Federal Judge Blocks Minnesota Plan to Ban Prediction Markets

Rare win earned by prediction market sites

The CFTC and leading prediction market sites in the US market, such as Kalshi and Polymarket, don't get much chance to savor a victory in the ongoing legal battle over sports event contracts. They've already taken significant losses resulting in bans of their product in Michigan, Washington, Nevada, and New York.

It was U.S. District Judge Katherine Menendez in Minneapolis who issued a preliminary injunction at the request of Kalshi, Polymarket, and the CFTC after finding that federal law likely would preempt the state law.

"The Court finds that Plaintiffs have met their burden to show they are likely to succeed on the merits of their express-preemption claims, at least as to the application of Minnesota’s law to many of the trades listed on Kalshi’s and Polymarket US’s platforms," read the ruling from Judge Menendez. She felt that there were several examples of event contracts hosted ​by Kalshi and ⁠Polymarket, both CFTC-regulated entities, that fit the legal definition of a swap.

Naturally, the prediction market sites are celebrating this rare court victory.

"[This] decision makes it clear: States cannot ban things that they don't have jurisdiction over," Kalshi spokesperson ​Elisabeth Diana said in a statement, according to reporting by Reuters.

Expect that Minnesota will continue fighting this battle

While this legal skirmish may not have gone their way, it's abundantly clear that the Minnesota state government intends to keep fighting. They aren't giving up on the notion of shutting down prediction market sites in their state.

Keith Ellison, Minnesota's Democratic Attorney General, made it evident that he disagreed with the ruling. He intends to continue to defend the state's law.

"Prediction markets are gambling, plain and simple," Ellison said in a statement. "Minnesota has every right to keep predatory gambling out of our communities."

The judge appears to be leaving the door open a crack for Minnesota

Judge Menendez did leave the door open a crack to allow Minnesota the opportunity to hit back at this ruling. Seeking to implement an outright ban of prediction market sites is not the state's best move. The most viable path to success for Minnesota in this showdown is to rewrite state law.

The court did find that not every prediction market event contract qualifies as a swap under federal law. That would leave room for narrower state restrictions that could swing a future appeal ruling in favor of Minnesota.

For the time being, Judge Menendez is opting to go with the status quo.

"Given the unique nature of Minnesota's prediction market statute, the ​posture of these cases, and the imminent effective date of Minnesota’s statute, a preliminary injunction maintaining the status quo until the merits of this case ​can be fully resolved is appropriate," Judge Menendez wrote in her ruling.