Written by: Leigh Baker
During the 2026 FIFA World Cup, new users flocked to buy event contracts on prediction market apps to bet on their favored teams. Even though some users were located in states that ban traditional sports betting, prediction markets offered an alternative way to place their wagers. Yet this alternative pathway may be changing as more states, like Minnesota, seek to ban and/or limit prediction markets.
What are Prediction Markets?
While both traditional sports betting and prediction markets allow a person to make or lose money based on the outcome of a future event, they differ on how a person wins or loses. Traditional betting requires a person to bet against the bookmaker (“bookie”). The bookie sets the price and can shift it to minimize their own risk. The bookie’s vig (or commission) is built into the odds and the bet is locked until settled with no option to exit early. Prediction markets allow users to bet on the outcomes of future events by trading contracts with other traders. Instead of betting against a bookie, a trader bets against other traders. The contract’s price reflects the real-time probability of the event, driven by the collective belief of traders—similar to how stock prices move. There is no commission or “vig” built into the odds of the outcome, but a transaction fee is collected per trade.
The differences between traditional sports betting and prediction markets also persist in their legal treatment. States freely regulate or prohibit traditional sports betting within their borders. However, prediction markets are federally regulated by the Commodity Futures Trading Commission (“CFTC”), leaving state regulation in a legal gray area.
Minnesota’s Gamble
In 2026 alone, at least fifteen states have introduced legislation curtailing prediction markets in one form or another. On May 18, 2026, Minnesota enacted a ban on prediction markets which goes into effect on August 1, 2026. The ban makes it a felony for a person to create, operate, or advertise a prediction market. Minnesota’s approach is unique among states: instead of trying to curtail certain types of prediction markets or utilizing its existing gambling laws to restrict their activities, Minnesota found the risk posed by prediction markets so significant that it justified enacting a separate law to create a total ban. Indeed, Minnesota is the first state in the nation to do so.
According to Minnesota, the risks posed by prediction markets include underage gambling, money laundering, corruption, and addiction. Nevertheless, one day after Governor Tim Walz signed the bill into law, the CFTC filed a lawsuit on May 19, 2026, seeking a “preliminary injunction to stop the law from going into effect on August 1, 2026.”
The CFTC and prediction market providers emphasize how an event contract is a financial tool like other derivatives and distinct from traditional betting. Since the Commodity Exchange Act (“CEA”) grants the CFTC exclusive jurisdiction over regulation of event contracts, “state gaming laws do not reach trading on [prediction markets].” Minnesota counters that prediction markets function as gambling, not as the price-stabilizing tool for producers and consumers that Congress intended under the CEA. Furthermore, Minnesota argues that federal oversight does not preempt states’ powers to enact policies that protect the health and safety of their residents. These arguments are currently being considered by the United States District Court for the District of Minnesota, with a decision expected before the August enactment date.
What’s Next?
Minnesota’s lawsuit joins more than twenty legal actions nationwide. The results from these actions have been mixed. In April 2026, the Third Circuit affirmed the District Court of New Jersey’s preliminary injunction barring New Jersey from enforcing its gambling laws, while the Ninth and Fourth Circuit courts gave prediction market providers a far cooler reception on the same preemption question during oral arguments. New Jersey, for its part, appears to be positioning itself for the Supreme Court: after the Third Circuit’s ruling, state officials—represented by the Attorney General’s office—sought an extension to file a petition for writ of certiorari, which Justice Alito granted until August 4, 2026. Despite receiving that extension, New Jersey requested a second one, seeking to push the deadline to September 3, 2026. Meanwhile, oral arguments before the Sixth Circuit in a related case were scheduled for July 30, 2026.
Given the fractured legal landscape, whatever the District Court of Minnesota decides, the losing side will likely appeal to the Eighth Circuit. And if New Jersey does petition for certiorari, Minnesota’s own dispute would give the Supreme Court one more reason to grant it and settle the question nationwide. Whether the Supreme Court will grant certiorari and rule in favor of states or the prediction markets is something you might be able to bet on… for now.
Sources:
Act of May 18, 2026, ch. 97, art. 8, 2026 Minn. Laws (to be codified at Minn. Stat. § 609.7615 (2026)).
Alyssa Chen, Minnesota becomes first state to outlaw prediction markets, immediately sued by federal regulators, Minnesota Reformer (May 19, 2026).
Application, Flaherty v. KalshiEX LLC, No. 25A1465 (U.S. filed July 22, 2026) (requesting extension from August 4, 2026 to September 3, 2026, submitted to Justice Alito).
Bobby Allyn, Kalshi says it’s not a sportsbook even as World Cup bets surge, NPR (July 17, 2026).
Complaint for Permanent Injunction and Declaratory Relief at 20, KalshiEX LLC v. Ellison, No. 26-cv-02778 (D. Minn. May 27, 2026); see also Complaint for Injunctive and Declaratory Relief at 8-22, United States v. Minnesota, No. 26-cv-02661 (D. Minn. May 19, 2026).
Dana Ferguson, Nationally watched lawsuit has judge weighing future of Minnesota ban on prediction markets, MPR News (July 2, 2026).
Isaiah Poritz, Prediction Markets Get Cold Reception Before Ninth Circuit (1), Bloomberg Law (Apr. 16, 2026).
KalshiEX LLC v. Flaherty, 172 F.4th 220 (3d Cir. 2026).
KalshiEX LLC v. Schuler, No. 26-3196 (6th Cir. to be argued July 30, 2026) (appeal from No. 2:25-cv-01165, S.D. Ohio); KalshiEX LLC v. Orgel, No. 26-5235 (6th Cir. to be argued July 30, 2026) (appeal from No. 3:26-cv-00034, M.D. Tenn.).
Kyle Collis, Prediction Markets vs. Sports Betting: Key Differences Explained, Sports Illustrated (July 23, 2026).
Nathan Goldman, Prediction Markets Hit $24B A Month. Now US States Are Fighting Back, Forbes (July 1, 2026).
Order, Flaherty v. KalshiEX LLC, No. 25A1465 (U.S. July 1, 2026) (Alito, J., in chambers) (granting extension of time to file petition for writ of certiorari to August 4, 2026).
Prediction Markets 2026 State Legislation, NCSL (last visited July 24, 2026).
Prediction Markets: A New Frontier in State Regulatory Authority, NCSL (last visited July 24, 2026).
Prediction Markets vs Sports Betting: Key Differences, Backpack Learn (July 16, 2026).
Press Release, Commodity Futures Trading Commission, CFTC Sues Minnesota to Block State Law (May 19, 2026).
Press Release, Minn. Att’y Gen. Keith Ellison, Attorney General Ellison responds to prediction market lawsuits in court (June 18, 2026).
Press Release, Rep. Emma Greenman, House Votes to Add Prediction Market Ban to Public Safety Package (Apr. 30, 2026).
S.F. 4760, 94th Leg., Reg. Sess. (Minn. 2026) (showing bill history and enactment status).
Sulaiman Abdur-Rahman, ‘Basically Gambling’?: 4th Circuit Questions Kalshi’s Anti-State-Regulation Claim, Law.com (May 7, 2026).