Minnesota’s move to shut down prediction market activities within its borders has been halted in court. U.S. District Judge Katherine Menendez of the District of Minnesota officially issued a preliminary injunction against a state law that criminalizes prediction market platforms.
The ruling puts on hold legislation newly enacted by Minnesota in early 2026. The injunction comes in response to lawsuits brought by three parties: platforms Kalshi and Polymarket, alongside the U.S. Commodity Futures Trading Commission (CFTC). Under the injunction, Kalshi and Polymarket can continue operating in Minnesota while litigation proceeds, pending a final ruling on the merits of the case.
Jurisdictional Battle in Court
At the heart of the legal dispute is the division of authority between the federal government and state regulators. Judge Menendez determined that Minnesota’s prohibitory law is likely preempted by the existing federal statutory framework under the Commodity Exchange Act.
Under that federal framework, prediction market contract instruments are classified as swaps. This classification places prediction markets squarely under the regulatory jurisdiction of the CFTC as a national agency, rather than local state authorities. The judge found that Kalshi, Polymarket, and the CFTC have a strong likelihood of success in demonstrating this regulatory overlap at a full trial.
The court also agreed that the state ban would inflict irreparable harm on Kalshi and Polymarket if allowed to take effect without pause. This finding provided an urgent basis for granting the preliminary injunction to prevent the platforms from being forced to halt operations.
The Gray Area of Entertainment Contracts
While the interim ruling favored the ongoing operations of prediction platforms, Judge Menendez noted the diverse range of contracts on offer. The court acknowledged that certain types of wagers might fall outside the scope of pure commodities regulation, pointing to contracts predicting the outcome of reality TV shows like Love Island as an example.
Such entertainment contracts could legitimately fall under activities state authorities have the power to prohibit. However, the judge noted that it would be difficult to craft an overly narrow injunction simply to carve out entertainment wagers from federally regulated commodity contracts.
Beyond the immediate fate of the two platforms, the lawsuit represents a much broader battle. The final outcome will define who holds primary authority to govern prediction markets in the United States - federal regulators like the CFTC, or local regulators in each state.
Reported by CoinDesk.
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