Lawsuit follows Governor Tim Walz signing legislation into law that prohibits prediction markets in the state from August 1
The Commodity Futures Trading Commission (CFTC) has filed a lawsuit against Minnesota to block a new law that prohibits prediction markets from operating in the state.
The lawsuit comes after Minnesota Governor Tim Walz signed into law bill SF4760, an omnibus public safety policy bill that includes financial crimes and fraud prevention provisions, and makes operating or assisting in the operation of a prediction market a criminal felony.
The CFTC is seeking a preliminary injunction to stop the law from going into effect on August 1.
Minnesota is one of the largest agricultural producers in the United States. The CFTC said that the state government has enacted a state law criminalizing trading in many CFTC-regulated markets with a broader reach than any other state the CFTC has sued to date, including criminalizing weather-related event contracts.
According to the CFTC, the new legislation represents the most aggressive move by a state to shut down CFTC-regulated markets.
“This Minnesota law turns lawful operators and participants in prediction markets into felons overnight,” said CFTC chairman Michael Selig. “Minnesota farmers have relied on critical hedging products on weather and crop-related events for decades to mitigate their risks. Governor Walz chose to put special interests first and American farmers and innovators last.”
In a lawsuit filed by the CFTC, a federal court in Arizona recently issued a preliminary injunction blocking Arizona from using its gambling laws to criminally prosecute prediction market operators.
The Commission has also filed lawsuits against Connecticut, Illinois, and New York, and has filed amicus briefs in the U.S. Court of Appeals for the Sixth and Ninth Circuits and the Supreme Judicial Court of Massachusetts.
In related news, the CFTC has brought in DJ Hennes to serve as director of the Market Participants Division.
Hennes joins from KPMG, where he was a managing director in the firm’s Financial Services Risk & Compliance Advisory Practice. Prior to joining KPMG, he spent 15 years at Promontory Financial Group, most recently leading its Capital Markets Practice for the Americas.
“I am pleased to welcome DJ to the CFTC,” Selig said. “He brings a wealth of experience advising clients across the financial services industry, including CFTC intermediaries, on governance, risk, compliance, and enforcement matters. His experience with crypto assets and prediction markets will also be of tremendous value as we seek to future-proof the CFTC’s rules and regulations for these innovations.”
Commenting on his appointment, Hennes said: “I am honored to be joining the Commission. I look forward to working with Chairman Selig, his leadership team, and the dedicated staff as we continue the CFTC’s mission of fostering integrity, innovation, and liquidity in our vibrant derivatives markets.”