On July 27, 2026, Judge Katherine Menendez of the U.S. District Court, District of Minnesota blocked Minnesota from enforcing its felony prediction-market ban against CFTC-registered exchanges. The ruling was widely reported as a win — and it is. But it has real limits that the headlines missed.
Minnesota's Minnesota Statute §609.7615 (SF 3432), signed by Gov. Tim Walz on May 18, 2026, made Minnesota the first state to criminalize prediction markets outright — not by applying an existing gaming statute to selected contracts, but through a purpose-built ban.
Note: The statute did not penalize Minnesota residents for using prediction markets — only companies for operating or advertising them. That framing was itself part of the state's legal argument: it was regulating businesses, not individuals.
Judge Katherine Menendez's 44-page order granted a preliminary injunction on the narrowest ground that would work: federal preemption under the Commodity Exchange Act (CEA). She found the plaintiffs were likely to succeed on their express-preemption claims, that they faced irreparable harm, and that the balance of harms supported blocking the law while litigation continues.
CEA express preemption: The Commodity Exchange Act gives the CFTC "exclusive jurisdiction" over swaps traded on designated contract markets (DCMs). Many Kalshi and Polymarket contracts appear to qualify as swaps, meaning the state cannot criminalize them.
Irreparable harm: If the law took effect, Kalshi and Polymarket US would face immediate felony exposure, forcing them to either exit Minnesota or risk criminal liability — harm that couldn't be fixed by money damages later.
Balance of harms: The harm to the companies from losing access to a state market outweighed the harm to Minnesota from a temporary delay in enforcement while the legal questions were resolved.
First Amendment claims: The plaintiffs argued that banning prediction market advertising violates the First Amendment. Judge Menendez found she didn't need to reach this issue to grant the injunction — it remains open for the full trial.
Implied preemption: Beyond the explicit CEA preemption, the plaintiffs also raised implied-preemption theories. The judge deferred those to the full merits proceeding.
Whether the law is permanently invalid: The court explicitly said this is a preliminary assessment. The ultimate question — is Minnesota's ban preempted by federal law? — remains unanswered.
What the headlines missed
Judge Menendez was explicit in a footnote: “The Minnesota statute may not be preempted in all its applications. But the Court finds the state law is likely preempted in many respects.” The injunction blocks enforcement broadly because drawing precise lines contract-by-contract at this stage would be impractical — not because every contract is definitively protected.
The CEA's protection extends to contracts that qualify as swaps — financial instruments with genuine economic, commercial, or financial consequences. The judge found that many Kalshi and Polymarket contracts clearly meet that definition: markets tied to macroeconomic data releases, interest rate decisions, and commodity price movements look like federally regulated derivatives.
But some contracts are harder to fit. The judge's order flagged entertainment outcomes — the example given was a reality TV competition — as contracts that may not have the economic consequences required to qualify as swaps. Those contracts might be reachable by state law even if the platforms ultimately win on the core CEA preemption theory.
Likely swap-qualifying contracts
Potentially contested contract types
This contract-level ambiguity is the same question driving the CFTC's June 2026 NPRM (RIN 3038-AF65), which proposed a public-interest review process for gaming contracts, war, terrorism, and certain sports markets. The federal rulemaking and the Minnesota case are now parallel tracks addressing the same fundamental boundary question. See the CFTC Rule 40.11 explainer
Coverage of court rulings tends to compress nuance. Here's what this ruling doesn't say.
Prediction markets are now permanently legal in Minnesota.
The injunction is preliminary — it preserves the status quo while litigation continues. A final ruling on the merits is still ahead.
All prediction market contracts are protected by federal law.
Only contracts that qualify as "swaps" under the CEA get federal preemption protection. Some entertainment or sports prop contracts may not qualify.
Minnesota has no path to enforcing its ban against CFTC-registered platforms.
If the final ruling finds that certain contract types aren't swaps, the state could enforce its law against those specific markets even on Kalshi or Polymarket.
The ruling means the CFTC has full authority over prediction markets.
The court found the CFTC likely has exclusive jurisdiction over swap contracts on DCMs — but the boundary of what qualifies as a swap remains actively contested.
Other states' restrictions on Kalshi are now invalid.
This ruling applies only to Minnesota's criminal statute. Nevada's civil settlement and Michigan's TRO involve different laws, different courts, and different legal theories.
AG Keith Ellison's statement on the injunction
“Prediction markets are gambling, plain and simple, and Minnesota has every right to keep predatory gambling out of our communities.”
Attorney General Keith Ellison has indicated the state will continue defending the law through the full litigation. Minnesota argues that prediction markets are gambling — an area historically regulated by states — and that the CFTC's jurisdiction doesn't automatically override state police powers over unlicensed gambling activity.
The state also has a factual argument the court left open: that certain contracts on Kalshi and Polymarket don't qualify as swaps and are therefore not protected by federal preemption. If the final merits ruling agrees with that narrower reading, Minnesota could enforce its ban against those specific contract types even against CFTC-registered platforms.
Minnesota residents can use Kalshi and Polymarket US normally. The platforms are not required to geofence Minnesota under the injunction.
The law's criminal penalties — including felony exposure for operators — cannot be enforced while the injunction is in place.
The injunction is not permanent. If the state wins at trial — particularly on the argument that some contracts aren't swaps — access to those markets could be restricted or cut off.
Platform access in Minnesota should be treated as conditional until a final merits ruling resolves the swap-definition question.
Minnesota's injunction is the strongest federal-preemption ruling yet against a state prediction-market ban — but it doesn't resolve the underlying national dispute. Courts in Nevada and Michigan have separately restricted parts of Kalshi's activity under state law, and those restrictions remain in effect independent of the Minnesota ruling.
The common thread across all these cases is the same unresolved question: where does the federal swap definition end, and where does traditional state gambling regulation begin? Minnesota is the leading test of that question in a criminal statutory context. The Sixth Circuit cases involving Ohio and Tennessee address it in a different procedural posture. See the Sixth Circuit argument explainer
The CFTC's parallel rulemaking (NPRM RIN 3038-AF65, comment period closed July 27) could also affect the outcome. If the CFTC finalizes a rule that formally defines which sports contracts are disfavored or requires public-interest review, those contracts may lose the regulatory backing that supports the swap argument in court. What happens after the CFTC comment period
State status, platform access, and the court timeline.
Ohio and Tennessee cases — the next federal court battle.
The federal framework running in parallel to state litigation.
Timeline, next milestones, and what a final rule could change.
Live status across all active state and federal cases.
The big-picture answer to the question behind all these cases.
