A federal judge has blocked Minnesota from enforcing a ban on prediction markets that was set to take effect August 1, 2026, handing a win to Kalshi and Polymarket US as they fight a wave of state-level restrictions on their event-contract businesses. US District Judge Katherine Menendez issued the preliminary injunction on July 27, allowing both CFTC-regulated platforms to keep operating in the state while the underlying lawsuit plays out.

What the Minnesota Law Would Have Done

The Minnesota statute, had it taken effect as scheduled, would have prohibited the creation, operation, and advertising of prediction markets within the state, with criminal penalties attached for those found supporting such platforms. That made it one of the more aggressive state-level efforts to restrict the fast-growing prediction market sector, which has drawn scrutiny from regulators in multiple states even as it operates under federal CFTC oversight.

a person holding a tablet with a chart on it
Photo by Coinstash Australia on Unsplash

The Preemption Argument

Central to Judge Menendez's ruling was a finding that Kalshi and Polymarket US were likely to succeed, at least in part, on their claim that the federal Commodity Exchange Act preempts Minnesota's statute. The judge determined that several of the event contracts offered by the platforms qualify as swaps, which places them under the exclusive jurisdiction of the CFTC when traded on designated contract markets — a jurisdictional line that state law cannot override, according to the court's preliminary assessment.

A Narrow, Temporary Win

The injunction preserves the status quo rather than resolving the case outright. Judge Menendez cautioned that the order could later be narrowed if the plaintiffs are unable to demonstrate that every listed event contract meets the legal definition of a swap, leaving open the possibility that some products could still face state restrictions once the case is fully litigated.

The Minnesota case is one front in a wider battle playing out across several states as prediction markets attempt to establish that federal commodities law shields them from a patchwork of state-level bans and restrictions. The outcome in Minnesota, and the preemption reasoning behind it, is likely to be closely watched by regulators and platforms alike as similar disputes continue to unfold elsewhere.