Federal Judge Blocks Minnesota's Prediction Market Ban Before It Takes Effect
Key Takeaways:
- A federal judge granted Kalshi, Polymarket, and the CFTC a preliminary injunction pausing Minnesota's first-in-the-nation prediction market ban.
- The court found the ban is likely preempted by the federal Commodity Exchange Act, which gives the CFTC exclusive jurisdiction over "swaps."
- Minnesota may still be able to prohibit some wagers, and the case now heads toward a full trial on the merits.
A federal judge has blocked Minnesota from enforcing the first US state law to ban prediction markets, just days before it was scheduled to take effect.
On July 27, 2026, US District Judge Katherine Menendez granted Kalshi, Polymarket US, and the Commodity Futures Trading Commission (CFTC) a preliminary injunction, ruling that the state ban is likely preempted by federal law and cannot be enforced pending the outcome of the case.
What The Court Ruled
Minnesota passed its prediction market statute in May 2026, becoming the first state in the country to criminalize the creation, operation, and advertising of prediction markets. The law was set to take effect on August 1, 2026, and carried criminal penalties for operators and for anyone supporting the markets.
The federal government and the two largest prediction market platforms pushed back quickly. Kalshi, Polymarket US, and the CFTC each sued the state, and the cases were consolidated before Judge Menendez in the District of Minnesota.
In her order, the judge found that the plaintiffs had met their burden to show they are "likely to succeed on the merits" of their claim that the Commodity Exchange Act (CEA) preempts the state ban. That finding was enough to justify pausing the law before it took effect.
Why Federal Law Overrides The State Ban
At the heart of the dispute is whether the event contracts traded on Kalshi and Polymarket qualify as "swaps." Under federal law, swaps fall under the CFTC's exclusive jurisdiction, leaving no room for a state to ban them outright.
Menendez wrote that many of the contracts listed on the two platforms fit the definition of a swap because they turn on events with clear "economic, financial, or commercial consequences." Because both companies operate as CFTC-designated contract markets, she concluded, the federal regulator holds exclusive authority over those trades. The full preliminary injunction order lays out the reasoning in detail.
What Minnesota Can Still Do
The ruling is not a total loss for the state.
Menendez was careful to note that the injunction turns on which specific trades count as swaps, and that some contracts offered on prediction markets might fall outside that definition.
That leaves the door open for Minnesota to regulate or prohibit certain wagers once the case is fully litigated, particularly those that most closely resemble traditional sports betting.
State lawmakers had framed the markets as effectively gambling and passed the ban to protect residents from the harms they associate with it.
What Happens Next
The preliminary injunction only pauses the ban until a final decision on the merits, so the underlying question of who gets to regulate prediction markets remains unsettled. The Minnesota case is one front in a broader fight over who regulates prediction markets playing out in courts across the country, and the outcome could shape how far states can go in policing the fast-growing industry.
For now, Kalshi and Polymarket can keep operating in Minnesota while the litigation runs its course.
