Minnesota's Prediction Market Ban Hits Pause, Kalshi and Polymarket Stay in the Game 🟢

A US federal judge temporarily blocked Minnesota from enforcing its new prediction market ban against CFTC-regulated platforms Kalshi and Polymarket US, issuing a preliminary injunction Monday in a 44-page order ahead of the statute's Aug. 1 effective date. US District Judge Katherine Menendez found the plaintiffs likely to succeed, at least in part, on claims that the Commodity Exchange Act preempts the Minnesota statute. The order bars enforcement against exchanges registered with the CFTC as designated contract markets and holds until a decision on the merits. Minnesota's law, SF 3432, would have prohibited the creation, operation and advertising of prediction markets and imposed criminal penalties for supporting them. The injunction allows the platforms to continue operating in the state while litigation proceeds.

Menendez wrote that whether Minnesota's law is preempted turns on whether the trades at issue "qualify as 'swaps' within the meaning of the CEA." Contracts on Senate races, the World Cup winner and the reopening of the Strait of Hormuz clear that bar, she found, because they concern events with "clear potential economic, financial, or commercial consequences." Kalshi markets on who wins Love Island USA, or on what announcers say mid-match, likely do not. 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 CFTC confirmed at a July 2 hearing that its challenge is facial, which requires showing there is no set of circumstances in which the law would be valid. Menendez found the statute "may not be preempted in all its applications" and enjoined it anyway to preserve the status quo, faulting both sides for treating the dispute as "all-or-nothing propositions." Permanent relief, she wrote, "may be much narrower."

Minnesota Attorney General Keith Ellison said the state "respectfully disagree[s]" with the court's reading of the status quo, one he told Courthouse News "allows predatory gambling apps to proliferate." His memorandum argued the platforms could satisfy federal requirements while restricting what they offer in the state. The order landed a day before a deadline the agency set itself. In a July 24 letter, the CFTC told Menendez that absent a ruling or stay by close of business Tuesday it would treat its motion as "constructively denied" and seek interim relief from the Eighth Circuit. Kalshi and Polymarket said they would do the same.

The Justice Department and the CFTC jointly filed lawsuits Thursday against Illinois, Arizona and Connecticut, coming to the aid of prediction markets in the latest escalation of an ongoing jurisdictional battle over the novel sector. In the lawsuits, the Trump administration argues the CFTC has exclusive jurisdiction to regulate sports-related wagers on popular prediction market platforms including Polymarket and Kalshi. The CFTC has sued multiple states, among them Illinois, Arizona, Connecticut, Wisconsin and Minnesota, where the DOJ and the agency filed within hours of the bill becoming law. Kalshi followed days later.