Federal Judge Halts Minnesota’s Ban on Prediction Markets

The ruling provides a critical reprieve for Kalshi and Polymarket US, which faced a state law set to take effect August 1 that would have classified the operation or facilitation of prediction markets as a felony. Judge Menendez determined that the plaintiffs are likely to succeed on claims of federal preemption, noting that the Commodity Exchange Act grants the Commodity Futures Trading Commission (CFTC) exclusive jurisdiction over swaps traded on federally registered platforms. By blocking the law, the court preserved the current status quo while the underlying litigation proceeds toward a final judgment.

Despite the setback, the legal battle is far from resolved. Menendez explicitly declined to rule on First Amendment or implied-preemption arguments, and she signaled that the final scope of the injunction could narrow. She noted that not every event contract—ranging from weather futures to sports propositions—necessarily qualifies as a swap under federal law. Consequently, future rulings may distinguish between contracts with clear economic consequences and those that fall outside federal oversight. Minnesota Attorney General Keith Ellison, who argued that the state has a right to protect residents from unlicensed gambling, confirmed the state will continue to defend the statute. Meanwhile, the CFTC is moving forward with its own rulemaking process to establish stricter public-interest tests for event contracts, a move that will likely define the long-term boundaries for the industry.