Kalshi and Polymarket win injunction against Minnesota prediction market ban

A federal judge just handed prediction market operators their biggest legal win yet. US District Judge Katherine Menendez issued a preliminary injunction on July 27 blocking Minnesota’s outright ban on prediction markets, which would have made operating or advertising such platforms a felony punishable by up to five years in prison and a $10,000 fine.

The law was set to kick in on August 1. Four days of breathing room doesn’t exactly inspire confidence in the legislative process.

What Minnesota tried to do

Governor Tim Walz signed the prediction market ban into law on May 18, making Minnesota the first state in the country to classify prediction market operations as a criminal offense. The statute treated prediction markets as a form of illegal gambling, a characterization that Kalshi, Polymarket, and federal regulators found deeply objectionable.

The response was swift. The Commodity Futures Trading Commission filed a lawsuit against the state the very next day, on May 19, arguing that federal law preempts state attempts to ban platforms operating under CFTC oversight. Kalshi and Polymarket joined that legal challenge, turning the case into a multi-front battle over who actually gets to decide whether prediction markets are legal financial instruments or glorified sports betting.

The federal preemption argument

Kalshi operates as a CFTC-registered exchange, meaning it already submits to federal oversight, compliance requirements, and market integrity standards. The core legal argument is that when Congress gave the CFTC authority over derivatives and event contracts, it created a federal regulatory framework that states generally can’t override by banning outright what federal law has authorized.

A hearing took place around July 2 before Judge Menendez issued her ruling. The court ultimately agreed that the prediction market operators had demonstrated a likelihood of success on the merits of their federal preemption claim, and that allowing the law to take effect would cause irreparable harm to their businesses.

Why this matters beyond Minnesota

Minnesota may have been the first state to go full prohibition on prediction markets, but it wasn’t operating in a vacuum. Arizona has been dealing with similar jurisdictional disputes over prediction markets and federal authority.

This injunction doesn’t resolve that tension. It’s a preliminary measure, meaning the underlying lawsuit will continue. But preliminary injunctions are often strong signals of where a court is likely to land on the merits.

The risk that remains is political. Governor Walz and the Minnesota legislature clearly had the appetite to criminalize prediction markets, and that appetite isn’t going away because of a preliminary injunction. Other states with skeptical legislators could still attempt their own restrictions, and the political dynamics around anything that looks like gambling tend to be volatile.

Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.