Judge Halts Minnesota Prediction Market Ban Before It Starts

A federal judge has frozen Minnesota’s new prediction market law days before it was set to take effect. U.S. District Judge Katherine Menendez issued a preliminary injunction on Monday. The order pauses the Minnesota prediction market ban while the courts sort out who actually holds authority over event contracts. Kalshi and Polymarket can keep serving customers in the state in the meantime.

What the Minnesota Prediction Market Ban Would Have Outlawed

Governor Tim Walz signed the measure in May as part of a wider public safety bill. It would have made it a crime to create, operate, host or promote a prediction market anywhere in the state. The law aimed at operators and the companies that support them, and it set no penalties for residents who placed trades. Saturday was the scheduled start date.

Most states have gone after these platforms using gambling statutes written decades ago. Minnesota took a different route and wrote the products into law by name. That directness made the Minnesota prediction market ban the bluntest state prohibition in the country. It also turned the statute into a clean test case for federal pre-emption.

Federal Authority Sits at the Heart of the Case

The Commodity Futures Trading Commission, Kalshi and Polymarket all challenged the statute after Walz signed it. The Justice Department filed against the measure as well. Their argument runs along a single line. Congress handed the CFTC exclusive authority over event contracts traded on federally registered exchanges, so a state cannot criminalise them.

Menendez agreed that the challengers had shown a real likelihood of winning, at least in part. She pointed to several contracts from both platforms that appear to meet the legal definition of a swap. Her order does not extend that protection to every contract the platforms list. The injunction covers entities registered with the CFTC as designated contract markets.

The judge stayed careful about how far she went. She wrote that parts of the state law may survive, but that much of it looks pre-empted. Holding the status quo made more sense to her than letting the statute bite while the case develops. The court could narrow the injunction later if certain contracts turn out to sit outside federal protection.

Platforms Warned of Damage Money Could Not Fix

Kalshi and Polymarket both argued that enforcement would cause harm no payout could repair. Polymarket said the prohibition would break apart a market it runs on a single national footing. It also raised a First Amendment claim over its ability to advertise in the state. Menendez left that constitutional question alone at this stage.

The CFTC had pushed hard for speed. The agency asked for a decision by July 17 and later signalled it might go to an appeals court without a prompt answer. The effective date was closing in fast. A ruling delivered after Saturday would have arrived too late to matter.

Minnesota Plans to Keep Fighting

Attorney General Keith Ellison said the state will keep defending the Minnesota prediction market ban in court. He called prediction markets gambling and defended Minnesota’s right to keep predatory products out of its communities. State officials treat the contracts as wagers because customers put money on real-world outcomes, including sports results and elections.

Kalshi spokesperson Elisabeth Diana framed the decision as a jurisdiction question, arguing that states cannot ban activity they have no power over. Lawmakers who backed the bill have made the public health case for years. Neither side has moved an inch, and the injunction settles none of it.

The Same Fight Is Running in Other States

The Minnesota prediction market ban is one front in a much larger conflict. States argue that sports event contracts function as sports wagering, which falls under powers they have always held. The platforms and the CFTC counter that federal law governs anything traded on a registered exchange.

Results so far have been mixed. Arizona filed criminal charges against Kalshi in March over transactions the state alleged mimicked sports betting, and a federal judge blocked that prosecution on pre-emption grounds. Courts in Massachusetts, Michigan, Nevada and Washington have each restricted some Kalshi activity. A Nevada state court also extended a temporary prohibition involving the platform.

Utah went its own way and banned proposition betting through legislation that reaches prediction markets. Gambling remains illegal there regardless. Every ruling adds another piece to a national picture that still has no clear shape.

What Happens Next

The preliminary injunction settles nothing permanently. It keeps the Minnesota prediction market ban dormant while the court examines whether any part of it can apply to federally regulated platforms. Operators get breathing room, and the state gets its chance to defend the statute on the merits.

The bigger question is heading toward higher courts. Nothing short of an appellate ruling or action from Congress will close the split between state gambling authority and federal commodities oversight. For now the Minnesota prediction market ban sits on the shelf. Every other state weighing its own version has one more reason to wait.