Polymarket Joins Kalshi, Sues Minnesota Over Prediction Market Ban

Prediction market operator Polymarket has filed a lawsuit against Minnesota, challenging the state’s recent ban on certain types of event contracts offered by prediction markets.  

The lawsuit, filed in federal court, argues that Minnesota’s new legislation unlawfully interferes with federally regulated event-contract markets. The law, known as SF 3432, is the first state law in the US to impose a blanket ban on prediction market apps and will take effect in August, after which operating a prediction market platform in Minnesota could result in felony charges.  

Polymarket argues that its products fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC) and that the state is exceeding its legal authority by attempting to regulate federally supervised markets. 

In its 42-page complaint, the company adds that the ban would force it to either stop operations in Minnesota or face potential criminal liability. Polymarket also claims state enforcement could disrupt federally authorized business activities and harm customers and commercial relationships. 

The lawsuit names Minnesota Attorney General Keith Ellison, Governor Tim Walz, and Gambling Enforcement Director Jon Anglin as defendants. It also alleges that restrictions on advertising and market information violate First Amendment protections. 

“Polymarket US’s event-contract markets rely on accurate, real-time pricing and risk information,” the operator says in the complaint. “When a state restricts access to truthful information, no one benefits: not those the state regulates, and not the citizens of that state.” 

The case adds to a growing legal dispute surrounding prediction markets. Kalshi, another federally regulated prediction market company, has filed a separate lawsuit against Minnesota over the same law. The federal government has also challenged state efforts to regulate prediction markets, arguing that event contracts serve legitimate economic and risk-management purposes. 

Polymarket examines possible corporate espionage by rival Kalshi 

Meanwhile, Polymarket is also investigating what it believes is corporate espionage by rival prediction market firm Kalshi. 

According to reports, Polymarket has compiled a dossier of instances in which it believes Kalshi launched similar products or marketing campaigns just before or alongside its own initiatives. Company representatives have described the timing of some of these events as suspicious, though no evidence of wrongdoing has been publicly presented. 

Among the incidents is a February grocery-store promotion in New York. Polymarket employees reportedly spent months planning a temporary store that would provide free groceries, only to see Kalshi launch a similar promotion days before Polymarket’s scheduled opening. 

The company is also examining whether information about future product launches may have been gathered by outside parties. Some employees reportedly raised concerns about the proximity of offices used by venture capital firm Paradigm, a Kalshi investor, to Polymarket’s headquarters in Manhattan. Paradigm dismissed the allegations, while Kalshi described the claims as unfounded. 

Kalshi representatives have denied copying Polymarket’s initiatives and said the company had created its products and campaigns independently.