A federal judge in Minnesota issued a preliminary injunction blocking the state’s first-in-the-nation ban on prediction markets, finding that the law is likely preempted by federal authority over event contracts.
The ruling this week comes just days before the law was set to take effect and marks another significant win for the Commodity Futures Trading Commission and prediction markets operators in the ongoing jurisdiction fight with states. The CFTC sued Minnesota after Gov. Tim Walz signed the bill in May.
U.S. District Judge Katherine Menendez ruled that the CFTC, Kalshi and Polymarket had met their burden to show they are likely to succeed on their claims that federal law preempts Minnesota’s ban, and that allowing it to take effect would cause irreparable harm to the operators. The order forbids enforcement of the law against entities registered as designated contract markets with the CFTC.
It all continues to set up a legal battle that will likely be settled by the Supreme Court.
Prediction markets make their case
In the order, Menendez wrote that the plaintiffs “have met their burden to show they are likely to succeed, at least in part” on their preemption claims.
She also noted that while the Minnesota statute may not be preempted in all its applications, “the Court finds the state law is likely preempted in many respects.”
The judge said temporarily enjoining enforcement of the statute maintains the status quo while enabling further development on the issue. The law will remain blocked while the lawsuit proceeds.
Why the ruling matters
The decision is the first major judicial setback for a state that has tried to outright ban prediction markets, and it reinforces the CFTC’s argument that event contracts fall under exclusive federal jurisdiction.
It also adds to the growing split between states that have tried to regulate or ban prediction markets and the federal regulator that says it has sole.
Minnesota’s law would have made it a crime to create or operate prediction markets or help administer nearly any activity connected to one. The CFTC, Kalshi and Polymarket argue that federal law gives the CFTC exclusive jurisdiction to regulate the type of “event-contract transactions” offered by the platforms.
The broader jurisdiction fight
The Minnesota ruling comes as other states have also tried to regulate or ban prediction markets, only to face lawsuits from the CFTC and operators.
New Jersey, Nevada and other states have been involved in similar battles over whether prediction markets are gambling or federally preempted financial products.
The CFTC has been aggressive in defending its jurisdiction, filing lawsuits against multiple states that have tried to apply gambling laws to event-contract platforms. The agency has also submitted amicus briefs in appellate courts asserting its exclusive authority over commodity derivatives markets, including prediction markets.
Last month, the CFTC filed a lawsuit against Kentucky, which passed a new state tax on prediction markets revenue.
What comes next in prediction markets fight
The Minnesota attorney general will now have to decide whether to appeal the ruling, and the case will continue to move through the courts.
For now, though, the law is blocked and prediction markets can continue operating in the state while the lawsuit proceeds.
The ruling is another reminder that the prediction market fight is increasingly being decided in the courts, with states and the CFTC battling over who gets to regulate these products.
