Minnesota is the first state to ban prediction markets. It's already being sued by the federal government

“This Minnesota law turns lawful operators and participants in prediction markets into felons overnight,” CFTC Chairman Michael S. Selig said in a statement. “Minnesota farmers have relied on critical hedging products on weather and crop-related events for decades to mitigate their risks.”

Protecting children

The law makes it a crime to host or advertise a betting platform that isn’t authorized by the state, such as the tribal gaming allowed in Minnesota. Democratic state rep Emma Greenman sponsored the bill.

“It is critical we act this year to address this explosion of gambling on almost anything and rein in these Big Tech billionaires who skirt the law to circumvent our state authority and hurt our children just to line their own pockets,” she said in a statement last month.

The CFTC argues the law is too broad in scope. The agency has sued five other states to block their attempts to regulate prediction markets, saying oversight is the responsibility of the federal government, not the states.

Whales and suckers

Minnesota’s law comes as scrutiny of prediction markets intensifies. A recent study by The Wall Street Journal found that 67% of profits on Polymarket, one of the leading prediction markets, go to just 0.1% of accounts. Of the 1.6 million accounts studied, more than 1.1 million were unprofitable.

On Kalshi, there are 2.9 unprofitable users for every profitable one.

These markets have also proven to be a convenient vehicle for people with inside information to profit.

For example, a soldier in the U.S. Special Forces placed a wager using classified information about the planned removal of Venezuelan leader Nicolas Maduro and reportedly earned more thanr $400,000. He was later arrested.