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U.S. District Judge Katherine Menendez hit pause on Minnesota’s prediction market ban Friday, days before it was set to take effect. Kalshi and Polymarket US can keep operating in the state — for now.
The ruling came out of a 44-page injunction blocking enforcement of Minnesota Statutes Section 609.7615 against CFTC-registered markets. Governor Tim Walz had signed the statute into law, and it was scheduled to go live August 1. The law was written broadly: it would have criminalized running a prediction market, helping one run, and even advertising prohibited transactions. Felony charges, not fines. That’s a pretty serious threat for any platform trying to stay in the state.
Kalshi and Polymarket US didn’t wait around.
The Federal Preemption Fight
Both platforms argued that the Commodity Exchange Act hands the CFTC exclusive authority over swaps traded on federally designated markets. Minnesota’s attempt to criminalize those same transactions, they said, runs straight into that federal wall. Menendez found the preemption argument compelling — at least enough to justify blocking enforcement while the case plays out.
She went further, though, and that’s where it gets complicated. Menendez identified certain contracts — ones tied to U.S. Senate elections, the World Cup — as likely qualifying as federal swaps. Federal jurisdiction probably covers those. But she wasn’t sold on everything. Contracts linked to entertainment events, reality TV outcomes specifically, raised her eyebrows. She questioned whether those even meet the swap definition, given the absence of real financial consequences. So not every prediction market contract is treated the same here, and that distinction matters a lot going forward.
The practical problem was timing. Menendez said she couldn’t realistically administer a contract-by-contract injunction before August 1. Going through each contract type and sorting federal from non-federal before the deadline wasn’t feasible. So she blocked the statute’s enforcement against all CFTC-registered markets as a whole — a broader shield than either platform might have expected, at least temporarily.
Without the injunction, Kalshi and Polymarket US said they’d have had to pull out of Minnesota entirely. They can’t sue the state for damages because of sovereign immunity, so their only real option was an injunction or an exit. The judge clearly weighed that.
States and the CFTC, Still at War
Minnesota’s law isn’t sitting in isolation. It’s part of a messy, sprawling national fight over who gets to regulate prediction markets — and the map is genuinely chaotic right now.
Massachusetts, Michigan, and Nevada have all obtained orders restricting Kalshi. New Jersey and Washington have produced varying court decisions. Over 40 states are pushing back against the CFTC’s claim of authority over sports event contracts specifically. That’s not a fringe position — that’s most of the country.
Minnesota Attorney General Keith Ellison didn’t take the ruling quietly. He called the platforms gambling operations and made clear he disagrees with the court’s read of federal preemption. The state had signed off on a similar ban before SF 3432 — the statute at issue now — replaced earlier provisions that were also challenged in court. Minnesota’s approach is genuinely novel: it’s the first state to try criminal penalties rather than leaning on traditional gambling law frameworks.
The CFTC had its own urgency here. The agency had pushed for a fast decision, with the possibility of an appeal to the Eighth Circuit if no ruling landed by July 28. Menendez came in just before that deadline. Whether the CFTC or Minnesota takes this to the Eighth Circuit next is unclear, but the window is open.
What the Injunction Actually Leaves Open
It’s not a full win for Kalshi and Polymarket. Not really. The injunction is temporary — it holds until a final decision gets made. And Menendez left room for a narrower, more targeted ruling down the line, one that might carve out entertainment contracts or other categories she’s skeptical about.
The entertainment contract question is probably the most interesting loose thread. If a court eventually rules that reality TV outcome contracts don’t qualify as swaps, those could fall back under state jurisdiction — and Minnesota’s felony statute could theoretically apply to them even if the broader ban stays blocked. That’s a real gap, and it’s one the platforms will need to watch.
The broader prediction market industry has grown fast. Federal and state regulators were always going to collide over it eventually — the question was just when and where. Minnesota, it turns out, is where the first serious criminal-penalty test is playing out.
Kalshi and Polymarket US stay in the state for now. The felony clock stopped. But the underlying legal fight over who actually controls these markets — the CFTC or 40-plus states — is nowhere close to settled, and Menendez’s 44-page ruling is just one chapter in it.
Frequently Asked Questions
What did Minnesota’s prediction market law actually ban?
Minnesota Statutes Section 609.7615 would have criminalized operating prediction markets, providing related services, and advertising prohibited transactions — with felony-level charges attached.
Which platforms does the injunction protect?
Judge Menendez’s injunction covers CFTC-registered markets, with Kalshi and Polymarket US specifically named as parties that sought the temporary relief.
