Minnesota prediction markets ban blocked by federal judge

A federal judge blocked the Minnesota prediction markets ban days before it was set to take effect, keeping platforms such as Kalshi and Polymarket US operating in the state while the case continues. The order matters because Minnesota was the first state to pass a full prohibition, and the lawsuit tests whether federal commodities law overrides state gambling rules for at least some event contracts.

The Trump administration, the US Commodity Futures Trading Commission, Kalshi and Polymarket sued after Minnesota enacted the law in May. US District Judge Katherine Menendez of the District of Minnesota issued a preliminary injunction against enforcement of the statute, which had been scheduled to begin on August 1.

Why did the judge block the Minnesota prediction markets ban?

Menendez said the challengers had shown they were likely to win on at least part of their claim that federal law preempts Minnesota’s statute. The key issue, according to the court, is whether prediction-market event contracts qualify as “swaps” under the Commodity Exchange Act.

Under federal law, swaps can include contracts whose payout depends on whether an event happens when that event carries a potential financial, economic or commercial consequence. Menendez wrote that several contracts listed by Kalshi and Polymarket US appear to meet that standard, and that the CFTC has exclusive authority over swap transactions on designated contract markets.

Prediction markets offer contracts tied to future events, such as elections, sports-related outcomes or commercial developments. Menendez pointed to examples including a US Senate race, which NBA team would sign LeBron James, the World Cup winner and the timing of restored traffic in the Strait of Hormuz as markets that appear closely connected to economic or commercial consequences.

Which prediction markets could still face state limits?

The ruling does not give Kalshi and Polymarket US a complete victory. Menendez said the platforms had not shown that every event contract they list is a swap, meaning Minnesota may still be able to restrict some markets after fuller litigation.

The judge cited contracts tied to the winner of season eight of Love Island USA and to words used by announcers during World Cup broadcasts as examples that do not appear to fit the federal definition. If those kinds of contracts fall outside CFTC-only authority, the court said, Minnesota’s claims would be stronger.

Menendez said any final injunction could be narrower than the temporary order now in place. She also stressed that the ruling was not a final decision on whether the Commodity Exchange Act preempts the Minnesota law.

What did Minnesota say?

Minnesota Attorney General Keith Ellison said he disagreed with the court’s view of the status quo and would continue defending the law. In a statement, Ellison said the case raises complex issues that are difficult to resolve quickly without a fuller factual record.

Ellison also described prediction markets as gambling and said Minnesota has the right to keep what he called predatory gambling out of its communities. He did not say whether the state would ask an appeals court to reverse the preliminary injunction.

Menendez wrote that Minnesota argued swaps should be limited to event contracts tied to commodities. The judge rejected that reading at this stage, saying the federal definition does not contain that limitation and noting that other courts have treated sports-outcome event contracts as falling within the law’s scope.

The fight is one of several over whether states can regulate prediction markets through gambling laws. Courts have reached different conclusions, according to the reported rulings, increasing the chance that the question eventually reaches the Supreme Court.

This story draws on original reporting from Ars Technica.