Federal judge halts Minnesota prediction market ban pending lawsuit
A U.S. district judge issued a preliminary injunction that stops Minnesota's new law banning prediction markets, citing likely preemption by federal regulations and potential irreparable harm to the companies involved.
A federal judge on Monday granted a preliminary injunction that pauses Minnesota's first-of-its-kind ban on prediction markets, preventing the law from taking effect as scheduled on Saturday. The injunction follows lawsuits filed by the Justice Department, the Commodity Futures Trading Commission (CFTC) and two prediction-market operators, Kalshi and Polymarket US, which argue that the state law is pre-empted by federal authority.
U.S. District Judge Katherine Menendez found that the plaintiffs have shown a likelihood of success on their claim that federal law gives the CFTC exclusive jurisdiction over event contracts traded on federally registered exchanges, and that the ban would cause irreparable harm if enforced. She wrote that “the Minnesota statute may not be preempted in all its applications. But the Court finds the state law is likely preempted in many respects,” and ordered a temporary stay to maintain the status quo while the issues are further litigated.
The order bars enforcement of the ban against entities registered as designated contract markets with the CFTC. The CFTC indicated it would appeal the decision if the court does not respond promptly, having previously sought a ruling by July 17 and asked for an expedited hearing.
Polymarket and Kalshi contended that the ban would disrupt a “nationally uniform market” and infringe on First Amendment rights to advertise, though the judge said those constitutional questions need not be resolved at this stage. Minnesota’s legislation, embedded in a broader public-safety bill, characterizes prediction markets as gambling.
"Gambling has always been a public health and a public safety issue since states have been regulating it, and that has always been an uncontested fact," said state Rep. Emily Greenman.
Minnesota is not alone in targeting prediction markets; Arizona, Nevada and Utah have also taken regulatory actions, some of which have been blocked by federal courts on preemption grounds.