Judge blocks Minnesota’s prediction market ban

A federal judge temporarily blocked Minnesota from enforcing its new ban on prediction markets, allowing Kalshi and Polymarket US to keep operating in the state while the lawsuit continues. U.S. District Judge Katherine Menendez issued the injunction on July 27, just days before the law was due to take effect on Aug. 1.

The Minnesota measure, signed by Gov. Tim Walz in May, would have made it a felony to create, operate or advertise a prediction market in the state. The statute defines a prediction market as a system that lets consumers place wagers on the future outcome of a specified event, and it also reaches activity connected to those markets.

In the injunction order, Menendez said the challengers were likely to succeed at least in part on federal pre-emption claims. KalshiEX LLC and QCX LLC, which does business as Polymarket US, both operate designated contract markets registered with the Commodity Futures Trading Commission, and the order said users on those platforms can buy event contracts tied to sports, politics, culture and other areas.

The companies argued that the Commodity Exchange Act gives the CFTC exclusive jurisdiction over event contracts traded on such markets. Menendez wrote that Minnesota’s statute “may not be preempted in all its applications,” but was likely pre-empted in many respects. She also said the court did not need to decide the First Amendment claims at this stage.

Minnesota argued that prediction markets were gambling and fell within the state’s oversight power. Attorney General Keith Ellison said prediction markets are “gambling, plain and simple,” and he said the state would keep defending the law. He also objected to the court’s view of the status quo, saying he disagreed with a result that would allow what he called predatory gambling apps to spread.

The injunction barred enforcement of the law against entities registered as designated contract markets with the CFTC. Michael Selig, the CFTC chair, called the ruling a halt to “aggressive state overreach” and said it was the second time a court had granted an injunction in favor of the agency’s jurisdiction over prediction markets.

Kalshi spokesperson Elisabeth Diana said the decision showed states cannot ban things they do not have jurisdiction over. Neal Kumar, the chief legal officer at Polymarket, said the opinion made clear that prediction markets on CFTC-registered exchanges are governed by federal law, not a patchwork of state rules.

The ruling added to a broader fight over who gets to police prediction markets as states try to use gambling laws to shut them down. Associated Press reported that a tangle of lawsuits is growing, and that in April the federal government sued Connecticut, Arizona and Illinois over their efforts to regulate prediction market operators. In Arizona, a federal judge had already blocked a criminal case against Kalshi on pre-emption grounds.