Federal court blocks Minnesota's prediction-market felony law for Kalshi, Polymarket
In brief
- Federal judge blocks Minnesota felony law enforcement against CFTC-regulated prediction-market exchanges on July 27.
- Commodity Exchange Act likely preempts Minnesota statute criminalizing prediction-market operations, court ruled.
- Polymarket US will continue serving Minnesota users; Minnesota AG pledges to defend law.
- Preliminary injunction protects only registered contract markets; customers and service providers remain unshielded.
- New York court denied Kalshi interim protection in July, leaving broader state-federal conflict unresolved.
Federal preemption on the merits
The ruling hinges on a narrow but critical principle: federal law gives the CFTC exclusive jurisdiction over swap transactions conducted on designated contract markets. Judge Menendez identified markets tied to a Senate election, the World Cup winner, a LeBron James signing and Strait of Hormuz traffic as likely swaps under federal definition. She questioned whether a 20-point-lead market and contracts on the winning Love Island USA couple or words used by World Cup announcers would qualify, leaving the contract boundary unsettled even within the preliminary order.
Minnesota's prediction-market law criminalizes creating or operating a covered prediction market, or intentionally facilitating it through specified listing, funds, settlement, counterparty or pricing activity, when done for consideration and as part of a business. The law is scheduled to take effect August 1 for crimes committed on or after that date. The preliminary injunction does not treat every event contract as a swap—it shields only CFTC-designated contract markets and does not expressly protect customers, independent advertisers or outside service providers.
State and federal positions
Polymarket US welcomed the ruling and said it expected to keep serving Minnesota users. Minnesota Attorney General Keith Ellison said the state disagreed and would continue defending the law as the record develops. The disagreement reflects a deeper tension: both the Minnesota and New York cases remain open, and the opposite preliminary results do not settle how federal registration interacts with state gambling laws nationwide.
A New York court denied Kalshi interim protection from existing state gambling enforcement earlier in July, suggesting the broader conflict between federal registration and state enforcement remains far from resolved.
