A federal judge on Monday blocked Minnesota from enforcing a newly enacted law that made the state the first nationally to outright ban prediction markets like those run by Kalshi and Polymarket.
District Judge Katherine Menendez in Minneapolis issued a preliminary injunction at the behest of Kalshi, Polymarket and the Commodity Futures Trading Commission after finding that federal law likely preempted the state law, which was set to take effect on Saturday.
The companies, CFTC and Minnesota’s attorney general did not immediately respond to requests for comment.
The federal regulator and the two companies had sued after Democratic Governor Tim Walz signed the measure into law in May, making it a crime to operate, host or promote a prediction market in Minnesota.
Such platforms, which allow users to profit from predictions on a wide range of real-world events including sports and elections, are at the center of a battle over the power of state gaming regulators to police the multibillion-dollar prediction market industry.
Minnesota’s law directly targeted prediction markets, in contrast to other states that have in a series of court cases argued that the companies are running unlicensed wagering operations that run afoul of preexisting state gaming laws.
In Kalshi’s case, Massachusetts, Michigan, Nevada and Washington state have secured court orders that would restrict its activities.
Under President Trump’s administration, the CFTC has shared the companies’ position that event contracts users can trade on their prediction markets fall exclusively under the agency’s jurisdiction to regulate “swaps,” a type of derivative contract, and that states cannot regulate them.
Menendez, who was appointed by Democratic President Joe Biden, agreed, saying there were several examples of event contracts hosted by Kalshi and Polymarket, both CFTC-regulated entities, that fit the legal definition of a “swap.”
She stressed that at a later stage in the case she might issue a narrower injunction if she were to conclude that not every type of event contract listed on Kalshi and Polymarket fits that definition.
“But given the unique nature of Minnesota’s prediction market statute, the posture of these cases, and the imminent effective date of Minnesota’s statute, a preliminary injunction maintaining the status quo until the merits of this case can be fully resolved is appropriate,” she wrote.
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