TLDR
- A federal judge halted Minnesota’s SF 3432, the first state law to criminalize prediction markets.
- The ruling grants Kalshi, Polymarket, and the CFTC a preliminary injunction.
- Judge Katherine Menendez said the plaintiffs are likely to win on preemption grounds.
- The law was set to take effect August 1 before the block.
- Minnesota Attorney General Keith Ellison disagrees with the ruling and may continue the fight.
A federal judge has stopped Minnesota from enforcing a state law that would have banned prediction markets. The ruling came on Monday, just days before the law was set to take effect on August 1.
U.S. District Judge Katherine Menendez issued a preliminary injunction in favor of Kalshi, Polymarket, and the Commodity Futures Trading Commission. Her order runs 44 pages and blocks the state from acting against exchanges registered with the CFTC.
Minnesota’s law, known as SF 3432, was the first of its kind in the country. It aimed to criminalize prediction markets operating within the state.
Judge Menendez found that the plaintiffs were likely to succeed on their preemption claims. She also ruled that the platforms would face irreparable harm if the law moved forward as planned.
What the ruling means for now
The injunction will stay in place until the court makes a final decision on the merits. This gives Kalshi and Polymarket room to keep operating in Minnesota while the legal case continues.
Kalshi spokesperson Elisabeth Diana responded quickly to the decision. She said the ruling sends a clear message to states considering similar bans.
“Minnesota was the first state to pass a law banning prediction markets, and a court prevented it from being enforced less than two months later,” Diana said. She added that states do not have jurisdiction to ban markets that fall under federal oversight.
Diana said the law worked against the intent of Congress. Lawmakers, she said, gave federal regulators sole authority over financial markets like these.
Minnesota’s response to the decision
Minnesota Attorney General Keith Ellison does not agree with the court’s ruling. He told Courthouse News that the state’s current approach lets what he called predatory gambling apps operate freely.
Ellison’s memorandum argued that platforms could still meet federal rules while limiting their offerings inside Minnesota specifically. This suggests the state may keep pushing for restrictions even after this setback.
The case connects to a wider legal battle across several states. The CFTC has already filed suits against Illinois, Arizona, Connecticut, and Wisconsin over similar prediction market restrictions.
In Minnesota’s case, the Department of Justice and CFTC filed their challenge within hours of the bill becoming law. Kalshi joined the lawsuit just days later.
The timing of the ruling was tied to a deadline set by the CFTC. In a July 24 letter, the agency warned that without a ruling by Tuesday, it would treat its motion as denied.
The CFTC said it would then seek relief from the Eighth Circuit Court of Appeals. Kalshi and Polymarket said they were prepared to take the same route if needed.
The injunction arrived just before that deadline, avoiding an appeal for now. Both companies can continue operating in Minnesota while the case moves forward.
The broader legal question remains unresolved. Courts across multiple states will likely keep shaping how prediction markets are regulated in the months ahead.
