Federal judge pauses Minnesota ban on prediction markets

A U.S. district judge on Monday issued a temporary injunction that stops Minnesota's ban on prediction markets from taking effect, allowing platforms such as Polymarket and Kalori to continue operating in the state while the lawsuit proceeds. The court found that the plaintiffs, including the two platforms, had shown a likelihood of success on the claim that the Commodity Futures Trading Commission (CFTC) holds exclusive authority over such markets, rather than state gambling regulators. Judge Katherine Menendez noted that while some wagers might fall outside federal oversight, the primary regulatory responsibility lies with the CFTC.

Minnesota Governor Tim Walz enacted the ban in May, describing the platforms as akin to online gambling. The Trump administration joined the industry plaintiffs in challenging the measure, which was slated to become effective on Aug. 1.

"Today, a Minnesota federal court put a halt to aggressive state overreach seeking to ban federally regulated derivatives markets. This is the second time a court has granted an injunction in favor of the agency in defense of its jurisdiction over prediction markets," CFTC Chair Michael Selig said in a post on X.

The CFTC has previously argued that prediction markets fall under federal, not state, jurisdiction. Kalshi attorney Robert Denault praised a similar ruling in April as "a step in the right direction," emphasizing the supremacy of federal law. Minnesota Attorney General Keith Ellison disagreed, stating that prediction markets are gambling and the state has the right to protect its communities.

Spokespersons for the platforms welcomed the decision. Kalshi’s Elisabeth Diana said the ruling confirms that states cannot ban activities outside their jurisdiction, while Polymarket chief legal officer Neal Kumar said the opinion affirms that CFTC-registered exchanges are governed by federal law, not a patchwork of state rules.