Judge Pauses Minnesota Law Against Kalshi and Polymarket

The judge said federal preemption under the Commodity Exchange Act may apply, giving the CFTC and the platforms the edge over Minnesota for now. The case could help define how event contracts and prediction markets are regulated.

Key Takeaways

• A federal judge in Minnesota has temporarily blocked enforcement of a new state law targeting prediction markets.
• Kalshi, Polymarket, and the CFTC argue the law likely conflicts with the federal Commodity Exchange Act.
• The judge said some contracts may still fall under Minnesota law, but kept the preliminary injunction in place.

A federal judge in Minnesota has temporarily stopped enforcement of a new state law aimed at prediction markets, giving Kalshi, Polymarket, and the U.S. regulator CFTC an early win. The plaintiffs argue the law likely runs into conflict with the federal Commodity Exchange Act.

Judge Sees Federal Preemption

On Monday, U.S. District Judge Katherine Menendez said Minnesota’s law is likely preempted by federal commodities rules. In her view, Kalshi, Polymarket, and the CFTC are likely to show in the full case that the state cannot simply ban this market.

At the center of the dispute is a basic question: who gets to regulate event contracts? Kalshi and Polymarket say their products belong under CFTC oversight because they are structured as swaps. Menendez wrote that the plaintiffs are probably right that the state law reaches many trades on the platforms that meet the definition of swaps.

What Makes the Case Stand Out

Menendez also said some contracts could still fall under Minnesota law, pointing to predictions such as the winner of the TV show Love Island. Even so, she said it would be too difficult to narrow the temporary block to only those types of contracts.

She added that allowing the law to take effect without a pause could cause irreparable harm to Kalshi and Polymarket. As a result, the preliminary injunction will remain in place until the court issues a final ruling on the merits.

Why This Matters for European Readers

For European crypto and derivatives readers, the case is a good example of how quickly the line between state rules and federal oversight can become blurred in the U.S. Prediction markets sit somewhere between trading, gambling, and regulated financial products, so legal decisions can shape how platforms design what they offer.

The case also comes amid growing scrutiny of prediction markets after the CFTC stepped up enforcement attention earlier this year. It also ties into the broader legal fight over prediction markets, where the regulator is also pushing back against state intervention.