Market Ban Halted
Federal Judge Blocks Minnesota's Prediction Market Ban, Citing Likely Federal Law Preemption
Anonymous
Key Points
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The preliminary injunction specifically blocks enforcement of Minnesota's ban against entities that are registered as designated contract markets (DCMs) with the CFTC, with the court noting the statute may not be preempted in all its applications, implying some provisions could be challenged later.
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The judge cited concrete examples of Kalshi and Polymarket hosting event contracts that fit the legal definition of 'swaps' under federal law, reinforcing the CFTC's claim that federal regulation preempts state action.
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CFTC Chair Michael S. Selig characterized Minnesota's law as effectively turning lawful operators and participants in prediction markets into felons overnight, illustrating the federal government's adversarial stance to the ban.
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Kalshi—the company behind one of the lawsuits—has faced regulatory pushback in other states, with courts in Massachusetts, Michigan, Nevada and Washington securing orders that restrict its activities, underscoring the broader national conflict over prediction markets.
A federal judge blocked Minnesota from enforcing its first-in-the-nation ban on prediction markets just days before it was set to take effect on August 1, CBS News reported. Judge Katherine Menendez granted a preliminary injunction, pausing the law while lawsuits from the Commodity Futures Trading Commission (CFTC), Kalshi, and Polymarket move through court.
The law would have made operating or advertising a prediction market a felony, with penalties of up to five years in prison and heavy fines, according to Value the Markets. The judge ruled that federal law likely overrides the state ban — at least for platforms already registered with the federal government.
Federal Law Likely Trumps Minnesota's Prediction Market Ban
The core legal argument is about preemption. The Commodity Exchange Act gives the CFTC sole authority to regulate event contracts — financial agreements tied to real-world outcomes. Minnesota's law clashed directly with that federal authority, Bloomingbit reported. Judge Menendez found the state law is likely preempted, meaning federal rules take precedence.
The injunction specifically protects platforms registered as designated contract markets (DCMs) with the CFTC. The judge cited concrete examples of Kalshi and Polymarket hosting contracts that legally qualify as 'swaps' — a type of financial instrument regulated exclusively at the federal level. The court noted the law may not be preempted in every possible application, leaving room for future challenges.
CFTC Says Minnesota Would Have Turned Legal Traders Into Felons
The CFTC filed its own lawsuit alongside Kalshi and Polymarket, taking an unusually aggressive stance against a state law. CFTC Chair Michael S. Selig said Minnesota's ban would have effectively turned lawful operators and participants in prediction markets into felons overnight, according to NY Post.
Minnesota had tried to carve out some exceptions — crop futures were still allowed. But the state still sought to ban short-term weather-related bets and block advertising for prediction markets. The CFTC argued this created direct conflict with federally registered exchanges operating legally under federal oversight.
Kalshi and Polymarket Warned of Irreparable Business Harm
Kalshi and Polymarket argued the ban would cause irreparable harm to their businesses. They also raised a First Amendment claim, saying the advertising ban restricts speech tied to a lawful, nationally regulated market. The judge agreed the law posed enough risk to justify blocking it while the case proceeds, Head Topics reported.
This win is part of a broader national fight. Courts in Massachusetts, Michigan, Nevada, and Washington have issued orders restricting Kalshi's activities in those states, according to CBS News. Minnesota's case is now the most prominent federal clash over whether states can regulate — or ban — prediction markets at all.
Case Moves Fast as CFTC Eyes Appellate Review
The injunction preserves the status quo while expedited litigation continues. The ruling does not decide the final outcome — it only means the judge found the challengers are likely to win on the merits. The CFTC has signaled it will seek appellate review if needed, according to Value the Markets.
For now, platforms like Kalshi and Polymarket can keep operating in Minnesota. The case could set a national precedent for how far states can go in restricting federally regulated financial markets — and whether prediction markets are here to stay as a legal product across all 50 states.
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