A federal judge has temporarily blocked Minnesota from enforcing a newly enacted law that bans prediction markets in the state, marking a significant legal setback for state authorities. On Monday, U.S. District Judge Katherine Menendez in Minneapolis issued a preliminary injunction preventing the law from taking effect, which had been scheduled for this Saturday.
The statute, signed into law by Governor Tim Walz in May, was the first of its kind in the United States to categorically prohibit the operation, hosting, or promotion of prediction markets within the state. These platforms, including Kalshi and Polymarket, allow users to trade contracts based on the outcomes of future events, ranging from elections to economic indicators.
The legal challenge was brought by Kalshi, Polymarket, and the Commodity Futures Trading Commission (CFTC), the federal agency overseeing futures and derivatives markets. The plaintiffs argued that Minnesota’s legislation conflicts with federal law, which regulates prediction markets and certain types of derivatives trading. Judge Menendez found that the federal regulations likely preempt the state’s ban, supporting the motion for a preliminary injunction.
The injunction halts Minnesota’s ability to enforce the ban while the broader legal dispute proceeds, preserving the status quo for prediction market operators in the state. Neither the CFTC, the companies involved, nor Minnesota’s attorney general responded to requests for comment on the ruling.
The case represents a key test of the balance between state authority and federal oversight in regulating financial innovations such as prediction markets. Supporters of the Minnesota law cited consumer protection and market integrity concerns, while opponents maintain that federal regulation provides a comprehensive framework for these products and that state-level prohibitions may stifle innovation and market participation. Further litigation is expected to clarify the scope of state versus federal control in this evolving sector.