A federal judge has temporarily blocked Minnesota's new law banning prediction markets, just days before it was scheduled to take effect. The decision marks the latest development in a growing conflict between states seeking to regulate or outlaw these platforms and federal regulators asserting their authority.
U.S. District Judge Katherine Menendez found that the Commodity Futures Trading Commission (CFTC), along with prediction market operators Kalshi and Polymarket, are likely to succeed in their challenge to the law. The judge ruled that allowing the ban to take effect would cause “irreparable harm” to the operators.
The blocked law, which was set to take effect Saturday, would have made it a crime to create, operate, or assist in administering prediction markets. The injunction means the law will remain blocked while the lawsuit proceeds.
Kalshi, Polymarket, and the CFTC are seeking to have the law permanently blocked. They argue that federal law grants the CFTC exclusive jurisdiction to regulate "event-contract transactions" like those offered by the platforms. Conversely, states contend that many prediction market activities, particularly those related to sports events, constitute sports betting, which falls under state regulatory power.
Minnesota Attorney General Keith Ellison stated that prediction markets are "gambling, plain and simple," and that Minnesota has the right to exclude such activities from its communities. Ellison indicated his office disagrees with the court's decision to maintain a status quo that permits these platforms to operate but plans to continue defending the state's law.
Representatives for Polymarket and Kalshi expressed satisfaction with the ruling. Neal Kumar, Polymarket's chief legal officer, stated that the decision clarifies that prediction markets on CFTC-registered exchanges are governed by federal law, not a fragmented set of state rules. Kalshi spokesperson Elisabeth Diana added that states cannot ban activities over which they lack jurisdiction.
This ruling follows a February statement from the head of the CFTC, appointed by President Donald Trump, who declared the agency would no longer passively observe states attempting to regulate or ban prediction markets, thereby undermining federal authority. A growing number of lawsuits have emerged as states attempt to use gambling laws to shut down prediction market operators, classifying them as illegal, unlicensed gambling businesses.
In April, the federal government filed lawsuits against Connecticut, Arizona, and Illinois challenging their regulatory actions against prediction market operators. New York also initiated legal action against Coinbase and Gemini, two companies that have recently entered the prediction market industry.
The American Gaming Association estimates that states have lost over $1.2 billion in tax revenue from wagers since prediction markets began offering contracts based on sports events. Native American tribal leaders and gambling regulators have also voiced concerns, asserting that betting on outcomes of sporting events, elections, and other occurrences constitutes unlawful gambling.
Meanwhile, the CFTC has initiated a rulemaking process to determine which types of event contracts it might deem "contrary to the public interest" and subsequently prohibit from being listed on regulated prediction markets.