A federal judge temporarily blocked Minnesota from enforcing the nation’s first state law that expressly bans many forms of prediction-market betting.
U.S. District Judge Katherine Menendez, an appointee of President Joe Biden, granted a preliminary injunction Monday in favor of the Commodity Futures Trading Commission, Kalshi and Polymarket US.
Both betting platforms have ties to President Donald Trump’s eldest son. Donald Trump Jr. serves as a strategic adviser to Kalshi, while 1789 Capital—the venture firm where he is a partner—invested in Polymarket. Trump Jr. also joined Polymarket’s advisory board.
Minnesota’s bipartisan law was scheduled to take effect August 1. It would make it a felony to create, operate, advertise or knowingly support prediction markets involving sports, politics, entertainment, legal proceedings and several other categories of real-world events.
The statute left traditional commodity contracts and other instruments used to manage financial, commercial or economic risks untouched.
Prediction markets allow users to risk money on whether particular events will occur. Although the platforms offer contracts on elections, politics, entertainment and world events, sports have become a major source of their trading volume.
Minnesota lawmakers classified these products as gambling and sought to prevent federally sanctioned platforms from offering them as an alternative form of online sports betting. Minnesota has not legalized commercial online sports wagering.
“Prediction markets are gambling, plain and simple, and Minnesota has every right to keep predatory gambling out of our communities,” Minnesota Attorney General Keith Ellison said in June.
Minnesota Was First to Enact a Ban
Several states have tried to apply their existing gambling laws to sports-event contracts offered by Kalshi and similar platforms. Minnesota went further by enacting a new criminal statute specifically aimed at prediction markets.
To continue complying with federal requirements while avoiding Minnesota’s law, operators could have blocked users in the state from accessing the prohibited contracts based on their location.
Other states, including Nevada, New Jersey and Massachusetts, have been fighting separate legal battles over whether federally regulated event-contract platforms must comply with state gambling laws. The resulting court decisions have created a complicated and sometimes contradictory legal landscape.
Judge Finds Federal Challenge Likely to Succeed
Menendez concluded that the federal government, Kalshi, and Polymarket had shown a likelihood of succeeding on at least part of their legal challenge.
The plaintiffs argue that the Commodity Exchange Act gives the CFTC exclusive authority over event contracts classified as swaps, preventing states from banning transactions offered through CFTC-designated contract markets.
Menendez found that several contracts offered by Kalshi and Polymarket appeared to fall within the federal definition of a swap. She also determined that allowing the Minnesota statute to take effect while the lawsuits proceed could cause the plaintiffs irreparable harm.
The injunction does not permanently invalidate Minnesota’s law. It preserves the existing situation while the court considers the merits of the competing federal and state claims. Menendez also left open the possibility that the injunction could eventually be narrowed.
The court’s use of “irreparable harm” is nevertheless striking in a case involving products that Minnesota lawmakers say can inflict irreparable damage on people, families and communities affected by gambling addiction.
“States regulate gambling so closely because it can be incredibly addictive and immensely harmful without the proper guardrails,” Ellison said. “Wrapping an old vice in new technology does not change that fact, and it does not change our obligation to protect the people of Minnesota.”
