Judge Halts Minnesota’s Prediction Market Ban

U.S. District Judge Katherine Menendez issued a July 27 order granting preliminary injunctions that bar Minnesota from enforcing its new law against Kalshi and Polymarket US while the case proceeds. The judge found the plaintiffs were likely to succeed, at least in part, on a claim that federal law preempts the state statute.

Judge Menendez said several event contracts offered by the platforms appear to meet the legal definition of swaps. Under the Commodity Exchange Act, swaps fall under the Commodity Futures Trading Commission’s exclusive jurisdiction when traded on designated contract markets, a point at the center of the plaintiffs’ preemption argument.

Minnesota’s law was scheduled to take effect on Aug. 1 and would have made it a crime to create, operate or advertise prediction markets in the state, and to support such markets. The preliminary injunction prevents the state from enforcing those prohibitions against the named platforms while the court considers the full merits of the dispute.

The judge cautioned the injunction could be narrowed later. The plaintiffs did not show that every event contract listed by Kalshi and Polymarket US satisfies the statutory swap definition, so some contracts might fall outside CFTC jurisdiction and remain subject to state law.

Prediction markets allow users to buy and sell contracts tied to the outcomes of future events. When those contracts are structured as swaps and listed on regulated venues, federal law treats them as derivatives and assigns oversight to the CFTC. Kalshi and Polymarket US operate platforms that list such contracts and argued Minnesota’s ban conflicted with federal regulatory authority.

The case will continue with further briefs and hearings to determine whether the Minnesota statute is fully preempted and which contracts, if any, fall outside CFTC oversight. Until a final ruling, Kalshi and Polymarket US may keep offering the challenged contracts to users in Minnesota.