The Commodity Futures Trading Commission on Tuesday filed a lawsuit seeking to block Minnesota from enforcing a newly enacted law that made the state the first nationally to outright ban prediction markets like those run by Kalshi and Polymarket.

The federal regulator filed the lawsuit a day after Minnesota Gov. Tim Walz, a Democrat, signed into law a measure that starting on Aug. 1 would make it a crime to operate, host or promote a prediction market in the state.

Such platforms, which allow users to profit from predictions on events such as sports and elections, are at the center of a battle over the power of state gaming regulators to police the multi-billion-dollar prediction market industry.

Kalshi, which in a recent funding round was valued at $22 billion, in particular has been fighting a series of court cases involving states who claim it is running an illegal, unlicensed wagering operation that allows adults under 21 to gamble.

Under President Trump’s administration, the CFTC has shared the companies’ position that the event contracts users can trade on their prediction markets fall exclusively under the agency’s jurisdiction to regulate “swaps,” a type ​of derivative contract.

In Tuesday’s lawsuit, the CFTC argued that Minnesota’s novel law violated the US Constitution by criminalizing at the state level the operation of derivatives markets governed by federal law.

“This Minnesota law turns lawful operators and participants in prediction markets into felons overnight,” CFTC Chairman Michael Selig said in a statement.

A spokesperson for Minnesota Attorney General Keith Ellison, a Democrat, said his office “is reviewing the filing and will respond in court when appropriate.”

The CFTC has sued several other states seeking to prevent them from pursuing enforcement against prediction market operators. 

It recently won a court order blocking Arizona from pursuing a criminal case against Kalshi.

Nevada is the only state to have secured a court-enforced, in-effect ban ​against New York-based Kalshi.

Massachusetts’ highest court is considering whether to uphold a currently paused injunction in that state that would bar it from offering sports events contracts.