A U.S. federal court has temporarily blocked a Minnesota injunction against prediction market platforms. The state law, scheduled to take effect this Saturday, was considered the first state law in the U.S. to criminalize prediction markets. The judge ruled that enforcing the injunction before a formal trial could cause irreparable harm to the platforms.
The judge first issued a preliminary injunction.
U.S. District Judge Katherine Menendez granted a preliminary injunction on Monday, temporarily halting enforcement of SF 3432 in Minnesota. The order applies to trading platforms registered with the U.S. Commodity Futures Trading Commission (CFTC) as designated contract markets and remains in effect until the court makes further determinations on the substantive issues of the case.
In her 44-page ruling, the judge stated that Kalshi, Polymarket, and the CFTC have a high probability of winning at this stage on their claim that "federal law takes precedence over state law." She also determined that if the law takes effect as scheduled, the platforms involved may suffer losses that cannot be fully compensated for through subsequent remedies.
The key point of contention is whether the contract constitutes a swap.
The ruling states that the core of the dispute lies in whether the relevant transaction contracts fall under the definition of "swaps" in the Commodity Exchange Act. If they do, state law restrictions on them may be excluded by federal law.
The judge cited examples such as contracts surrounding the Senate election results, the World Cup champion, and whether the Strait of Hormuz should be reopened, all of which may have clear economic, financial, or commercial consequences and are therefore closer to products covered by federal rules.
However, she also pointed out that not all contracts on the platform meet this standard. For example, the marketplace on Kalshi that deals with the winner of Love Island USA or what commentators might say during a match may not fall under the same legal scope.
The final ruling may not be a one-size-fits-all approach.
The judge stated that the Minnesota law is not necessarily excluded by federal law in all applicable scenarios, therefore the ultimate permanent remedy "may be much narrower." She criticized both sides for tending to frame the case as an "either/or" dichotomy.
Minnesota Attorney General Keith Ellison disagreed with the ruling, arguing that the court's interpretation of "maintaining the status quo" would effectively allow what he calls "predatory gambling apps" to continue to expand. The state government had previously argued that platforms could still restrict the availability of certain products within the state, even if they met federal requirements.
Lawsuits in multiple states are still ongoing.
This is not the first time the CFTC has sued state governments on similar issues. Reports indicate that the agency has already filed lawsuits against Illinois, Arizona, Connecticut, Wisconsin, and Minnesota. After the Minnesota bill became law, the U.S. Department of Justice and the CFTC filed their lawsuits almost within hours, with Kalshi subsequently filing his own.
Prior to this ruling, the CFTC sent a letter to the court on July 24 stating that if it did not receive a ruling or a stay of execution arrangement by the close of business on Tuesday, it would consider its motion "factually dismissed" and apply for interim relief to the Eighth Circuit Court of Appeals. Kalshi and Polymarket also indicated at the time that they would take the same steps.
