Hassan Maishera
TL;DR
-
A federal judge has temporarily blocked Minnesota from enforcing its new prediction market ban.
-
The ruling allows Kalshi and Polymarket to continue operating in the state while the lawsuit proceeds.
-
The court found the law is likely preempted by the federal Commodity Exchange Act, which grants the CFTC authority over certain derivatives markets.
A federal judge has temporarily blocked Minnesota from enforcing its new law banning prediction markets, giving Kalshi and Polymarket a significant legal victory as the broader battle over prediction market regulation continues across the United States.
The ruling allows both platforms to continue operating in Minnesota while litigation moves forward over whether the state has the authority to regulate federally supervised prediction markets.
Judge Grants Preliminary Injunction Before Law Takes Effect
U.S. District Judge Katherine Menendez granted a preliminary injunction on Monday in response to a request filed by the Commodity Futures Trading Commission (CFTC), Kalshi, and Polymarket.
The decision prevents Minnesota from enforcing legislation passed earlier this year that prohibits the creation, operation, and advertising of prediction markets within the state.
The law was scheduled to take effect on August 1. A preliminary injunction preserves the existing legal framework while the court considers the underlying case, allowing the platforms to continue offering their services in Minnesota for now.
The CFTC, Kalshi, and Polymarket filed their lawsuit in May, arguing that Minnesota's law conflicts with federal regulations governing derivatives markets.
The plaintiffs contend that prediction market contracts traded on federally regulated Designated Contract Markets (DCMs) fall under the exclusive jurisdiction of the CFTC through the Commodity Exchange Act (CEA).
According to the lawsuit, individual states cannot impose regulations that interfere with markets overseen by the federal regulator.
Court Says Federal Law Likely Overrides State Ban
In her ruling, Judge Menendez indicated that Minnesota's prediction market statute is likely preempted, at least in part, by federal law.
She concluded that the Commodity Exchange Act grants the CFTC exclusive authority over transactions involving swaps traded on designated contract markets, making it likely that portions of Minnesota's legislation conflict with federal oversight.
The judge added that temporarily blocking enforcement of the law represents the appropriate balance while the legal dispute is resolved and helps preserve the status quo.
While the Minnesota decision marks a notable victory for prediction market operators, Kalshi continues to face legal challenges in several other jurisdictions.
On the same day as the Minnesota ruling, U.S. District Judge Analisa Torres of the Southern District of New York denied Kalshi's request for an emergency injunction pending appeal. Earlier in July, the court also rejected the company's motion for a preliminary injunction against New York regulators.
Kalshi has also encountered setbacks elsewhere:
-
A Michigan judge issued a temporary restraining order preventing the platform from offering sports-related event contracts in the state.
-
A Washington court recently granted a temporary order blocking Kalshi's sports-event contracts after determining the products likely constitute illegal gambling under state law.
These rulings highlight the growing legal divide between federal oversight of prediction markets and individual states seeking to regulate or prohibit certain event-based contracts.
Kalshi and Polymarket Continue to Dominate Prediction Markets
Despite the ongoing legal uncertainty, Kalshi and Polymarket remain the largest prediction market platforms by trading volume.
According to industry data, Kalshi recorded approximately $33 billion in monthly trading volume during June, while Polymarket and its U.S. platform generated a combined $13.95 billion over the same period.
As legal battles continue across multiple states, future court decisions could play a pivotal role in determining how prediction markets are regulated throughout the United States.
