A U.S. federal judge on July 27 granted Kalshi, Polymarket US and the Commodity Futures Trading Commission preliminary relief from Minnesota’s prediction market ban.
Summary
- Judge Katherine Menendez blocked Minnesota’s prediction market law before its August 1 effective date statewide.
- The injunction protects CFTC-registered contract markets while three lawsuits continue toward final decisions on merits.
- Minnesota may seek narrower enforcement because the judge questioned whether every event contract qualifies legally.
Judge Katherine Menendez barred officials from enforcing Minnesota Statute 609.7615 against entities registered with the CFTC as designated contract markets. The July 27 order arrived five days before the law’s August 1 start date and remains effective until the court reaches a final decision.
Minnesota’s measure would make creating, operating or facilitating a covered prediction market a felony. It would also criminalize certain support, data and payment services, as well as advertising products that promote prohibited transactions. The state statute covers markets tied to sports, elections, government action, legal cases, popular culture and several other events. It was the first state measure designed to prohibit prediction markets directly, rather than applying an existing gaming law to selected contracts.
Kalshi and Polymarket won on federal preemption
Menendez found that the plaintiffs were likely to succeed, at least partly, on their express-preemption claims. The Commodity Exchange Act gives the CFTC “exclusive jurisdiction” over swaps traded on federally registered contract markets. The judge concluded that Minnesota’s across-the-board prohibition would probably reach many transactions reserved for federal oversight.
The court also found that the plaintiffs faced irreparable harm and that the balance of harms supported temporary relief. However, the ruling is not a final judgment that Minnesota’s law is invalid. Menendez described it as a preliminary assessment intended to preserve the existing position while the cases proceed. She did not decide the companies’ implied-preemption or First Amendment claims.
The temporary injunction could become narrower
The injunction protects CFTC-registered designated contract markets rather than every prediction market or event contract provider. Kalshi and QCX LLC, which operates as Polymarket US, are parties in separate cases considered alongside the federal government’s challenge during the preliminary-injunction process.
Menendez also rejected the idea that registration alone resolves every contract’s legal status. She said the plaintiffs had not shown that every event contract on the two platforms meets the federal definition of a swap. A weather or crop contract may have an economic consequence, while some sports propositions may not. Permanent relief could therefore cover fewer products than the current injunction.
Minnesota will continue defending its ban
Minnesota Attorney General Keith Ellison said he disagreed with the decision and would continue defending the law. He described prediction markets as gambling and argued that Minnesota may protect residents from unlicensed activity. Kalshi said the ruling confirmed that states cannot ban products outside their jurisdiction, while Polymarket also welcomed the order.
The Minnesota result does not settle the wider state-federal dispute. Massachusetts, Michigan, Nevada and Washington have obtained orders restricting parts of Kalshi’s activity. In related coverage, Kalshi and Polymarket lost bids to halt proceedings in Nevada and Washington, while a separate Michigan order temporarily restricted Kalshi’s sports contracts.
CFTC rules could shape what happens next
The three Minnesota lawsuits now move toward final decisions on the merits. The injunction keeps the challenged criminal provisions from applying to CFTC-registered contract markets during that process. The court may later examine specific contract categories and decide whether federal preemption protects all, some or none of them.
A parallel CFTC rulemaking may also define the boundary. The regulator’s June proposal would create a contract-by-contract process for reviewing event contracts involving gaming, war, terrorism, assassination or unlawful conduct. Its public-comment period closed on July 27. As previously reported, the proposed framework could directly affect Kalshi and Polymarket by establishing formal public-interest tests for listed contracts.
Earlier on July 27, the CFTC had asked the court to rule before the August 1 deadline and indicated that it could seek emergency appellate relief if no decision arrived. Kalshi and Polymarket joined that request. The injunction removed that immediate deadline, but Minnesota’s attorney general has made clear that the underlying jurisdiction dispute will continue.
