Minnesota prediction market ban paused by federal judge days before rollout

Technology Minnesota prediction market ban paused by federal judge days before rollout Comments: by Ashleigh Fields - 07/27/26 8:39 PM ET Comments: Link copied by Ashleigh Fields - 07/27/26 8:39 PM ET Comments: Link copied

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A federal judge on Monday halted a prediction market ban in Minnesota days before it was set to roll out.

District Judge Katherine Menendez wrote that the Trump administration, Kalshi and Polymarket are “likely to succeed on the merits” in the case arguing that the state ban is pre-empted by federal law.

“Specifically, it appears that whether the Minnesota statute is expressly preempted turns on whether the state law attempts to regulate trades in event contracts that qualify as ‘swaps’ within the meaning of the CEA [Commodity Exchange Act],” Menendez, a Biden appointee, wrote in the order.

A swap is a type of financial agreement where two parties trade cash flows or risk based on interest rates, currencies, or commodities, regulated by the CFTC under the CEA.

Menendez wrote that “there are several examples of event contracts hosted by Kalshi and Polymarket US that fit that definition because they concern the occurrence of events with clear potential economic, financial, or commercial consequences that are neither remote or unattenuated.”

The judge also noted that Kalshi and Polymarket US are “designated contract markets,” which grants the Commodity Future Trading Commission exclusive jurisdiction to regulate transactions involving those “swaps.”

However, lawmakers in the North Star State remain concerned about the ethical impact of prediction markets after Kalshi suspended a political candidate in Minnesota for betting on his own race.

Menendez wrote that the Minnesota state ban could possibly stand in some cases where transactions aren’t considered a swap.

“The Court pauses to note that the Minnesota statute may not, ultimately, be preempted in all respects, even as to Kalshi and Polymarket US. Aside from the preliminary nature of this Court’s assessment of the likelihood of success, Plaintiffs have not shown that every event contract listed on Kalshi and Polymarket US fits the statutory definition of a ‘swap,’” the judge wrote.

“If they don’t fit, Plaintiffs have much weaker claims that the CFTC is the only authority that can regulate them,” she added.

Minnesota isn’t the only state to initiate a crackdown on prediction markets. Rhode Island, New Jersey and California are attempting to do the same, arguing that apps like Kalshi and Polymarket should qualify as predatory gambling.

On Monday, Minnesota Attorney General Keith Ellison said the state will “respectfully disagree” with the court’s preliminary injunction and that the “proper ‘status quo’ to maintain is one that allows predatory gambling apps to proliferate.”

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