Kalshi and Polymarket Secure Temporary Relief from Minnesota's Prediction Market Ban

A federal judge has granted a preliminary injunction against a Minnesota law that bans prediction markets, suggesting it likely violates the federal Commodity Exchange Act. This ruling is a significant win for Kalshi, Polymarket, and the Commodity Futures Trading Commission (CFTC).

Judge Katherine Menendez of the U.S. District Court for Minnesota ruled that the newly implemented state law, which prohibits prediction market operators from offering services in Minnesota, appears to be overridden by federal law. The judge indicated that the plaintiffs, which include Kalshi, Polymarket, and the CFTC, are likely to succeed in proving this during a full trial.

The CFTC and the two companies filed a lawsuit following the state’s enactment of the ban, arguing that it infringes on the CFTC's authority to regulate “swaps,” the basis for prediction market contracts. Judge Menendez acknowledged that the plaintiffs have shown a strong likelihood of succeeding in their claims that federal law takes precedence over state law, thus affirming the CFTC's jurisdiction.

In her ruling, she stated, “The Court finds that Plaintiffs have met their burden to show they are likely to succeed on the merits of their express-preemption claims.” She highlighted that whether the state law regulates trades qualifying as ‘swaps’ under the Commodity Exchange Act (CEA) is crucial to the case.

While the Minnesota law may apply to some specific contracts on prediction markets, such as bets related to reality TV shows, the judge noted it would be difficult to limit the injunction solely to those instances.

Furthermore, she expressed that not pausing the law would cause “irreparable harm” to Kalshi and Polymarket. The preliminary injunction will remain in effect until the court reaches a final decision on the case.