On July 27, a U.S. federal judge blocked Minnesota’s new law banning prediction markets, just days before it was set to take effect on August 1. The injunction protects platforms like Kalshi and Polymarket US, along with the Commodity Futures Trading Commission (CFTC), allowing them to operate while ongoing lawsuits challenge the state statute.
Judge’s Ruling and Its Impact
Judge Katherine Menendez issued the preliminary injunction to stop enforcement of Minnesota Statute 609.7615 against CFTC-registered designated contract markets. The law would have criminalized running or facilitating certain prediction markets, making these activities felonies. It also targeted services supporting such markets, including data providers and advertisers. The statute covered markets related to sports, elections, government decisions, legal cases, and pop culture events.
The judge sided with the plaintiffs, agreeing they are likely to prove that federal law preempts Minnesota’s ban. Specifically, the Commodity Exchange Act grants the CFTC exclusive jurisdiction over swaps traded on federally registered contract markets, which the state law would block. Menendez emphasized this as a preliminary ruling meant to preserve the current state until the cases reach final decisions. She did not rule on other claims involving free speech or implied preemption.
The protection is currently limited to contract markets registered with the CFTC, so not all prediction market operators are covered. Kalshi and QCX LLC, the entity behind Polymarket US, are involved in separate but related cases considered alongside the federal government’s challenge.
While the injunction halts Minnesota’s broad ban for now, the judge indicated it might be narrowed in the future. Minnesota officials could seek enforcement only against specific event contracts if they argue those fall outside federal jurisdiction.
This legal battle marks a significant development for the regulation of prediction markets, which have faced a patchwork of state laws. For example, Kalshi and Polymarket’s ability to continue operations contrasts with earlier crackdowns in other jurisdictions. The ruling also highlights the CFTC’s role in overseeing these platforms, reaffirming its authority over derivatives trading.
