Judge Blocks First State Law That Would Have Banned Prediction Markets (arstechnica.com) 52
An anonymous reader quotes a report from Ars Technica: Minnesota, the first US state to prohibit prediction markets, was prevented from enforcing the law by a federal court ruling just days before the ban was scheduled to take effect. But while Minnesota was stopped from enforcing a total ban, the state may ultimately be allowed to prohibit some types of prediction-market wagers. The Trump administration and the two largest prediction markets -- Kalshi and Polymarket -- sued Minnesota after the state enacted the law in May. The cases were consolidated, and a ruling (PDF) issued yesterday imposed a preliminary injunction blocking the law that was scheduled to take effect on August 1.
Minnesota lawmakers saw prediction markets as indistinguishable from gambling, but the US Commodity Futures Trading Commission (CFTC) argues it has exclusive authority to regulate the platforms under federal law. One of the primary legal questions is whether event contracts are "swaps," which are regulated by the CFTC. Swaps are defined broadly in US law to include contracts in which payment "is dependent on the occurrence, nonoccurrence, or the extent of the occurrence of an event or contingency associated with a potential financial, economic, or commercial consequence." US District Judge Katherine Menendez in the District of Minnesota, a Biden appointee, said Minnesota's total ban on prediction markets is likely to violate US law because many trades on Kalshi and Polymarket are swaps.
Menendez wrote: "Specifically, it appears that whether the Minnesota statute is expressly preempted turns on whether the state law attempts to regulate trades in event contracts that qualify as "swaps" within the meaning of the CEA [Commodity Exchange Act]. And there are several examples of event contracts hosted by Kalshi and Polymarket US that fit that definition because they concern the occurrence of events with clear potential economic, financial, or commercial consequences that are neither remote or unattenuated. Kalshi and Polymarket US are designated contract markets, so the CFTC has exclusive jurisdiction to regulate transactions involving those 'swaps.'"
Menendez said the CFTC, Kalshi, and Polymarket met their burden of showing they are likely to succeed on the merits, so she issued "a preliminary injunction barring enforcement of Minnesota's prediction market statute until a final decision on the merits is reached." But she said Minnesota may be able to prohibit some types of event contracts offered on Kalshi and Polymarket because not all of them appear to meet the definition of swaps. For example, Menendez doesn't think prediction-market bets on the outcome of Love Island USA meet the legal definition of swaps. Minnesota could continue litigating the case in district court or ask a federal appeals court to overturn the preliminary injunction.
Minnesota lawmakers saw prediction markets as indistinguishable from gambling, but the US Commodity Futures Trading Commission (CFTC) argues it has exclusive authority to regulate the platforms under federal law. One of the primary legal questions is whether event contracts are "swaps," which are regulated by the CFTC. Swaps are defined broadly in US law to include contracts in which payment "is dependent on the occurrence, nonoccurrence, or the extent of the occurrence of an event or contingency associated with a potential financial, economic, or commercial consequence." US District Judge Katherine Menendez in the District of Minnesota, a Biden appointee, said Minnesota's total ban on prediction markets is likely to violate US law because many trades on Kalshi and Polymarket are swaps.
Menendez wrote: "Specifically, it appears that whether the Minnesota statute is expressly preempted turns on whether the state law attempts to regulate trades in event contracts that qualify as "swaps" within the meaning of the CEA [Commodity Exchange Act]. And there are several examples of event contracts hosted by Kalshi and Polymarket US that fit that definition because they concern the occurrence of events with clear potential economic, financial, or commercial consequences that are neither remote or unattenuated. Kalshi and Polymarket US are designated contract markets, so the CFTC has exclusive jurisdiction to regulate transactions involving those 'swaps.'"
Menendez said the CFTC, Kalshi, and Polymarket met their burden of showing they are likely to succeed on the merits, so she issued "a preliminary injunction barring enforcement of Minnesota's prediction market statute until a final decision on the merits is reached." But she said Minnesota may be able to prohibit some types of event contracts offered on Kalshi and Polymarket because not all of them appear to meet the definition of swaps. For example, Menendez doesn't think prediction-market bets on the outcome of Love Island USA meet the legal definition of swaps. Minnesota could continue litigating the case in district court or ask a federal appeals court to overturn the preliminary injunction.
Gasp - A Trumpian move to be sure (Score:5, Insightful)
Re:Gasp - A Trumpian move to be sure (Score:5, Informative)
Don Jr is a paid "strategic advisor" to both Kalshi [kalshi.com] and Polymarket [reuters.com], and the private investment company he's partner in, 1789 Capital, invested millions into Polymarket. Reportedly the Trump family owns stock in both companies.
The corruption and grift has become so blatant that nobody even bothers reporting on it anymore.
Trump supports grifting? (Score:3)
Quelle surprise that Trump supports the gambing^Wgrifting sites.
Re:Trump supports grifting? (Score:5, Informative)
He flat out says his family uses inside information for financial gains. https://www.yahoo.com/news/pol... [yahoo.com]
Now if you don't have a problem with this let me put it in terms you can understand.
Imagine if Obama said the exact same thing.
Now how do you feel?
Re: (Score:3, Interesting)
Yet he managed to do that without having jackbooted masked thugs going door to door intimidating anyone who looks "foreign" and randomly shooting people that protest or resist.
Re: (Score:2)
LOL /. has become a contest to be provably more stupid than SuperKendall.
Also, for all anyone knows Obama did say and do everything he wanted. Judging by the outrage over his tan suit, plenty was said on a daily basis.
Re: (Score:2)
Why do you think the deportations under Obama was less controversial?
Your answer to this will say more than you know about your politics and worldview.
Re:Trump supports grifting? (Score:4, Informative)
A portion of the Democratic party was very unhappy with Obama for those deportations. Fox of course wasn't going to highlight Obama doing something the Republicans wanted, that would be to close to reporting the news. I doubt most Republicans knew/know this fact about Obama in the first place. I know I've educated a few.
I think a big part of it is all the rhetoric around it. Obama did it without talking about it at all. Trump can't stop talking if his life depended on it.
Re:Trump supports grifting? (Score:4, Informative)
Partial credit, that's a small part of it but that is also connected to the actual answers.
The biggest reason is the majority of those deportations were done at the border itself, it was CBP catching illegals around the border and sending them back, every one of those is counted the same as deporting someone from a town or city.
But yes, the fact Obama didn't make a fascist spectacle out of the day-to-day operations of immigration enforcement is also a piece of, along with the fact that that the admin at the time still held to some degree of human rights, for example they were allowed to make phone calls.
Re: (Score:2)
Do you really think I have an issue with Ukraine bombing warehouses?
For someone clinically obsessed with me you really don't pay attention to what I say.
Re: (Score:3)
Cool. If Trump can run in 2028 then so can Obama.
Re: (Score:2, Troll)
They're okay with the hypocrisy. Here in FL the governor has been pushing hard for eliminating property taxes for homesteads. If that passes, it will essentially defund the police. Yeah, can't say I recall that previously being a Republican position.
It all makes sense when you just realize their justification is "It's fine when we do it."
Re: (Score:3)
How about "Take the guns first, go through due process second" from Donald Trump. Also not previous typically a Republican position (except when the Black Panthers emerged, I suppose).
Re: (Score:1)
The same way I felt before you said it.
Barack Obama got $400k/yr as president, $250k/yr after that. Total income about $8m in 2026.
He's now worth $70m.
They live in 4 homes, primarily;
Oahu $8,4m
Wash DC $8.1m
Martha's Vineyard $11.8m
Chicago $2m
~$30m in homes.
That's pretty good for his income.
Re: (Score:2)
Re: (Score:2, Offtopic)
The CFTC (Score:2)
can go suck a giant dick, because nothing on Kalshi or Polymarket are swaps. It's gambling.
"They are swaps because they're 'event contracts'!"
I don't give a flying fuck. That just means they are gambling...with event contracts. The contracts are the 'casino chips'; win and turn them into cash, lose and they go bye-bye. And if you really want to believe they are swaps, then local, state, and federal gambling laws should apply on top of any regulation by CFTC. The assholes who don't think this is gambling are
Re: (Score:2)
like a someone who was into hft from mid-2010s I can only say that all of your US stock market is gambling and I laugh at yer feeble attempts to deny it.
Re: (Score:3)
all of your US stock market is gambling
It is.
I fundamentally disagree with all forms of stock markets and believe they should be eliminated worldwide. All companies should either be non-profit or for-profits, and all for-profits should be co-ops/profit shares among all employees. All utility providers should be non-profits and owned 100% by customers of that utility.
Re: (Score:3)
If you day trade, then yes... the stock market is gambling.
If you invest in low-cost index funds and hold them for a decent amount of time, the odds that you'll make money are almost 100%.
There's no analogously-safe way to use prediction markets.
Re: (Score:2)
In a lot of cases, maybe even most it could be that functionally but there are still real assets under it and real direct economic interests in the outcomes for parties to those contracts and instruments, that alone separates it from simple wagering which is what a prediction market is.
Most of stocks, options and other financial instruments shift risk, or speculatively take on risk for potential gain. "predicting" who will get an Oscar, with a payout if you're right or loss of your "investment" if you are n
Swaps manage financial risk; bets provide entertai (Score:2)
Financial swaps and gambling are differentiated by their economic function, legal classification, and risk management utility. While both involve a contingent transfer of money based on future uncertain events, swaps are commercial tools used to manage existing financial risk, whereas gambling creates artificial risk for entertainment or speculative profit.
Re: (Score:2)
Stock markets are also the reason why we have mega corporations and an extremely unbalanced diversity of wealth.
So, over the long term, go fuck yourself.
Re:The CFTC (Score:4, Informative)
It's also the reason we have quite a number of average people with secure retirements. Yes, BURN DOWN CAPITALISM sounds good, and given the huge problems of unregulated capitalism in the USA, I even have some sympathy for the sentiment, but in reality, well-regulated capitalism backstopped by robust government social programs is simply the best way to generate wealth for everyone.
Burning down capitalism completely will simply make everyone poor and make life shittier than ever. We need to regulate it.
Re: (Score:2)
It's also the reason we have quite a number of average people with secure retirements.
We can find good, if not better, alternatives.
Re: (Score:2)
You'd better have real-world evidence that these alternatives work before burning down the current system. And I do not believe there is any real-world evidence; in fact, most of the real-world evidence points to the contrary.
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Even if there was real-life evidence, capitalism wouldn't let it exist for long. Capitalism is an exploitative and parasitic system no matter how hard its regulated.
Newspeak (Score:2)
Betting is now "prediction market" ...
Getting fired now called "Evaporating Financial Security" or "Involuntary separation"
Killing a product is now "Sunsetting a product"
"Non-performing loan" = a loan nobody's paying back
Bombing people is now called "kinetic action"
We live in the century of the euphemism.
These people need to be sent 'to a farm upstate'.
Re: (Score:2)
And which party do you support? These are the people you have argued for.
Re: (Score:2)
Honestly, I am to the point where I can't stand either Democrats or Republicans. I'd be just fine handing it over to the Greens and the Libertarians. Even if it didn't work, what we have now isn't exactly "working" for most of us at this point. It would be worth a shot.
damned if they win or lose? (Score:4, Interesting)
If they lose, showing that these are unregulated forms of gambling, then the states can come after them.
If they win and the injunction is dismissed, it's because these prediction markets are operating like credit default swaps, which are heavily regulated. This would force every prediction market to operate through clearing houses, eliminate direct holding of users' funds, force them to to become registered dealers, and most importantly limit their market to those who have high discretionary assets, because at least regulated swaps require you to have $10M in discretionary assets to even buy swaps.
Again I may be missing something here, but I read this as the injunction being put on hold because they could essentially be swaps; if that holds, then it could be argued they must then act like swaps which are highly regulated and would kill their retail business. I'd be curious to know if I'm missing something about these though that would suggest a different analysis.
Re: damned if they win or lose? (Score:4, Insightful)
Well, it falls to a jurisdiction in which there is a high chance of selective regulatory oversight/enforcement, given the conflict of interest with Trump's family vested interest in prediction markets.
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This would force every prediction market to...
I wish I shared your optimism. With the Trump Family's integration with these companies, and the current Patriarch running the government like it's his to do with as he pleases, I wouldn't be betting on any meaningful regulation of these "markets" any time soon. But hey, at least if you wanted to there's probably a "contract" out there for you to get in on.
Thou Shalt Not Block Corporate Profit (Score:2)
- 1st rule of crony capitalism
This is no surprise (Score:1)
Once again the republican federal government comes down against states' rights to regulate themselves.
Trumplicans predictably prefer to allow their wanna-be dictator to allow Big Companies to screw the american public at every opportunity.
Re: (Score:2)
Should states' rights trump individual rights?
This is a free society. If consenting adult Minnesotans want to use these markets why should a state be permitted to stop them? States should be permitted to regulate to ensure clarity and no fraud, and to tax.
Awesome! (Score:3)
Swaps are defined broadly in US law to include contracts in which payment "is dependent on the occurrence, nonoccurrence, or the extent of the occurrence of an event or contingency associated with a potential financial, economic, or commercial consequence."
So, casinos just need to define card table game moves as swaps, and all pesky state laws regarding these games can easily be struck down and moved to the more friendly confines of the CFTC. If there is a pesky requirement that swaps be technically tradeable , I'm sure there's an in-house technology workaround for that. If the pesky requirement requires actually trading, that also would be easy to surmount with an in-house technology workaround.
Create state tax on prediction wager returns (Score:2)
It's gambling (Score:3)
Plain language understanding is that these sites offer online gambling.
The Federal Government has issued licenses to operate via the CFTC. Gambling on these sites is therefore legal in the United States.
Individual states may be able to regulate (but not outright prohibit) them. The CFTC may have difficulty claiming exclusive authority over these sites. It is common for states to regulate things in parallel with the federal government, as long as the states regulations are in addition to the federal regulations and do not attempt to replace the federal regulations.
It will take an act of Congress to change any of this. Good luck with that!
swap (Score:2)