A federal judge on Monday issued a preliminary injunction blocking Minnesota's prediction market ban, halting a law that would have made operating such markets a felony just days before its August 1 effective date. US District Judge Katherine Menendez ruled that the Commodity Exchange Act likely preempts the state statute, giving the Commodity Futures Trading Commission exclusive authority over swaps traded on designated contract markets.
A felony for predicting outcomes
The Minnesota law, codified as Minn. Stat. § 609.7615, would have made it a felony to create or operate a prediction market covering elections, sports, legal actions, pop culture, or statements by specific people. Advertising and providing data services for such markets also carried criminal penalties. Governor Tim Walz signed the legislation in May, and the CFTC filed its lawsuit shortly after.
Preemption and the Commodity Exchange Act
CFTC Chairman Michael Selig argued the ban would criminalize weather contracts used by Minnesota farmers for hedging. The court agreed that the Commodity Exchange Act likely preempts the state law, noting that Kalshi and Polymarket US are designated contract markets (DCMs) under federal law. However, Judge Menendez pointed out that not every event contract qualifies as a swap. She cited Kalshi markets on Love Island USA winners and World Cup announcer mentions as examples that likely fail the swap definition.
Because both sides briefed the case as all-or-nothing, the judge froze the entire statute rather than carving out a narrower remedy. “Little guidance was provided for a more tailored approach,” she wrote.
The harm to exchanges and users
Kalshi reported more than 90,000 verified Minnesota users as of May 26, with millions of dollars in open positions. That evidence supported a finding of irreparable harm if the law took effect. Sovereign immunity would also bar any recovery of damages if enforcement proceeded against state officials, the court noted.
First Amendment questions remain
The court did not address First Amendment claims raised by both exchanges. Those arguments, along with the preemption issue, await a full merits ruling. For now, the injunction keeps prediction markets open in Minnesota — but the legal fight is far from over.
