A federal judge in Minnesota blocked the state’s first-in-the-nation prediction-market ban before its August 1, 2026 effective date, giving Kalshi, Polymarket US and the Commodity Futures Trading Commission an early win in a widening jurisdiction fight. The July 27 preliminary injunction keeps the platforms operating in Minnesota while the federal litigation continues.
What did the Minnesota court decide?
U.S. District Judge Katherine M. Menendez granted a preliminary injunction on July 27 in the U.S. District Court for the District of Minnesota, finding that the plaintiffs had shown they were likely to succeed on key preemption arguments under the Commodity Exchange Act. The order paused enforcement of Minnesota’s prediction-market law as applied to many trades listed on Kalshi and Polymarket US.
In the order, Menendez wrote that the plaintiffs had met their burden to show likely success on express preemption, at least for many of the event contracts on the two platforms. She also found that Kalshi and Polymarket US faced irreparable harm if the law took effect because the statute carried criminal consequences for operating or assisting prediction-market activity in the state.
The ruling is preliminary, not a final judgment. It does not settle every possible state-law claim against every event contract, and Menendez noted that some categories of markets may raise different questions. But the injunction is still a material signal for CFTC-registered exchanges because it treats Minnesota’s ban as likely to conflict with the federal market structure Congress assigned to the CFTC.
What did Minnesota’s law cover?
Minnesota enacted the prediction-market restrictions through SF 4760, an omnibus public-safety bill signed by Gov. Tim Walz in May 2026. The law was scheduled to take effect August 1 and made it a felony to create, operate or assist in the operation of a prediction-market platform serving Minnesota residents.
The measure reached a broad set of event contracts, including markets tied to sports, elections, weather, cultural events and other future outcomes. The CFTC, in its May 19 press release announcing suit against Minnesota, described the law as the broadest state effort it had challenged to date and said it would criminalize activity in CFTC-regulated markets.
Minnesota officials framed the statute as a gambling and consumer-protection measure. Attorney General Keith Ellison, whose office is defending the state, said after the injunction that Minnesota disagreed with the court’s view of the status quo and would continue defending the law. “And Minnesota has every right to keep predatory gambling out of our communities,” Ellison said, according to the Associated Press.
Why is the CFTC suing states over prediction markets?
The CFTC’s legal theory is that event contracts traded on CFTC-registered designated contract markets fall under the Commodity Exchange Act, and that state gambling laws cannot be used to shut down federally regulated exchanges. In its May 19 Minnesota announcement, the agency said the state law would undermine a federal regulatory framework established by Congress more than 50 years ago.
CFTC Chairman Michael S. Selig put the agency’s position in criminal-liability terms. “This Minnesota law turns lawful operators and participants in prediction markets into felons overnight,” Selig said in the CFTC’s May 19 release. He also argued that weather and crop-linked event contracts can serve hedging functions for agricultural businesses, a point Minnesota has not accepted as a reason to displace state gambling authority.
Minnesota is one part of a broader federal campaign. The CFTC has filed or initiated actions against nine states, including Arizona, Connecticut, Illinois, Kentucky, Minnesota, New York, New Mexico, Rhode Island and Wisconsin, according to CFTC releases and CBS News reporting. The agency has also filed amicus briefs in appellate and state high-court proceedings where prediction-market preemption is at issue.
The state position is different: officials argue that sports and other event contracts offered to retail users function as gambling, even if the platforms use futures-market infrastructure and federal registration. That dispute is now moving through parallel federal and state proceedings, with no single court yet resolving the national question for all platforms and all contract categories.
How does New York’s Kalshi lawsuit change the fight?
New York escalated the state side of the conflict on July 31, when Attorney General Letitia James filed a lawsuit accusing Kalshi of operating an illegal, unlicensed gambling business in the state. The Associated Press reported that New York seeks to shut down Kalshi’s in-state operations, force forfeiture of profits and impose penalties that could total up to $36 billion.
The New York case follows earlier state pressure on Kalshi over sports-related event contracts. Kalshi has argued in federal litigation that it is a federally regulated exchange under CFTC oversight and that state gambling enforcement is preempted. New York’s suit puts that defense into a high-stakes state-court posture, with damages and customer restitution now part of the fight.
James described Kalshi as an illegal gambling operator, not a financial exchange outside state gaming law. Gov. Kathy Hochul backed the action, saying state gaming laws are designed to protect consumers and ensure companies operate under the same rules. Kalshi has rejected the state’s framing and has said state-by-state enforcement would push users away from federally supervised markets.
The New York litigation also shows why the Minnesota order matters beyond one state. A federal judge in Minnesota accepted, at least at the preliminary stage, the argument that the Commodity Exchange Act likely preempts a state ban for many CFTC-regulated event contracts. New York is pressing the opposite practical result through gambling enforcement, and the two paths could produce conflicting rulings unless appellate courts or federal rulemaking narrow the question.
What do the market numbers show?
The legal clash is unfolding as prediction-market trading has grown sharply. Pew Research Center, using data from The Block accessed in May 2026, found that combined monthly global trading volume on Kalshi and Polymarket reached nearly $24 billion in April 2026. Pew’s figures excluded Polymarket US from the Polymarket total and measured notional taker volume in U.S. dollars.
Pew also found that market composition can shift quickly around major events. Political contracts accounted for 90% of Kalshi volume and 65% of Polymarket volume in October and November 2024, during the U.S. presidential election period. By 2026, sports contracts had become a central point of state concern, because state regulators view them as competing directly with licensed sports betting.
That growth explains the intensity of the legal fight. For platforms, preemption is the difference between a national exchange model and a state-by-state compliance map. For states, the same contracts look like a way to bypass gambling licenses, age limits, responsible-gaming rules and tax systems built around casinos and sportsbooks.
What happens next?
The Minnesota injunction remains in place while the federal case proceeds toward a merits decision. The next legally significant step is not a new launch or product announcement, but the court’s deeper review of whether the Commodity Exchange Act preempts Minnesota’s law across the contract categories at issue.
At the same time, New York’s July 31 lawsuit gives state regulators a separate front with larger financial exposure for Kalshi. The CFTC’s event-contract rulemaking also remains central because a final rule could clarify which contracts the agency views as permissible, contrary to the public interest or subject to additional limits. Until then, the industry’s operating map will be shaped by injunctions, state enforcement actions and appellate rulings rather than a settled national standard.
Meta/SEO description: A Minnesota federal judge paused the state’s prediction-market ban as New York sued Kalshi for alleged unlicensed gambling in 2026.
Tags: Kalshi, Polymarket, CFTC, Minnesota, New York, Keith Ellison, Letitia James
market_platform: none-if-cross-platform
category: Regulation
