A federal judge just stopped Minnesota from making it a crime to run a prediction market, ruling that states don't get to ban what federal law already regulates — and handing free-market backers a win against a government that wanted to tell Americans what they can and can't bet on.
U.S. District Judge Katherine Menendez issued a preliminary injunction Monday, blocking Minnesota's first-in-the-nation prediction market ban days before it was set to take effect August 1. The law would have criminalized creating, operating, or even helping administer nearly any activity connected to a prediction market. Menendez, a Biden appointee, found that the CFTC, Kalshi, and Polymarket were likely to succeed on the merits and that letting the ban take effect would cause "irreparable harm" to the operators.
The core legal question: are prediction market contracts "swaps" under the Commodity Exchange Act? If yes, the CFTC has exclusive jurisdiction, and states are preempted. Menendez said many contracts on Kalshi and Polymarket — those tied to events with clear "potential economic, financial, or commercial consequences" — fit the definition. Those platforms are designated contract markets, putting them under federal, not state, authority.
But here's the nuance both outlets handled differently. HuffPost buried it; Ars Technica flagged it up front: Menendez explicitly said not every contract qualifies. Bets on the outcome of Love Island USA, for instance, don't meet the legal definition of a swap. Minnesota may ultimately be able to prohibit some types of wagers — just not the blanket ban lawmakers passed.
Minnesota Attorney General Keith Ellison isn't backing down. "Prediction markets are gambling, plain and simple," he said in a statement. "And Minnesota has every right to keep predatory gambling out of our communities." Ellison said his office disagrees with the court but acknowledged the legal issues are complex and pledged to keep defending the law.
Follow the money. The American Gaming Association, which represents commercial casinos, estimates states have lost more than $1.2 billion in tax revenue from wagers since prediction markets began offering sports event contracts. Native American tribal leaders and state gambling regulators are also sounding alarms. This isn't just about protecting consumers — it's about protecting entrenched gambling monopolies and the tax revenue that flows from them.
The Trump administration's CFTC is aggressively backing the platforms. In February, Trump's CFTC appointee declared the agency "will no longer sit idly by" while states try to "undermine the agency's exclusive jurisdiction." The federal government has already sued Connecticut, Arizona, and Illinois over their efforts to regulate prediction markets, while New York sued Coinbase and Gemini.
Polymarket chief legal officer Neal Kumar called the decision a confirmation that prediction markets on CFTC-registered exchanges "are governed by federal law, not a patchwork of state rules." A Kalshi spokesperson, Elisabeth Diana, put it more bluntly: "states cannot ban things that they don't have jurisdiction over."
The injunction holds while the case proceeds. Minnesota can keep litigating in district court or appeal. Whether states can carve out prohibitions on specific contract types — the entertainment bets, the sports-adjacent wagers — remains an open question. What's settled for now is that a total ban doesn't fly.
