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A federal judge has temporarily barred Minnesota from enforcing its new prediction-market law against exchanges registered with the Commodity Futures Trading Commission. The statute was due to take effect on August 1 and would have imposed criminal penalties on businesses operating or promoting covered markets.
U.S. District Judge Katherine Menendez granted preliminary injunction requests from the CFTC, Kalshi and Polymarket US on July 27. The ruling keeps both platforms available in Minnesota while three related lawsuits move toward a final decision.
Court Says Federal Derivatives Law Likely Overrides State Ban
Menendez found that the plaintiffs were likely to succeed, at least partly, on their argument that the Commodity Exchange Act overrides Minnesota’s law. The federal statute gives the CFTC exclusive jurisdiction over transactions involving swaps traded on designated contract markets.
The court said many event contracts listed by Kalshi and Polymarket US appear to qualify as swaps because they concern events with economic, financial or commercial consequences. Enforcing a statewide ban against those products would intrude on the CFTC’s federal authority.
Injunction Protects Only CFTC-Registered Exchanges
The order prevents Minnesota officials from enforcing the statute against entities registered with the CFTC as designated contract markets. It does not strike down the law, resolve every contract type or protect unregistered operators.
Menendez noted that some entertainment and other event contracts may fall outside the federal definition of a swap. Any permanent injunction could therefore be narrower once the court examines individual products and develops a fuller record.
Minnesota Law Remains in Force During Court Review
Minnesota lawmakers approved the measure after arguing that prediction markets resemble gambling and expose users to manipulation and addiction risks. The law prohibits creating, operating and advertising covered markets and classifies violations as criminal offenses.
The CFTC, Kalshi and Polymarket US sued separately, claiming Minnesota cannot criminalize activity governed by federal derivatives law. Kalshi and Polymarket also raised free-speech challenges, but the court left those issues undecided after granting relief on the preemption claim.
Kalshi and Polymarket Can Keep Serving Minnesota Users
The injunction will remain in place until the court reaches a final decision on the merits. Minnesota can continue defending the statute during the litigation. CFTC-registered platforms can keep serving users in the state while the lawsuits proceed.
The next step is a fuller court review of whether Minnesota’s law is permanently preempted for federally regulated prediction markets.
