CoinDesk
A federal judge in Minnesota granted a preliminary injunction Monday blocking the state's law that criminalized operating prediction market platforms, siding with Kalshi, Polymarket US, and the Commodity Futures Trading CFTC in their joint suit. U.S. District Judge Katherine Menendez found the plaintiffs "are likely to succeed on the merits" of their claim that Minnesota's statute is expressly preempted by the federal Commodity Exchange Act, which gives the CFTC jurisdiction over event-based swap contracts. The injunction will stay in place until a final decision on the merits, letting Kalshi and Polymarket US continue offering their products to Minnesota residents in the meantime.
Why it matters
The ruling turns on a structural question every state considering similar legislation will now have to answer: when a prediction market contract qualifies as a "swap" under the CEA, federal law controls and the state cannot criminalise the activity. Menendez acknowledged that some contracts (she pointed to "Love Island" winner markets as an example) might not clearly fit the CEA's swap definition, but said carving those out of an injunction wasn't feasible at this stage. CFTC involvement as a co-plaintiff adds federal weight to the preemption theory and signals the agency is willing to litigate, not just regulate, when states move against designated contract markets.
Market impact
Kalshi and Polymarket US both gained meaningful operating certainty in a state that had threatened to make their business a criminal enterprise. The decision sets a template other state legislatures weighing prediction market bans will now have to grapple with before passing similar statutes. Watch for copycat filings in any state that has advanced comparable bills, and for Kalshi's and Polymarket's US user metrics to reflect renewed access to a market that had been in legal limbo.
Frequently asked questions
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What did the federal judge actually rule in the Kalshi and Polymarket case?
Judge Katherine Menendez granted a preliminary injunction blocking Minnesota's law that criminalized operating prediction market platforms, finding that Kalshi, Polymarket US, and the CFTC are likely to succeed on their claim that the state statute is preempted by the federal Commodity Exchange Act.
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Why does the Commodity Exchange Act preempt Minnesota's prediction market law?
The plaintiffs argued that prediction market contracts are structured as 'swaps' under the CEA, which gives the CFTC exclusive federal jurisdiction over them. Menendez agreed the state law likely attempts to regulate trades in event contracts that qualify as those swaps, triggering express preemption.
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How long will the preliminary injunction last?
The injunction will remain in place until a final decision on the merits is reached in the case, allowing Kalshi and Polymarket US to keep offering their products to Minnesota residents during the litigation.
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Are all prediction market contracts covered by the ruling?
No. Menendez noted that some contracts, including non-sports event markets like winner predictions for the TV show 'Love Island,' might not clearly fall within the CEA's swap definition, but said it was not feasible to carve those specific contracts out of the injunction at this stage.
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What is the broader impact on other US states considering prediction market bans?
The ruling sets a federal precedent that states cannot criminalize prediction market activity when the contracts qualify as CEA swaps. Other state legislatures weighing similar bans now face the same preemption challenge, and the CFTC's decision to co-sue signals it is willing to litigate to defend its jurisdiction.
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