A federal judge on Monday issued a preliminary injunction blocking Minnesota from enforcing a law that would have made the state the first nationally to ban prediction markets. The ruling came after the prediction market operators Kalshi and Polymarket, along with the Commodity Futures Trading Commission (CFTC), filed a lawsuit arguing that federal law preempts the state's ban.
District Judge Katherine Menendez stated that federal law likely preempts the Minnesota statute, which was set to take effect on Saturday. The injunction maintains the status quo until the merits of the case can be fully resolved.
Governor Tim Walz signed the measure into law in May, criminalizing the operation, hosting, or promotion of prediction markets within Minnesota. These platforms allow users to trade on the outcomes of various real-world events, including sports and elections.
The lawsuit argued that the event contracts traded on platforms like Kalshi and Polymarket fall under the exclusive jurisdiction of the CFTC as a type of derivative contract known as a "swap." Judge Menendez agreed that several of the event contracts fit the legal definition of a swap, supporting the argument for federal preemption. She noted, however, that a narrower injunction might be considered later if not all event contracts on the platforms qualify as swaps.
This decision contrasts with actions taken in other states, where authorities have pursued legal challenges against prediction market companies for operating unlicensed wagering operations under existing state gaming laws. Kalshi, for instance, has faced court orders restricting its activities in Massachusetts, Michigan, Nevada, and Washington state. Minnesota's law, however, directly targeted prediction markets as a category.