Judge Blocks Minnesota’s Prediction Market Ban, Leaving Tribes Exposed

U.S. District Judge Katherine Menendez blocked Minnesota’s felony ban on prediction market trading Monday, stopping the nation’s first criminal crackdown on apps like Kalshi and Polymarket just days before it was set to take effect. The preliminary injunction sides with the Commodity Futures Trading Commission (CFTC), the federal agency that regulates derivatives markets, and the two trading platforms that joined its lawsuit against the state.

Minnesota’s tribal nations fought to keep the ban alive. Their casinos hold the state’s only legal gambling monopoly outside horse racing, and they told the court prediction markets threaten that business directly. Monday’s ruling leaves that monopoly newly exposed to a competitor state law can no longer reach.

Menendez Halts the Nation’s First Felony Betting Ban

Gov. Tim Walz signed the ban into law May 18, making Minnesota the first state to treat prediction market trading as a crime. The CFTC sued the very next day. Kalshi and Polymarket, the two largest platforms, joined the case soon after.

The law was due to take effect Aug. 1. It would have made hosting or advertising a prediction market a felony, punishable by up to five years in prison and a $10,000 fine. Menendez’s 44-page order stops that clock while the underlying case plays out.

To win a preliminary injunction, the CFTC and the two companies had to show they were likely to succeed on the merits and would suffer harm without immediate relief. Menendez found both. She wrote that the plaintiffs face a threat of irreparable harm if the law took hold even temporarily.

But given the unique nature of Minnesota’s prediction market statute, the posture of these cases, and the imminent effective date of Minnesota’s statute, a preliminary injunction maintaining the status quo until the merits of this case can be fully resolved is appropriate.

Menendez wrote that in her order, siding with the argument that federal commodities law leaves Minnesota little room to police exchanges the CFTC already licenses.

Why ‘Swaps’ Put Minnesota Outside Its Own Jurisdiction

A swap, broadly, is a financial contract whose payout depends on the outcome of a future event, anything from an interest rate move to which team wins a championship. Kalshi and Polymarket US are both registered with the CFTC as designated contract markets, exchanges cleared to list swaps under the Commodity Exchange Act.

“Kalshi and Polymarket US are designated contract markets, so the CFTC has exclusive jurisdiction to regulate transactions involving those ‘swaps,’” Menendez wrote in her order.

That status is why Minnesota cannot reach the bulk of what the two platforms list. Menendez’s order covers contracts on almost anything tradeable as a swap, including wagers on which NBA team signs LeBron James or when shipping traffic normalizes in the Strait of Hormuz.

One category could still be fair game for state regulators: pop culture contracts like wagers on which couple wins Love Island USA.

Menendez said those contracts might not fit the legal definition of a swap, leaving them outside the CFTC’s exclusive reach and open to state law.

What the ruling settles:

• Sports and political contracts on Kalshi and Polymarket are shielded from Minnesota’s law while the injunction stands.
• Criminal penalties in the felony law cannot be enforced against either platform until the case is resolved.

What is still unresolved:

• Pop culture and entertainment contracts may not qualify for federal preemption, leaving them open to state regulation.
• The final scope of relief will not be set until the case reaches a ruling on the merits, which has no scheduled date.

The Tribes Holding Minnesota’s Gambling Monopoly

Minnesota has never legalized sports betting. The only legal gambling in the state runs through horse tracks and the casinos tribal nations operate under compacts with the state and federal government. Prediction markets sidestepped that entire structure without asking permission.

That is why tribal nations joined the case in defense of the ban, arguing the platforms pose a direct threat to the gambling business inside their casinos. A market where anyone with a smartphone can trade a contract on an NBA game functions like a sportsbook, minus the compact, the state license and the revenue sharing that come with one.

Minnesota Attorney General Keith Ellison’s office laid out its defense of the state’s gambling authority in June court filings on behalf of the Department of Public Safety, which regulates gambling statewide.

State Rep. Emma Greenman, a Minneapolis Democrat who backed the ban, said she was disappointed by Monday’s ruling but expects the fight to continue.

“If it walks like a duck and if it quacks like a duck, it’s gambling,” Greenman said. “It’s a duck and we should be able to regulate it in the public interest.”

Minnesota Is the Fifth State to Hit This Wall

Minnesota is not the first state to run into CFTC preemption. It is the first to make a felony out of resisting it.

No earlier state fight matched Minnesota’s criminal penalties. The Trump administration has pursued similar cases against states that tried to restrict or curb the platforms, but none had gone as far as Minnesota did.

Attorneys tracking the litigation describe a fast-forming pattern of federal preemption rulings that leave state gambling regulators with less room to maneuver each time a court weighs in.

How Big Is the Market Minnesota Tried to Ban?

Combined monthly trading on Kalshi and Polymarket climbed from under $5 billion to roughly $24 billion in about seven months, and sports contracts pull in the biggest share of the action. That is the scale of business now sitting outside tribal compacts and state licensing rules.

Pew Research Center found combined monthly volume jumped to roughly $24 billion in April, up from under $5 billion the previous September. Sports contracts are doing most of the work.

• 80% of Kalshi’s trading volume has come from sports contracts since mid-2024.
• 39% of Polymarket’s volume comes from sports over the same stretch, still its largest single category.
• 91% of Kalshi’s volume and 90% of Polymarket’s volume is concentrated in just three categories: sports, politics and crypto.

That volume runs through no state license, no tribal compact and none of the consumer protection rules written for traditional gambling.

Minnesota’s Fight Moves to the Merits

Critics of the law raised a separate objection beyond federal preemption. They argued its ban on advertising prediction markets violated free speech protections. Menendez did not need to resolve that claim to justify blocking enforcement now, but it remains part of the case.

Greenman said she was disappointed by the ruling but considers it just the start of the litigation over Minnesota’s law.

No trial date has been set. The case moves next to full merits briefing, with Minnesota’s felony provisions on hold until a court decides how far the CFTC’s jurisdiction actually reaches.

Frequently Asked Questions

Is Kalshi Still Legal in Minnesota After This Ruling?

Yes, for now. Menendez’s preliminary injunction blocks Minnesota from enforcing its felony ban while the lawsuit continues, so Kalshi and Polymarket can keep operating in the state. That could change if a later ruling narrows or lifts the injunction.

What Is a Designated Contract Market?

It is an exchange the CFTC has approved to list futures, options or swaps for trading, the same federal designation that covers traditional commodity exchanges. Kalshi and Polymarket US both hold that status, which is why Menendez found federal law, not Minnesota’s statute, controls how their contracts are regulated.

Can Minnesota Still Charge Anyone Under the Felony Law?

No. The injunction blocks the state from enforcing the law’s criminal penalties, up to five years in prison and a $10,000 fine for hosting or advertising a prediction market, for as long as the order stands.

Why Did Tribal Nations Support Minnesota’s Ban?

Tribal casinos hold Minnesota’s gambling monopoly outside horse racing, operating under compacts that do not extend to prediction markets. Tribal nations argued in court that letting the platforms run as unregulated sportsbooks undercuts that arrangement without the same oversight or revenue sharing casinos provide.

What Happens if Minnesota Loses the Case Completely?

A final ruling against the state would make the block permanent. Lawmakers would likely need a narrower approach, such as advertising limits or age verification rules, since federal law leaves little room for an outright ban.