Minnesota prediction markets ban temporarily halted by judge
A federal judge has temporarily blocked Minnesota’s new prediction markets law, preventing it from taking effect while legal challenges continue. The ruling provides temporary relief to platforms including Kalshi and Polymarket, which argued the law conflicts with federal regulation.
US District Court Judge Katherine Menendez found that the plaintiffs, including Kalshi, Polymarket, and the Commodity Futures Trading Commission (CFTC), are likely to succeed in their claim that the Commodity Exchange Act preempts Minnesota’s law.
The injunction preserves the current regulatory framework while the case proceeds and adds to the growing legal dispute over whether the federal government or individual states should regulate prediction markets.
Minnesota’s prediction market case
The Minnesota dispute reflects a broader national debate over whether sports-related prediction markets should be classified as gambling under state law or as financial contracts under federal commodities supervision. Sportsbooks normally operate under state licences; however, prediction market sites believe that their contracts are governed by the CFTC.
Minnesota lawmakers were concerned that residents could access sports event contracts even though the state had not legalised sports betting. Minnesota’s SF 4760 was signed into law by Gov. Tim Walz on 18 May 2026, after the legislature passed it as part of the state’s omnibus public safety bill. The measure made Minnesota the first state to ban prediction markets explicitly.
Legal challenge and court response
The operators of prediction market platforms and the CFTC argued that the regulation conflicted with the federal government’s jurisdiction under the Commodity Exchange Act. They sought immediate relief because enforcing the legislation would have an impact on federally regulated platforms.
Judge Katherine Menendez issued a preliminary injunction, halting the implementation of the measure. The ruling is not intended to resolve the greater issue of the validity of the statute, but it was required to provide some stability pending the case’s final verdict. The preliminary injunction will keep the status quo and prevent any disturbance to the operations of businesses, regulatory agencies, and consumers until the dispute is resolved. The decision came just days before the law was scheduled to take effect on 1 August 2026.
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. The @CFTC…
— Mike Selig (@ChairmanSelig) July 27, 2026
Why Minnesota introduced ban
Minnesota’s decision to restrict the development of sports prediction markets was driven by the reality that these markets were expanding considerably faster than state gambling regulations. While other states have permitted sports betting, Minnesota residents can use federal prediction markets that offer contracts on sports. The lawmakers believed that market contracts were wagers that lacked sufficient regulation, similar to those seen in sportsbooks.
Another reason was the sudden increase in participation in prediction markets. Platforms such as Kalshi and Polymarket gained popularity as users traded contracts on elections, economic indicators, entertainment, and sports. Officials were concerned that younger users, attracted by mobile access and real-time trading, would treat prediction markets as entertainment rather than financial products, raising the risk of gambling-related harm.
Temporary injunction
The judge emphasised that the court’s decision is merely temporary and does not support or dismiss Minnesota’s arguments regarding prediction markets. This order is a temporary solution to maintain stability until constitutional issues are fully considered. If Minnesota wins the case, it will be able to enforce its law in the future.
Judge Menendez wrote, “If Plaintiffs prevail on the merits, Defendants will not be harmed because the preliminary injunction would simply have prevented enforcement of a state law that is preempted by the (federal Commodity Exchange Act). And if Defendants ultimately prevail, the preliminary injunction will no longer be effective, and Defendants can begin enforcing the prediction market statute against those who violate it.”
Possible outcomes
Finally, the Minnesota ruling could have far-reaching implications across the country. If federal jurisdiction is upheld, states may no longer be able to block nationally approved contracts. On the other hand, if Minnesota wins, other states may follow with their own rules governing sports prediction markets. In either case, exchanges, traders, and consumers would be affected.
This issue also emphasises the importance of cooperation between federal and state regulatory agencies. Several experts believe that Congress should provide greater guidance to reduce confusion and uncertainty. For the time being, lawsuits will continue to play an essential role in the regulatory process.
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