Judge Halts Minnesota’s Prediction Market Ban in Win for Kalshi

A US judge issued a preliminary injunction against Minnesota’s ban on prediction markets, citing the CFTC's exclusive federal jurisdiction.

The decision marks a significant win for Kalshi, Polymarket US, and the Commodity Futures Trading Commission (CFTC). These entities are challenging the state law, arguing it directly clashes with federal authority.

Judge Katherine Menendez issued a 44-page preliminary injunction, freezing the law just days before its scheduled August 1, 2026, start date. This ruling ensures these platforms remain operational in the state while the legal merits of the dispute are litigated.

Federal Regulation Likely Takes Precedence

Judge Menendez noted that the plaintiffs showed a strong probability of winning the case. Platforms like Kalshi operate as licensed federal derivatives markets, placing them under the exclusive oversight of the Commodity Exchange Act and the CFTC.

The court clarified that platforms registered as “Designated Contract Markets” answer solely to the CFTC. Because of this, individual states lack the authority to unilaterally criminalize activities already governed by federal law.

This ruling preserves the status quo until the case concludes, shielding operators from the immediate criminal penalties outlined in the Minnesota statute.

Court Leaves Room for Narrower Interpretation

While the ruling favors the plaintiffs, Judge Menendez cautioned that the injunction does not grant blanket protection to every contract these platforms offer.

Her findings suggest that specific markets—such as those tied to television shows or entertainment events—might fail to meet the legal definition of financial derivatives or swaps. This distinction allows the court to potentially restrict the injunction’s reach at a later stage.

Minnesota’s Attempt to Criminalize Prediction Markets

The legal conflict ignited in May when Governor Tim Walz signed bill “SF 4511 / SF 4760,” which labeled prediction markets as illegal gambling.

The legislation proposed harsh consequences for operators, hosting providers, and advertisers, including five-year prison terms and $10,000 fines. Minnesota was the first state to attempt such a broad criminal ban on these platforms.

One day after the bill became law, the CFTC sued the state. Kalshi and Polymarket US joined the litigation shortly after, claiming Minnesota was overstepping into territory reserved for federal regulators.

Broader Implications for the Sector

The financial industry is tracking this case as a litmus test for the boundaries between federal power and state authority. A final ruling in favor of the plaintiffs would cement the CFTC’s role as the lead regulator for licensed event contract markets.

Such a result would strip individual states of the power to impose independent bans on these products. For Kalshi and Polymarket, the outcome could establish a vital precedent for the expansion of prediction markets across the United States.