A federal judge blocked Minnesota’s prediction market ban days before its August 1 effective date, granting a preliminary injunction that bars enforcement against CFTC-registered designated contract markets such as Kalshi and Polymarket US while the case proceeds. The court found the Commodity Exchange Act likely preempts the state statute for swaps traded on DCMs, noting Kalshi had over 90,000 verified Minnesota users as of May 26 and millions of dollars in open positions, though the judge said some event contracts may not qualify as swaps and final relief could be narrower. The ruling reduces immediate state regulatory risk for crypto prediction markets and preserves CFTC authority over DeFi/derivatives products.

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In Brief

Judge Katherine Menendez blocked Minnesota's prediction market ban days before August 1.
The court found the CEA likely preempts the law for CFTC-registered markets.
Kalshi reported over 90,000 verified Minnesota users as of May 26.

A federal judge blocked Minnesota’s prediction market ban on Monday, handing Kalshi, Polymarket US, and the Commodity Futures Trading Commission (CFTC) a preliminary injunction days before the law’s August 1 effective date.

US District Judge Katherine Menendez found the Commodity Exchange Act (CEA) likely preempts the statute. Her order bars enforcement against CFTC-registered designated contract markets (DCMs) until a final merits decision.

Why the Court Found Federal Law Likely Preempts Minnesota’s Statute

Menendez issued the order in 3 related cases against Minnesota, Attorney General Keith Ellison, Governor Tim Walz, and other state officials. Kalshi, Polymarket US, and the federal government each won their injunction motions.

Minnesota’s law, Minn. Stat. § 609.7615, makes operating or creating a prediction market a felony. It covers sports, elections, legal actions, pop culture, and statements by specific people. Advertising and providing data services also carry criminal penalties.

The CFTC filed its lawsuit in May, after Walz signed the legislation. Chairman Michael Selig argued the ban would criminalize weather contracts that Minnesota farmers use for hedging.

Menendez ruled that the CEA gives the CFTC exclusive jurisdiction over swaps traded on DCMs. She found many contracts on both platforms, including election and geopolitical markets, that likely qualify as swaps. Consequently, Minnesota likely cannot regulate them.

“Kalshi and Polymarket US are designated contract markets, so the CFTC has exclusive jurisdiction to regulate transactions involving those swaps,” the order read.

Judge Signals Final Relief Could Be Narrower

However, Menendez stressed that not every event contract fits the swap definition. She pointed to Kalshi markets on Love Island USA winners and World Cup announcer mentions as likely failing the test.

Both sides briefed the case as all-or-nothing, she noted. That left the court little guidance for crafting a narrower remedy, so she froze the entire statute for now.

Irreparable harm weighed heavily in the decision. Kalshi reported over 90,000 verified Minnesota users as of May 26, with millions of dollars in open positions. Sovereign immunity would bar any recovery of damages if enforcement proceeded.

The court did not address the First Amendment claims raised by both exchanges. Those questions, along with the implied preemption issue, now await a full merits ruling.

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