Kalshi filed a federal lawsuit against Minnesota over a newly enacted state law that criminalizes prediction markets. This marks the sharpest flashpoint yet in a high-stakes jurisdictional war that pits Washington federal regulators squarely against state gaming authorities.

Governor Tim Walz signed the total ban, which is slated to take effect August 1 and stands as the nation’s first state-level felony prohibition on event contracts.

Kalshi’s legal strategy leans heavily on two constitutional pillars. Under the Supremacy Clause, the company argues that the Commodity Futures Trading Commission (CFTC) holds exclusive statutory authority over event contracts traded on registered exchanges, legally preventing states from outlawing them. Concurrently, Kalshi relies on the First Amendment to challenge the state law’s sweeping restrictions on corporate advertising. Underscoring this federal alignment, the CFTC filed its own federal lawsuit against Minnesota less than 24 hours after Walz signed the bill.

Regulators Pick a Side

State gaming regulators are not staying quiet. Speaking at a gaming conference at the Bellagio, Nevada Gaming Control Board Chair Mike Dreitzer called on the traditional casino industry to fight back, warning that prediction markets amount to an end run that opens sports betting in all 50 states without a single state license.

“We have to stand up to it.” Dreitzer told the room. The Louisiana Gaming Control Board went further on paper, issuing an advisory declaring that sports event contracts are illegal sports betting under state law and that a CFTC registration is no shield.

DraftKings Jumps In

While the lawyers argue, the operators are building. DraftKings self-certified its first six sports event contracts with the CFTC under the DKeX brand, filing on May 22 and listing on May 27 through its Railbird exchange, a registered contract market it bought last October.

Self-certification is the mechanism doing the heavy lifting across this whole fight. A CFTC-registered exchange can file new contracts, certify they comply with federal commodities law, and list them without prior approval. All with no state sportsbook licenses required. It’s the same state-versus-federal gray area that US sweepstakes casinos have leaned on for years, now pointed straight at sports betting.

Trump Weighs In

The political dimensions of the fight expanded significantly when President Trump endorsed the markets on Truth Social, praising the CFTC’s “Gold Standard” rules. Trump emphasized the critical importance of maintaining the federal government’s exclusive jurisdiction over prediction markets, explicitly name-checking Walz and other prominent state Democrats as actors who should not be dictating financial market regulations.

That puts the White House squarely behind the federal-pre-emption case the operators are running. The states see their sports-betting tax base, built licence by licence since 2018, being routed around by a derivatives loophole. One side is going to lose badly, and the Minnesota courtroom is where the first real answer comes.