A federal judge has blocked Minnesota's ban on prediction markets, ruling that the state cannot treat every contract traded on those platforms as a swap under federal law. The decision, issued in the U.S. District Court for Minnesota, halts enforcement of the state's prohibition while the legal challenge proceeds.
The state's argument
Minnesota lawmakers passed the ban last year, arguing that prediction market contracts—where users bet on outcomes like election results or sports scores—are swaps under the Commodity Exchange Act. That classification would put them under the exclusive regulatory authority of the Commodity Futures Trading Commission, the state said. But the court disagreed.
The judge's reasoning
The judge found that the state's definition was too broad. Not every contract on a prediction market qualifies as a swap, the ruling said. Some contracts are simple bets that fall outside federal commodities law, meaning states can still regulate them—but not ban them outright under the guise of federal preemption. The decision did not strike down the entire state law, only its application to prediction markets.
What this means for prediction platforms
For companies like PredictIt and others that offer event-based contracts, the ruling is a temporary win. They can continue operating in Minnesota without fear of state penalties. The judge's order prevents the state from enforcing the ban while the case is litigated. But the legal fight is far from over. The state could appeal the preliminary injunction, and the CFTC may still weigh in with its own interpretation.
Unresolved questions
The ruling leaves open a key question: where exactly is the line between a regulated swap and a permissible prediction contract? The judge said it depends on the specific terms and structure of each contract. That ambiguity means more litigation is likely. The state has 30 days to decide whether to appeal the injunction to the Eighth Circuit Court of Appeals.
