Kalshi filed a federal lawsuit Wednesday, May 28, to stop Minnesota from enforcing the first state-level prediction market ban in U.S. history — opening a third legal front against a law that has already drawn suits from both the Justice Department and the CFTC within a week of its signing.
The complaint, filed in the U.S. District Court for the District of Minnesota, asks a judge to enjoin the law before it takes effect August 1. Under Minnesota's new statute, signed by Governor Tim Walz last week, creating, operating, or promoting a prediction market is a felony crime. Kalshi, the largest U.S. prediction market platform by trading volume, argued it will be deemed a felon in Minnesota for offering event contracts that are "entirely lawful under federal law" — as confirmed by the CFTC, the agency it says holds exclusive jurisdiction.
"Kalshi 'will be deemed a felon in Minnesota for offering certain event contracts on its federally authorized DCM that are entirely lawful under federal law — as confirmed by the federal agency with exclusive jurisdiction to make that determination,'" the complaint states.
The federal preemption argument
Kalshi's legal theory tracks the Trump administration's. Hours after Walz signed the ban last week, the DOJ and CFTC jointly sued Minnesota, arguing the state law illegally encroaches on federal jurisdiction. That makes Kalshi's filing the third active challenge to the same statute in under a week, all pressing the same core claim: prediction markets are event contracts, the CFTC has exclusive authority over them, and state criminal statutes cannot override that.
The CFTC has filed similar suits against Illinois, Arizona, Connecticut, and Wisconsin — a pattern that predates the Minnesota law but has accelerated sharply. Red and blue states alike have sought to classify prediction market wagers on sports, politics, and entertainment as gambling subject to state oversight. Platforms and the Trump administration say that's preempted by federal commodities law.
Trump weighs in — hard
The day before Kalshi filed, President Trump posted on social media that state officials opposing CFTC jurisdiction over prediction markets are "SCUM." The post was a conspicuous escalation: Trump had told reporters last month that he was "never much in favor" of prediction markets after a U.S. soldier was arrested for allegedly profiting from insider information on one. He walked those remarks back days later, telling Decrypt he knew people in the industry who are "pretty happy" with its trajectory.
Tuesday's post removed any remaining ambiguity about the administration's position. On Wednesday, Kalshi filed.
The Trump Jr. dynamic
The political overlay on this fight is unusually dense. Donald Trump Jr. serves as an advisor to Kalshi and is also an advisor to and investor in Polymarket, Kalshi's chief U.S. competitor. His dual role has drawn scrutiny as the administration's enforcement apparatus has lined up squarely with the industry's legal arguments.
Kalshi and Polymarket have otherwise been adversaries in the race for market share and regulatory favor. That rivalry found another dimension last month when a Google engineer was charged with insider trading on Polymarket — a case Crypoch has already covered — adding to a run of legal turbulence across the sector. Kalshi's lawsuit does not reference that case, and this story is not about it; the point is that the industry is fighting on multiple legal fronts simultaneously.
What August 1 means
The August 1 effective date sets a hard deadline for Kalshi's injunction request. If the court does not act before then, Kalshi would technically face felony exposure under Minnesota law for operating in the state — an untenable outcome for a federally licensed derivatives exchange. The company's complaint leans on this timeline explicitly: the injunction, not the merits ruling, is the immediate ask.
Whether the court grants temporary relief before August 1 will likely depend on how quickly the judge moves and whether the existing DOJ/CFTC suit is treated as related. Federal courts handling the other CFTC state lawsuits have varied in pace.
The broader battle map
The Minnesota case is the most legally acute front in an expanding war. The CFTC has suits pending against at least five states. The DOJ joined for the first time with the Minnesota filing. And now a private platform has filed its own suit, arguing that federal law protects not just its regulatory status but its right to operate without state criminal penalty.
No other state has moved as far as Minnesota — a felony statute goes further than the civil cease-and-desist orders or licensing requirements other states have used. That may explain why the federal response was faster and more coordinated, and why Kalshi moved within the same week rather than waiting to see how the DOJ/CFTC litigation develops.
The core question for courts is not novel: federal preemption of state law in a regulated industry. What is novel is the speed, the political intensity, and the volume of simultaneous litigation. Three filings in under a week targeting a single state statute is an unusual concentration of legal firepower. How federal courts respond — particularly on the injunction — will set the tone for every other state currently considering similar bans.
Primary source: Kalshi complaint, U.S. District Court for the District of Minnesota, filed May 28, 2026. Reporting based on Decrypt's contemporaneous coverage of the filing, published May 28, 2026.