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Some MN lawmakers look to ban prediction markets
Minnesota lawmakers are taking steps toward banning prediction markets in the state, but some GOP officials are pushing back. FOX 9's Corin Hoggard has the details.
ST. PAUL (FOX 9) - The Trump administration has filed a lawsuit against Minnesota after its legislature passed a bill banning prediction betting markets like Polymarket and Kalshi.
Predictive market ban
The backstory:
Gov. Walz signed a bill this week outlawing prediction markets in Minnesota.
Prediction markets, like Polymarket and Kalshi, allow you to wager on real world events. The wagers work similar to futures trading where you purchase outcome contracts and the price of the contract varies based on the likelihood of the outcome. You can sell your contract before the event occurs to capitalize on profits or cut your losses.
The Minnesota ban goes into effect starting August 1.
Dig deeper:
The markets have become increasingly controversial as many have raised concerns about their lack of oversight and the fact that they can be used for what is essentially sportsbetting. Aside from that, some controversial bets have been placed on the platform connected to major world events, like a soldier who used classified information to bet on the U.S. capture of Venezuelan leader Nicolás Maduro.
This week, a New York Times investigation found more than a group of insiders placed bets on Polymarket ahead of the U.S. strikes on Iran in April. Those bets netted the users $1.7 million in winnings.
Minnesota Sen. Matt Klein was suspended by Kalshi after betting on himself to win his primary.
In this photo illustration, the Polymarket online betting app logo is seen displayed on a smartphone screen. (Photo Illustration by Davide Bonaldo/SOPA Images/LightRocket via Getty Images) (Getty Images)
Big picture view:
The Trump admin has filed lawsuits against other states over similar bans, including Arizona, Connecticut, Illinois, and New York.
MN and farmers
What we know:
In the lawsuit, brought by the U.S. Commodity Futures Trading Commission (CFTC), officials argue that under U.S. law only the federal government can regulate derivatives markets and futures trading.
In a press release, the commission implies the Minnesota law could have an unintended impact on farmers.
"This Minnesota law turns lawful operators and participants in prediction markets into felons overnight," said CFTC Chairman Michael S. 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."
Big picture view:
Farmers often rely on futures trading to set their crop prices. Rather than risk the price of crops fluctuating before harvest, a farmer will buy a futures contract to lock in a sale price.
However, when crafting the bill, Minnesota lawmakers were mindful to set exclusions for standard commodities and securities purchases. But the lawsuit argues that the new law puts certain tools that farmers rely on under new regulations.
However, the CFTC argues that Minnesota's law is too aggressive and bans event contracts on the designated contract markets (DCMs). Event contracts allow farmers can buy to hedge against weather events that can impact their crops.
Minnesota's law explicitly bars prediction market bets on short-term weather events or conditions. The CFTC argues that language would prevent farmers from buying the event contracts that some farmers rely on.