Cryptocurrency

Federal judge blocks Minnesota’s prediction-market ban

Judge Katherine Menendez granted Kalshi, Polymarket and the CFTC a preliminary injunction, finding the state law likely violates federal commodities law.

A federal judge has temporarily blocked Minnesota from enforcing its new ban on prediction markets, handing a win to Kalshi, Polymarket US and the Commodity Futures Trading Commission. U.S. District Judge Katherine Menendez, of the District of Minnesota, issued the preliminary injunction Monday, ruling the state law likely runs afoul of the federal Commodity Exchange Act.

Minnesota passed the prohibition earlier this year and Governor Tim Walz signed it in May, making it the first statewide ban of its kind, though observers doubted it would ever see enforcement. The law was scheduled to take effect Saturday and would have criminalized the creation, operation and advertising of prediction markets in the state.

Kalshi, Polymarket and the CFTC sued after the statute passed, arguing it intrudes on the CFTC’s jurisdiction over “swaps,” the structure that prediction-market contracts take. The platforms and the federal regulator told the court they would suffer irreparable harm without a halt, and the judge agreed to pause the law until a final decision on the merits is reached, according to CoinDesk.

What the prediction market ruling means

In her order, Judge Menendez wrote that the plaintiffs “have met their burden to show they are likely to succeed on the merits of their express-preemption claims, at least as to the application of Minnesota’s law to many of the trades listed on Kalshi’s and Polymarket US’s platforms.” The question, she said, turns on whether the state law tries to regulate event contracts that qualify as swaps under the CEA.

The judge cautioned the injunction could later be narrowed, since not every contract on the platforms clearly meets the swap definition. She pointed to predictions about who wins the TV program “Love Island” as an example that might still fall within Minnesota’s reach, but said tailoring the order to those issues would be difficult.

CFTC Chairman Michael S. Selig, joining the Trump administration’s suit, argued in May that the legislation “represents the most aggressive move by a state to shut down CFTC-regulated markets and undermine the federal regulatory regime set up by Congress more than 50 years ago.” The CFTC warned the court that absent a ruling by July 28 it would treat its motion as denied and begin an appeal.

Why the fight is bigger than Minnesota

The ruling lands as prediction markets push further into mainstream finance and politics. Kalshi has built out election and event hubs while Polymarket’s volume has drawn both users and regulators, and the companies have framed state bans as threats to a federally overseen market.

The injunction keeps both platforms live in Minnesota while litigation proceeds, but the underlying preemption fight is far from settled. Other states are watching whether federal swap jurisdiction precludes their own restrictions, a question the courts have only begun to test.

For now the platforms operate under the status quo the judge sought to preserve, with the CFTC backing their federal footing. The decision follows a year of expanding interest in event contracts, from sports and politics to macro calls tracked by Polymarket Fed odds and new entrants such as the Fanatics BGC exchange.

FAQ

Q1. Which judge blocked Minnesota’s prediction-market ban?

A1. U.S. District Judge Katherine Menendez, of the District of Minnesota, granted the preliminary injunction on Monday against the state law.

Q2. Why did the court say the ban likely fails?

A2. The judge found the plaintiffs likely to succeed on claims that the Commodity Exchange Act preempts the state law, because many prediction-market contracts qualify as federally regulated swaps.

Q3. Does the injunction last forever?

A3. No. The preliminary injunction stays in place until a final decision on the merits is reached, and the judge cautioned it could later be narrowed to exclude contracts that are not swaps.