Federal Judge Halts Minnesota Law Targeting Prediction Markets

A federal court has temporarily stopped Minnesota from enforcing a first-of-its-kind ban aimed at prediction markets, delivering an early procedural win for Kalshi, Polymarket and the U.S. Commodity Futures Trading Commission (CFTC). According to Reuters, U.S. District Judge Katherine Menendez issued a preliminary injunction after concluding the statute—scheduled to take effect Saturday—is likely preempted by the federal Commodity Exchange Act. The order allows Kalshi and Polymarket to keep offering event contracts to Minnesota users while the case moves forward. The fight began after Gov. Tim Walz signed legislation in May that made it a criminal offense to operate, host or promote prediction markets in the state. Minnesota took a different approach from other states that have challenged firms such as Kalshi under existing gaming laws, instead passing a measure specifically targeting prediction markets. Menendez said several event contracts offered by Kalshi and Polymarket likely qualify as "swaps" under federal law. Because swaps fall under CFTC oversight, she found federal law is likely to override Minnesota's ban. She added the injunction could be narrowed later if the court determines not every event contract on the platforms fits that definition, but said maintaining the status quo is appropriate while the court considers the merits. Both platforms welcomed the decision. Kalshi spokesperson Elisabeth Diana said the ruling confirms states cannot prohibit activities outside their jurisdiction. Minnesota Attorney General Keith Ellison said the state disagrees and will continue defending the law, arguing, "Prediction markets are gambling, plain and simple, and Minnesota has every right to keep predatory gambling out of our communities." The ruling lands as Kalshi continues to face legal restrictions in Massachusetts, Michigan, Nevada and Washington. The company has also tightened enforcement of its trading rules. In April, Kalshi suspended three U.S. political candidates after finding they traded contracts tied to elections in which they were running, calling the conduct political insider trading and a violation of its CFTC-approved rules. Minnesota State Senator Matt Klein and Texas candidate Ezekiel Enriquez each placed trades worth less than $100 on their own races, then accepted fines and five-year suspensions. Virginia candidate Mark Moran received a larger fine and a five-year ban after making multiple trades and refusing to settle; Moran said he made the bets to test Kalshi's enforcement process. A month later, federal prosecutors charged Google software engineer Michele Spagnuolo, known online as "AlphaRaccoon," with allegedly using confidential Google search data to earn about $1.2 million by trading on Polymarket. Authorities say he accessed nonpublic "Year in Search 2025" rankings before their release and placed bets in a related prediction market. The post "Minnesota's Prediction Market Ban Hits Legal Roadblock After Federal Court Ruling" appeared first on CryptoPotato.