Kalshi scored a legal win on July 27 when a federal judge halted Minnesota’s new ban on prediction markets just days before it was set to take effect on August 1. U.S. District Judge Katherine Menendez issued a preliminary injunction, siding with Kalshi, Polymarket, and the Commodity Futures Trading Commission (CFTC) who argued the state law conflicted with federal commodities regulations.
The judge’s decision hinges on the Commodity Exchange Act, under which she found several contracts involved likely qualify as swaps. This classification places them under exclusive federal oversight, limiting the state’s authority to regulate or outlaw such markets. Minnesota’s statute, passed by a large majority in May and signed by Governor Tim Walz, banned creation and operation of various prediction markets covering sports, elections, weather, and other events while criminalizing related advertisements.
The CFTC filed suit in May to prevent the ban, citing direct conflict with federal law and seeking to protect the operation of platforms like Kalshi and Polymarket. The ruling temporarily preserves market access in Minnesota, setting up a key legal test over federal preemption in the growing sector of event contracts, which carry significant implications for crypto-linked platforms and trading firms interested in prediction market products.
In the wake of this ruling, Kalshi and Polymarket remain operational in Minnesota as the broader legal battle unfolds. Market participants will be watching closely how this case shapes the regulatory landscape for federally supervised exchanges versus state-imposed restrictions.
Trading activity in related markets showed little immediate reaction following the judge’s order.
This content is for informational purposes and not financial advice.
