert Daniel Wallach revealed that Kalshi has sued Minnesota in federal court following the enactment of a state law that bans certain types of event contracts. The platform is seeking a temporary restraining order and preliminary injunction to block the state from enforcing the law, which is to take effect on August 1st.

As CoinGape reported, the U.S. CFTC has also sued Minnesota to block the state law, as it seeks to defend its exclusive jurisdiction over prediction markets. Similarly, the Commission is seeking a preliminary injunction to block the law from taking effect.

In its lawsuit against Minnesota, Kalshi argues that the Minnesota law clearly violates the Supremacy Clause because the federal Commodity Exchange Act (CEA) grants the CFTC “exclusive jurisdiction” over event contracts. As such, the platform stated that the state law “impermissibly usurps” the CFTCs exclusive jurisdiction.

This development comes amid the state crackdown on prediction markets, with state regulators arguing that these platforms operate illegal gambling sites. Furthermore, there has been heightened scrutiny of these platforms over insider trading concerns.

CoinGape reported that the U.S. House Oversight Committee has launched a probe into insider trading on Polymarket and Kalshi. The Committee cited insider trading cases and suspicions, such as the U.S. military man who allegedly placed bets on Nicolás Maduros markets just prior to his capture.

Why These Platforms Differ From Casinos

Former CFTC Chair Chris Giancarlo has weighed in on why prediction markets differ from casinos and sportsbooks. In an interview on Bloomberg Crypto, he noted that for casinos and sportsbooks, the House sets the odds and that every participant can be a price taker but not a price maker.

On the other hand, he noted that top crypto prediction platforms such as Polymarket are truly marketplaces, as they set the proposition, but they do not win when others lose. Additionally, the participants are both price takers and price makers.

The former CFTC chair also described these casinos as retail establishments, while prediction markets are financial marketplaces. In line with this, he noted that retail establishments are traditionally regulated at the state level, whereas financial marketplaces are subject to federal oversight. This is why he believes that state regulators should not be able to regulate platforms like Polymarket and Kalshi.