#MinnesotaPredictionMarketBanBlocked

Federal Judge Blocks Minnesota's Prediction Market Ban, Delivering Industry's Biggest Legal Victory

A federal judge has halted Minnesota's first-in-the-nation prediction market ban just days before it was set to take effect on August 1 . The ruling grants a preliminary injunction against the law, which would have made operating or advertising prediction markets a felony punishable by up to five years in prison and a $10,000 fine .

The Ruling: Federal Preemption Prevails

U.S. District Judge Katherine Menendez ruled that the plaintiffs—Kalshi, Polymarket, and the Commodity Futures Trading Commission—are "likely to succeed on the merits" in their argument that federal law preempts the state ban . The judge found that event contracts offered by these platforms qualify as "swaps" under the Commodity Exchange Act, giving the CFTC exclusive jurisdiction to regulate them .

The ruling allows Kalshi and Polymarket to continue operating in Minnesota while the litigation proceeds . However, Menendez noted that the injunction could eventually be narrowed, as the plaintiffs have not shown that every event contract listed on their platforms meets the legal definition of a "swap" .

The Law and Its Implications

Minnesota Governor Tim Walz signed the measure into law on May 18, making the state the first to enact a direct ban on prediction markets rather than targeting them through existing gaming laws . The ban was embedded in a broader public safety bill and would have prohibited wagering on topics including sports, weather, popular culture events, war, and death .

The CFTC, Kalshi, and Polymarket filed lawsuits arguing that the state law infringes on the CFTC's regulatory authority over derivatives markets . CFTC Chairman Michael Selig called the Minnesota law an attempt to turn "lawful operators and participants in prediction markets into felons overnight" .

What This Means for the Industry

This is the industry's largest legal victory to date. If federal preemption is affirmed in the final ruling, it could set a precedent for challenging similar bans in other states . Minnesota isn't alone—Rhode Island, New Jersey, and California are attempting similar crackdowns, and other states have pursued enforcement through existing gambling laws .

Minnesota Attorney General Keith Ellison said the state will "respectfully disagree" with the court's decision and believes the "proper 'status quo' to maintain is one that allows predatory gambling apps to proliferate" . The preliminary injunction will remain in place until a final decision on the merits is reached .

What to Watch

The case now moves to a full trial on the merits. The ruling provides breathing room for prediction market operators, but the final outcome remains uncertain. If the court ultimately affirms federal preemption, it could protect prediction markets from similar state-level bans across the country. If the ruling is narrowed or overturned, it could open the door for states to regulate or ban event contracts more aggressively. For now, the injunction maintains the status quo while the legal battle continues .