Polymarket is the latest organization to challenge Minnesota’s ban on prediction markets in federal court.
The prediction market platform sued Minnesota in the U.S. District Court for the District of Minnesota on Wednesday. In a complaint for injunctive relief that names Minnesota Gov. Tim Walz and Attorney General Keith Ellison among the defendants, Polymarket alleges that the newly enacted legislation banning event contracts trading in the state is preempted by federal law and violates the First Amendment.
Polymarket’s legal challenge follows separate similar lawsuits filed in Minnesota by first the Commodity Futures Trading Commission (CFTC) and later Kalshi.
Why has Polymarket sued Minnesota?
In the summary of its complaint, Polymarket claimed that it needs a preliminary injunction from the court to avoid suffering “imminent and irreparable harm” from Minnesota’s recent enactment and anticipated enforcement of Senate File 3432, the state law that, as of Aug. 1, will make it a felony offense to operate, service, or advertise event contract markets.
Section 3 of that bill, which was passed by the Minnesota Legislature in mid-May as a successor measure to SF 4760, which Walz signed on May 18, outright bans prediction markets that offer trading on events including:
- Sports and athletic contests, or events within sports games such as individual performances
- Games of skill and dice games
- War, death, disasters, terrorism, and public health crises
- People-related and popular culture events
- Elections and other political events or outcomes
- Legal actions such as the results of lawsuits
- ‘Mention markets’, i.e. whether certain people will make particular statements
Polymarket calls Minnesota prediction markets ban ‘egregious’
Polymarket posits that the law poses an “immediate” threat to the company, and described SF 3432 as “the most egregious” of the various state legislative efforts to regulate or prohibit prediction markets, which it said undermines the CFTC’s federal jurisdiction to regulate financial trading.
“SF 3432 is the first law of its kind in the nation, criminalizing federally regulated event-contract markets,” wrote the firm’s legal representatives. “When it goes into effect in less than two months, Polymarket US will face a credible threat of imminent criminal prosecution — forcing it either to cease lawful and constitutionally protected conduct or risk felony criminal liability.
Polymarket also noted that SF 3432’s co-author, state Rep. Emma Greenman, cited Polymarket (and Kalshi) by name as the kind of prediction market platforms that the bill’s ban would apply to.
Polymarket emphasizes First Amendment argument
In its filing, Polymarket placed particular emphasis on the argument that banning the advertising of prediction markets violates such companies’ First Amendment rights to disseminate “truthful advertising” about the products and to use accurate data. SF 3432’s provisions also prevent service providers such as payment processing companies, geolocation firms, and advertisers from working with prediction market platforms.
“Unless this Court intervenes before SF 3432 takes effect, Polymarket US will be forced to choose between continuing to communicate truthful information and risking felony prosecution, or depriving consumers of accurate information about its product, current events, and the market,” adds the complaint. “Putting Polymarket US to this choice creates a quintessential, irreparable First Amendment injury.”
As is the case in the various other lawsuits brought against states by prediction market companies, Polymarket is seeking a declaratory judgment that the new Minnesota state law is preempted under the Commodity Exchange Act (CEA) and is unconstitutional and invalid. It also asks the court to rule that any state action to limit prediction market activity would violate the First Amendment or otherwise conflict with federal laws.
Polymarket wants the court to grant it preliminary and permanent injunctions against Minnesota’s Governor, Attorney General, and gaming regulator.
Kalshi and CFTC decry Minnesota ban
Polymarket is the third entity to sue Minnesota over its legislative ban, after the CFTC and Kalshi did so last month. Kalshi Head of Communications Elisabeth Diana told NPR that Minnesota banning prediction markets “is like trying to ban the New York Stock Exchange”.
In a statement issued on May 19, CFTC Chairman Michael Selig wrote that the new state law “turns lawful operators and participants in prediction markets into felons overnight,” leaning that statement on the idea that Minnesota farmers who have relied on hedging products on weather and crop-related events to mitigate risks will be punished.
His statement made no mention of event contracts related to sports, politics, war, or other major categories that have frequently been cited as problematic.
Minnesota is one of several Democrat-governed states that the CFTC has sued over prediction markets in recent months, also including:
- Arizona
- Connecticut
- Illinois
- New York
- Rhode Island
- Wisconsin
