A federal judge has issued a preliminary injunction that blocks Minnesota from enforcing its newly enacted prohibition on prediction markets, delivering a major win to platforms including Polymarket and Kalshi just days before the measure was set to take effect.U.S. District Judge Katherine Menendez of the District of Minnesota ruled on Monday, July 27, 2026, that the state law—signed by Governor Tim Walz in May and scheduled to become effective on August 1—likely conflicts with federal authority under the Commodity Exchange Act.
The statute would have criminalized the creation, operation, hosting, or promotion of platforms allowing users to trade on the outcomes of future events, ranging from sports and politics to weather and cultural contests, treating such activity as a felony.
The decision stems from coordinated legal challenges brought by the Commodity Futures Trading Commission (CFTC), the United States government, KalshiEX LLC, and Polymarket US.
These parties argued that the federal CEA grants the CFTC exclusive jurisdiction over event contracts qualifying as swaps when traded on designated contract markets.
Both Kalshi and Polymarket US hold such designations, placing their offerings under federal oversight rather than state gambling rules.
Judge Menendez determined that the plaintiffs demonstrated a strong likelihood of success on their preemption claims for a substantial portion of the contracts listed on the platforms.
She also found that the companies and regulator faced a credible threat of irreparable harm if the ban proceeded, including disruption to nationwide operations and the need for costly technical workarounds that could not later be recovered.
In her 44-page order, the judge noted that while certain niche contracts—such as those tied purely to entertainment outcomes like reality television winners—might fall outside the core preemptive scope, crafting a narrowly tailored injunction around those exceptions would prove impractical at this stage.
As a result, the court broadly enjoined enforcement of the Minnesota statute against any entities registered as designated contract markets with the CFTC, preserving the existing regulatory framework until a full resolution on the merits.
The ruling maintains the status quo for users in Minnesota who currently access these platforms to trade on real-world events.
State officials had defended the law as a necessary safeguard against what they characterized as predatory and addictive forms of wagering that could undermine civic life and exploit vulnerable participants.
Minnesota Attorney General Keith Ellison’s office expressed disagreement with the temporary block, emphasizing the state’s authority to regulate gambling and protect residents, while signaling intent to continue litigating the underlying issues.
This outcome arrives amid broader national debates over the classification of prediction markets.
Proponents view the platforms as legitimate derivatives exchanges that aggregate information and provide hedging tools, while critics insist they function primarily as unregulated betting operations.
By intervening at the federal level, the CFTC has reinforced its position that state-level criminalization of federally supervised markets exceeds constitutional bounds under the Supremacy Clause.
For Polymarket and Kalshi, the injunction represents a critical affirmation of their ability to operate uniformly across state lines without facing immediate felony exposure in Minnesota.
It also underscores the challenges states face when attempting to impose independent restrictions on products already subject to comprehensive federal commodity regulation. The case will proceed toward a final determination, but for now, the platforms remain free to continue serving Minnesota customers under existing federal rules.