Federal Judge Blocks Minnesota's Ban on Prediction Markets

Injunction Halts State Ban

A federal court has issued a preliminary injunction against Minnesota, preventing the state from implementing its ban on prediction markets. The ban was originally scheduled to take effect on August 1. This ruling comes after the Trump administration, Kalshi, and Polymarket filed lawsuits against the state, which were subsequently consolidated.

Regulatory Authority Dispute

The core legal question revolves around whether prediction markets fall under the exclusive regulatory authority of the US Commodity Futures Trading Commission (CFTC). Minnesota lawmakers viewed prediction markets as gambling, while the CFTC asserts its jurisdiction over these platforms under federal law. The court's decision suggests that many event contracts offered by Kalshi and Polymarket qualify as "swaps" under federal definitions.

Definition of "Swaps"

US law broadly defines "swaps" to include contracts where payment depends on the occurrence or non-occurrence of an event with potential financial, economic, or commercial consequences. US District Judge Katherine Menendez stated that Minnesota's total ban likely violates US law because many trades on Kalshi and Polymarket fit this definition. As designated contract markets, Kalshi and Polymarket are subject to the CFTC's exclusive jurisdiction for transactions involving these swaps.

Implications for State Regulation

The preliminary injunction means Minnesota cannot enforce its prediction market statute until a final decision on the merits is reached. However, the judge indicated that Minnesota might still be able to prohibit certain types of event contracts offered on these platforms that do not meet the federal definition of "swaps" or do not have clear economic consequences.