Federal Judge Blocks Minnesota Prediction-Market Ban Before August 1 Start Date

Meta description: Judge Katherine Menendez blocked Minnesota’s prediction-market ban as applied to CFTC-registered exchanges before its Aug. 1 start.

Tags: Kalshi, Polymarket US, CFTC, Minnesota, Keith Ellison, Katherine Menendez

market_platform: none-if-cross-platform

category: Regulation

A federal judge blocked Minnesota from enforcing its prediction-market statute against CFTC-registered designated contract markets on July 27, 2026, five days before the ban was scheduled to take effect. U.S. District Judge Katherine Menendez found in a District of Minnesota preliminary-injunction order that the United States, KalshiEx LLC and QCX LLC, doing business as Polymarket US, were likely to succeed at least in part on their federal preemption claims.

What did the Minnesota court block?

Menendez enjoined Minnesota officials from enforcing Minn. Stat. § 609.7615, as amended and adopted through Chapter 118, S.F. No. 3432, against CFTC-registered designated contract markets. The statute was scheduled to take effect August 1, 2026, and would have made certain prediction-market hosting, facilitation and advertising activity a felony.

Chapter 118 is a broader public-safety law signed by Gov. Tim Walz on May 26, 2026. The prediction-market provision added a new section, Minn. Stat. § 609.7615, defining covered prediction markets and barring business activity tied to those markets. The injunction focused on that prediction-market section, not on the public-safety law as a whole.

The July 27 order addressed three related cases in the District of Minnesota: United States v. Minnesota, KalshiEx LLC v. Ellison and QCX LLC v. Ellison. The court considered the preliminary-injunction motions together, while noting that the United States, KalshiEx and QCX filed separate lawsuits.

Menendez found that the plaintiffs were likely to prevail on their argument that the Commodity Exchange Act preempts Minnesota’s statute when the state seeks to bar federally regulated event contracts listed on CFTC-registered exchanges. The order also found that KalshiEx and QCX would face irreparable harm if the law took effect while the litigation continued.

A preliminary injunction is not a final judgment. It pauses enforcement while the cases proceed, based on the court’s assessment of likely success and immediate harm. Menendez also wrote that Minnesota’s statute may not be preempted in every application, leaving room for a narrower final ruling that separates federally regulated exchange activity from other conduct the state may still seek to regulate.

Who challenged Minnesota’s prediction-market law?

The challengers were the United States, KalshiEx LLC and QCX LLC. KalshiEx operates a CFTC-registered designated contract market. The CFTC lists QCX LLC as doing business as Polymarket US and designated as of July 9, 2025. That corporate distinction matters because the court’s order concerned federally regulated exchange structures, not every product or entity associated with the Polymarket brand.

The CFTC was central to the litigation. In a May 19, 2026 release, the agency said it had sued Minnesota to block a state law that would make operating or assisting in the operation of a prediction market a criminal felony. The agency said it sought a preliminary injunction to stop the law from taking effect on August 1, 2026.

The federal government’s theory was jurisdictional: transactions conducted on, or subject to the rules of, registered CFTC entities fall within federal derivatives regulation. KalshiEx and QCX advanced the same core argument from the exchange side, saying Minnesota could not use state gambling law to prohibit event contracts listed through CFTC-regulated market infrastructure.

Minnesota took the opposite view. In a June 18 filing announcement, Attorney General Keith Ellison said prediction markets are gambling and argued that the state has authority to regulate them as a public-safety matter. His office opposed the preliminary injunction and remains a defendant in the exchange-filed cases.

Is Kalshi legal in Minnesota right now?

For now, Minnesota cannot enforce Minn. Stat. § 609.7615 against CFTC-registered designated contract markets covered by the preliminary injunction. That allows KalshiEx and Polymarket US to continue operating in the state under the injunction while the cases proceed, but it does not resolve the final boundary between federal derivatives law and state gambling authority.

The court’s language points to that unresolved line. Menendez did not hold that every state prediction-market restriction is preempted. She held that the challengers had shown likely success, at least in part, on their claim that Minnesota’s ban conflicts with federal law as applied to CFTC-registered exchanges and their listed contracts.

Walz moved separately after the injunction. According to Minnesota Reformer coverage on July 28, 2026, the governor signed an executive order prohibiting state employees from using nonpublic or confidential information to bet on prediction-market sites. That order is narrower than Minn. Stat. § 609.7615 because it addresses state workers’ conduct, rather than imposing a statewide felony ban on operators, facilitators and advertisers.

Why does the ruling matter outside Minnesota?

The Minnesota ruling gives prediction-market operators and the CFTC a federal preemption order to cite as other states test how far they can go against event-contract platforms. Minnesota’s statute was unusually direct because it created a criminal prohibition, rather than relying only on administrative warnings, cease-and-desist letters or case-by-case enforcement.

The dispute turns on the line between two regulatory systems. The Commodity Exchange Act gives the CFTC authority over futures, swaps and certain exchange-traded derivatives. States retain broad police powers over gambling. Event contracts sit in the middle when users trade on political, economic, sports or cultural outcomes through federally registered market infrastructure.

Menendez’s order strengthens the derivatives-law side of that argument for now. The court found the plaintiffs likely to succeed because Minnesota’s law appeared to prohibit activity that federal law allows and regulates through registered exchanges. But the order’s caveat about possible non-preempted applications means the decision should not be read as a final nationwide rule for every prediction-market product.

The distinction is especially important for Polymarket US. QCX LLC, not Blockratize Inc., was the party before the court in the related Minnesota case. Blockratize, which did business as Polymarket.com, was the subject of a 2022 CFTC order resolving charges that it offered off-exchange event-based binary options contracts and failed to obtain designation as a designated contract market or registration as a swap execution facility. The Minnesota injunction concerns QCX’s challenge to a state statute in the context of federally regulated market access.

What happens next in the Minnesota cases?

The three related cases continue in the U.S. District Court for the District of Minnesota before Judge Menendez. The immediate question decided on July 27 was whether Minnesota could enforce Minn. Stat. § 609.7615 while the lawsuits proceeded. The broader merits question is whether the Commodity Exchange Act permanently blocks Minnesota from applying the statute to federally regulated prediction-market contracts.

The next phase will determine whether the preliminary injunction becomes permanent, is narrowed, or is dissolved after further proceedings. For other states watching the case, the practical stakes are specific: a final ruling for the challengers would make it harder to use state gambling law to block CFTC-registered event contracts, while a narrower ruling could preserve more room for state restrictions outside the federally regulated exchange context.