Minnesota's prediction-market ban hits a wall in court 🧱

A US federal judge has temporarily blocked Minnesota from enforcing its new prediction-market ban against CFTC-regulated platforms Kalshi and Polymarket US, according to a July 27 court order granting the plaintiffs' motions for preliminary injunctions. US District Judge Katherine Menendez found that the plaintiffs were likely to succeed, at least in part, on claims that the Commodity Exchange Act preempts the Minnesota statute. The ruling allows the two platforms to continue operating in the state while litigation proceeds.

In her order, Menendez said several event contracts offered by the platforms appeared to qualify as swaps, giving the CFTC exclusive jurisdiction over transactions involving those contracts on designated contract markets. Minnesota's law, which was scheduled to take effect Aug. 1, would prohibit the creation, operation and advertising of prediction markets and impose criminal penalties for supporting them.

The judge cautioned that the injunction could eventually be narrowed because the plaintiffs had not shown that every event contract listed by Kalshi and Polymarket US met the legal definition of a swap. The order said a preliminary injunction was appropriate to maintain the status quo until the merits of the case could be fully resolved.

The Minnesota case is part of a broader wave of legal challenges to state-level restrictions on event-contract platforms, with similar fights playing out in Rhode Island and other jurisdictions. Outcome of the litigation will determine whether CFTC-regulated prediction markets can continue offering services to users in states that have moved to outlaw them.