Federal Judge Blocks Minnesota's Prediction Market Ban

A federal judge has temporarily stopped Minnesota from enforcing a newly enacted ban on prediction markets, concluding the measure likely conflicts with the federal Commodity Exchange Act (CEA). U.S. District Judge Katherine Menendez in Minnesota granted a preliminary injunction sought by Kalshi, Polymarket and the Commodity Futures Trading Commission (CFTC). In a ruling issued Monday, she said the state law appears to be preempted by the CEA and that the plaintiffs "are likely to succeed" in proving that at trial. Minnesota passed the statute earlier this year, making operation of prediction markets a criminal offense in the state. Kalshi, Polymarket and the CFTC sued, arguing the law intrudes on the CFTC's authority to regulate "swaps," the category under which the companies say many event-based contracts on their platforms are structured. In her decision, Menendez wrote that the outcome turns largely on whether the Minnesota statute is attempting to regulate event contracts that qualify as "swaps" under the CEA. She said the plaintiffs had met their burden to show they are likely to prevail on their express-preemption claims, at least as applied to many trades listed on Kalshi's and Polymarket US's platforms. The judge noted some contracts could fall within the state's intended reach, citing wagers tied to who might win the TV show "Love Island" as an example, but said it would be difficult to tailor a preliminary injunction only to those limited categories. She also found that allowing the law to take effect would cause "irreparable harm" to Kalshi and Polymarket. The injunction remains in place until a final decision is reached on the merits of the case.