Judge Blocks Minnesota's Prediction Market Ban

A federal judge in the US has temporarily blocked a Minnesota law that would have banned prediction markets and imposed criminal penalties for running them. The ruling covers Kalshi and Polymarket US, the two largest prediction market platforms, which were cleared to keep operating in the state while litigation continues. Other states drafting similar restrictions on sports and election contracts are watching the case closely.

Judge Katherine Menendez's ruling

On Monday, US District Judge Katherine Menendez granted Kalshi's and Polymarket US's motions for a preliminary injunction. She found the plaintiffs likely to succeed on their claim that the federal Commodity Exchange Act preempts the state statute. Several event contracts offered by both platforms qualify as swaps, meaning the Commodity Futures Trading Commission (CFTC) holds exclusive jurisdiction over them.

Both companies filed suit back in the spring, right after the state legislature passed the law. Lawyers for Kalshi and Polymarket argued that Minnesota was trying to regulate a market already covered by federal law, and that dual regulation conflicts with the principle that federal law takes precedence over state statutes.

Minnesota's law was set to take effect on Saturday. It would have banned the creation, operation and advertising of prediction markets, with criminal penalties for violators. Both platforms can now keep operating in the state while the case proceeds on its merits.

What it means for Kalshi and Polymarket

For both companies, the ruling removes a near-term threat of losing an entire state market. Polymarket only entered the US legally in spring 2026, after buying a CFTC-licensed exchange that let it launch a separate Polymarket US unit. Once it launched, the platform began offering contracts on elections, sports and macroeconomic events, and Minnesota became one of the first states where it ran into an outright ban.

Kalshi has operated for years as a CFTC-registered derivatives exchange and built its business model on federal oversight rather than state-by-state licensing. The company is also fighting regulators in other states at the same time, including Rhode Island, where a similar case against prediction markets is under review.

Each win like this lowers the cost of entering a new state for both companies, since fewer legal bills mean more resources for partnerships with brokers and exchanges instead of fighting bans. It also makes it easier to bring in institutional clients who need legal certainty before connecting to a platform.

Losing Minnesota would have meant lower trading volume in the state and a precedent other regulators could cite. Both companies now have fresh support for their core legal argument: it is the federal regulator, not state authorities, that decides whether prediction markets can operate.

Why states keep trying to ban prediction markets

Minnesota, like several other states, treats prediction markets as a form of gambling that sidesteps local licensing rules. State lotteries and casinos worry about losing revenue if users place bets on sports or elections through Kalshi and Polymarket instead of licensed operators.

State lawmakers have argued that betting on sporting events through prediction markets effectively mirrors bookmaking, but without the licenses, taxes and limits applied to traditional gambling operators. Supporters of the ban also point to consumer protection, including for minors and people with gambling problems.

The NFL has publicly urged the CFTC to tighten rules for sports-related event contracts, citing risks to game integrity. That shows pressure on the federal regulator comes not only from states but also from industries directly affected by prediction markets.

• Not every Kalshi or Polymarket contract necessarily meets the legal definition of a swap, so the final ruling could narrow the protection granted by the preliminary injunction.
• Similar lawsuits are moving through other states beyond Minnesota, so the outcome could set a precedent for dozens of cases at once.
• The judge explicitly noted this is an interim decision, not a final verdict on the merits of the dispute.

How regulators and the industry are reacting

The CFTC has already allowed Kalshi to offer contracts on election outcomes and specific sports events, and the federal regulator has consistently defended its exclusive jurisdiction in courts across several states. The commission treats these contracts as ordinary commodity derivatives rather than a form of gambling, and that distinction is the foundation of Kalshi's and Polymarket's entire legal strategy.

For platforms like Polymarket, which runs on Polygon, a layer-2 network for Ethereum, and settles trades in the stablecoin USDC, federal status matters even more: it avoids separate licensing requirements in every state. Opponents of the state law, for their part, argue that criminalizing prediction markets also creates risk for ordinary users who simply want to legally trade contracts available nationwide.

What comes next

Litigation on the merits continues, and the judge has already warned that the final ruling could narrow the scope of protection. Other states drafting their own restrictions on prediction markets will be watching this Minnesota case closely, since it effectively tests whether individual states can intervene at all in a market the CFTC regulates. For Kalshi and Polymarket, the current win buys time to operate in the state, not a final legal victory.