U.S. District Judge Katherine Menendez blocked Minnesota from enforcing its prediction-market felony statute against CFTC-registered exchanges on July 27, four days before the law’s August 1 effective date. The preliminary injunction keeps Kalshi and Polymarket US operating in Minnesota while three related federal cases test whether the Commodity Exchange Act preempts the state ban.
What did the Minnesota injunction do?
Menendez’s order in United States v. Minnesota, No. 0:26-cv-02661, granted preliminary-injunction motions filed in related cases by the Commodity Futures Trading Commission, KalshiEX LLC and QCX LLC, which operates as Polymarket US. The order bars Minnesota officials from enforcing Minn. Stat. § 609.7615, as amended and adopted by SF3432, “against entities that are registered as designated contract markets by the CFTC” until a final merits decision.
The injunction is temporary, but it is a significant early ruling for federally registered event-contract exchanges. Menendez found that the plaintiffs were likely to succeed, at least in part, on express-preemption claims because the Commodity Exchange Act gives the CFTC exclusive jurisdiction over transactions involving swaps traded on designated contract markets.
The court did not decide that every prediction-market contract is beyond Minnesota’s reach. Menendez wrote that the state statute “may not be preempted in all its applications” but is likely preempted “in many respects.” That distinction matters because Kalshi and Polymarket US list both contracts that may fit the statutory definition of swaps and contracts where the financial, economic or commercial consequence is less clear.
What did Minnesota’s law prohibit?
Minnesota’s statute made it a felony, for consideration and as part of a business, to create a prediction market or operate, manage or control a platform intended for consumer wagers in a prediction market. The law also covered facilitation, including listing events, accepting or directing funds, determining settlement terms, providing outcome data and supplying support services tied to location, funds transfer or payments.
SF3432 defined a prediction market as a system allowing consumers to place a wager on the future outcome of specified events not determined or affected by the parties to the contract. The covered categories included athletic events, games of skill, war, emergencies, public health crises, elections, government decisions, legal actions, deaths, mass-casualty events, popular culture events and whether a person will make a particular statement.
The statute also made advertising or marketing financial or technological products that promote prohibited transactions a felony. Under the law’s effective-date clause, the prediction-market section was scheduled to apply to crimes committed on or after August 1, 2026.
The CFTC attacked the measure as an intrusion on federal derivatives regulation. In a May statement quoted by CBS Minnesota and other outlets, CFTC Chairman Michael S. Selig said the law would turn lawful participants in prediction markets “into felons overnight.”
Who sued Minnesota?
The litigation came through three related cases rather than a single platform suit. Menendez’s order describes claims brought by the CFTC, Kalshi and Polymarket US against Minnesota defendants, including the State of Minnesota, Gov. Tim Walz, Attorney General Keith Ellison, the Minnesota Department of Public Safety and Jon Anglin, director of the department’s Alcohol and Gambling Division.
The plaintiffs’ central argument is that the Commodity Exchange Act preempts Minnesota’s statute because Kalshi and Polymarket US operate designated contract markets registered with the CFTC. The court order states that Kalshi and Polymarket US each received CFTC approval to operate nationwide DCMs, and that both self-certify event contracts under federal law.
Kalshi and Polymarket US also raised First Amendment claims against the advertising and information-related provisions of the Minnesota statute. Menendez did not reach those claims at the preliminary-injunction stage because she found express preemption sufficient to support temporary relief.
How did Minnesota defend the statute?
Attorney General Keith Ellison argued that prediction-market contracts are gambling and fall within Minnesota’s traditional police powers. In a June 18 memorandum opposing the preliminary injunctions, Ellison’s office said the CFTC’s regulation of commodity futures and swaps does not prevent Minnesota from regulating gambling in the form of sports, cultural, political and social event contracts.
Ellison’s office framed the law as a consumer-protection and public-safety measure. In the same June 18 statement, Ellison said, “Prediction markets are gambling, plain and simple, and Minnesota has every right to keep predatory gambling out of our communities.” He also argued that markets on civic outcomes create risks around insider knowledge and manipulation.
Menendez acknowledged Minnesota lawmakers’ concern that some event contracts resemble gambling. But at the preliminary stage, she found that the CFTC’s exclusive-jurisdiction provision likely reaches a substantial share of the event contracts offered by Kalshi and Polymarket US when those contracts qualify as swaps traded on CFTC-regulated designated contract markets.
Why did the court find preemption likely?
The Commodity Exchange Act gives the CFTC exclusive jurisdiction over accounts, agreements and transactions involving swaps or futures contracts traded or executed on designated contract markets. Menendez’s order focused on whether event contracts listed by Kalshi and Polymarket US likely fall within the CEA’s broad swap definition when payments depend on events associated with potential financial, economic or commercial consequences.
The court cited examples such as election contracts, World Cup contracts and Strait of Hormuz contracts as event markets that can carry economic or commercial consequences. Because Kalshi and Polymarket US facilitate such trades on CFTC-registered DCMs, Menendez found it likely that Minnesota’s across-the-board statute would regulate transactions Congress placed under the CFTC’s exclusive jurisdiction.
The order also identified limits to that reasoning. Menendez noted that some popular-culture and “mention” markets may lack a clear financial, economic or commercial consequence. The court’s point was not that Minnesota can enforce the law against those contracts now, but that a permanent ruling may require a more precise line than either side’s all-or-nothing briefing supplied.
How does the ruling fit other state cases?
The Minnesota order adds to a divided but fast-moving body of federal prediction-market litigation. Menendez cited the Third Circuit’s 2026 decision in KalshiEx LLC v. Flaherty, which treated Kalshi’s sports-related event contracts as swaps subject to CFTC jurisdiction, as well as district-court decisions from Tennessee and Arizona reaching similar preliminary conclusions.
The order also cited decisions going the other way, including Nevada and Ohio rulings that questioned whether particular sports-related event contracts fit within the CEA’s swap definition or whether the CEA’s exclusive-jurisdiction language expressly preempts state gambling enforcement. That split keeps the legal posture unsettled even as Minnesota’s own statute remains blocked against CFTC-registered DCMs.
Minnesota is different from several earlier disputes because its statute targeted prediction markets broadly, not only the application of existing sports-betting laws to event contracts. Menendez noted that distinction when explaining why the case required analysis of a statute covering sports, elections, legal actions, popular culture, government decisions and statement-based markets.
What are the stakes for Kalshi and Polymarket US?
The immediate stakes are access to Minnesota users and open positions. Menendez’s order says Kalshi represented that it had more than 90,000 verified Minnesota users as of May 26, 2026, with millions of dollars of open positions on Kalshi markets that had not yet settled. The court said forcing the platforms either to face potential felony charges or exit Minnesota supported a finding of irreparable harm.
The ruling also affects the regulatory map for every CFTC-registered event-contract exchange. If Minnesota had been allowed to enforce the statute on August 1, it would have tested whether a state could criminalize the operation, advertising and support infrastructure of federally registered prediction markets inside its borders before the federal preemption question was fully resolved.
For now, the next milestone is the merits phase in the District of Minnesota. Menendez’s July 27 order keeps the injunction in place until a final decision, leaving the court to decide how much of Minn. Stat. § 609.7615 can survive when applied to CFTC-registered designated contract markets.
