A Minnesota federal judge blocked the state’s new prediction market ban on July 27, giving the CFTC, Kalshi, and Polymarket a significant preemption win days before the law was set to take effect. The ruling contrasts with pending fights in Wisconsin, New York, Nevada, and other states over whether sports-event contracts belong under federal derivatives law or state gambling law.
What did the Minnesota court decide?
U.S. District Judge Katherine Menendez of the District of Minnesota granted a preliminary injunction on July 27, 2026, halting enforcement of Minnesota’s prediction market law before its scheduled August 1 effective date. The Associated Press reported that the injunction favored the Commodity Futures Trading Commission, Kalshi, and Polymarket, which challenged the statute as an intrusion into federal jurisdiction over event contracts.
CoinDesk, citing Menendez’s ruling, reported that the court found the plaintiffs likely to succeed on their express-preemption claims, at least for many contracts listed on Kalshi’s and Polymarket US’s platforms. The court framed the key question as whether Minnesota was trying to regulate event contracts that qualify as swaps under the Commodity Exchange Act.
The order did not give prediction market operators a universal safe harbor. Menendez’s analysis left room for contract-by-contract distinctions, including event contracts tied to entertainment outcomes. CoinDesk reported that the court pointed to a market on the winner of the television program “Love Island” as an example of a contract that might be treated differently from contracts tied to elections, economic data, or other events with clearer financial or commercial consequences.
Why is Wisconsin still a major test?
Wisconsin remains one of the most important unresolved state cases because the CFTC sued there on April 28, 2026, after Wisconsin filed civil actions targeting Kalshi, Polymarket, Crypto.com, Robinhood, and Coinbase. The CFTC’s own press release said Wisconsin had brought suits asserting felony violations of state law against CFTC-regulated prediction market businesses.
The Eastern District of Wisconsin’s public page for United States v. Wisconsin, case number 26-CV-749, lists U.S. District Judge William C. Griesbach as the presiding judge and identifies the federal filing date as April 28, 2026. The listed filings include the CFTC complaint, the CFTC’s motion for a preliminary injunction, Wisconsin’s motion to change venue, Crypto.com’s motion to intervene, and Kalshi’s motion to intervene.
The Wisconsin dispute grew out of three Dane County actions, not five separate state cases: one involving Kalshi, Robinhood, and Coinbase, one against Polymarket, and one against Crypto.com. That structure matters because the case is not only about one exchange’s sports contracts. It is a state enforcement campaign against several federally regulated or federally connected prediction market businesses using Wisconsin gambling law.
What is the CFTC’s argument against state gambling enforcement?
The CFTC says Congress gave it exclusive jurisdiction over derivative products traded on federally registered markets, including event contracts offered by designated contract markets. In its April 28 Wisconsin release, the agency said states were attempting to regulate prediction markets through gambling laws despite federal oversight of those products.
CFTC Chairman Michael S. Selig put the agency’s position directly in that release: “States cannot circumvent the clear directive of Congress.” He added that the message to Wisconsin was the same as to New York, Arizona, and other states: the agency would sue if states interfered with federal regulation of financial markets.
States have pressed the opposite theory. Their position is that sports, election, and entertainment contracts can function as gambling products when offered to residents without a state gaming license. Nevada Attorney General Aaron D. Ford used that framing in a June 3 release announcing a preliminary injunction against Polymarket, saying unlicensed prediction markets may not bypass Nevada’s gaming regulation system.
Where do the federal courts split?
The strongest appellate ruling for the industry came from the Third Circuit on April 6, 2026, in KalshiEX LLC v. Flaherty. The court affirmed a preliminary injunction against New Jersey officials and held that the Commodity Exchange Act preempted New Jersey gambling laws as applied to Kalshi’s sports-related event contracts traded on a CFTC-licensed designated contract market.
New York moved in the other direction at the district-court level. In KalshiEX LLC v. Williams, U.S. District Judge Analisa Torres of the Southern District of New York denied Kalshi’s motion for a preliminary injunction on July 7, 2026. The Justia docket entry for the order says Kalshi sought to stop New York officials from enforcing state gambling laws against its sports-related event contracts, and that the motion was denied.
Reuters reported on July 8 that Torres found the Commodity Exchange Act did not supersede New York’s gambling laws as applied to Kalshi’s sports-event contracts. The decision gave state regulators a district-court win in the financial capital even as the Third Circuit’s New Jersey ruling gave Kalshi a favorable appellate precedent.
Minnesota now adds a third important data point. Menendez’s injunction aligns more closely with the federal preemption theory than the New York ruling does, but her contract-specific language narrows the industry’s best version of the argument. A broad federal shield for all prediction markets is harder to square with an approach that distinguishes sports, elections, economic data, and entertainment markets.
How has Nevada changed the practical stakes?
Nevada has already shown that state gambling enforcement can produce operational restrictions while federal appeals continue. The Nevada Attorney General’s June 3 release said a First Judicial District Court judge would grant a preliminary injunction against QCX LLC, which operates Polymarket, barring sports-, election-, and entertainment-related event contracts in Nevada while the state case continues.
The same Nevada release said Polymarket joined Kalshi and Coinbase as prediction market businesses enjoined from operating during Nevada enforcement actions. It also said Crypto.com and Robinhood had voluntarily stopped offering covered sports-, election-, and entertainment-related event contracts to Nevada residents.
The Nevada Gaming Control Board’s public timeline lists a January 29, 2026 temporary restraining order against Polymarket, a February 5 temporary restraining order against Coinbase, a March 20 temporary restraining order against Kalshi, a March 26 injunction against Coinbase, an April 3 injunction against Kalshi, and a May 29 injunction against Polymarket. That record undercuts any view that state-level cases are only theoretical threats.
What is the rulemaking track doing in parallel?
The litigation is moving alongside CFTC rulemaking. On March 16, 2026, the Federal Register published the CFTC’s advance notice of proposed rulemaking on prediction markets, 91 Fed. Reg. 12516, with comments due April 30. The notice asked how existing CFTC rules and statutory core principles should apply to event contracts and which contracts may be contrary to the public interest.
On June 10, 2026, the CFTC announced a proposed rule addressing Regulation 40.11 and event contracts involving enumerated activities under Section 5c(c)(5)(C) of the Commodity Exchange Act. The agency said the proposal would create a framework for reviewing contracts tied to activities including terrorism, assassination, war, gaming, and conduct unlawful under federal or state law.
That rulemaking could shape future disputes, but it does not erase the current split between state enforcement cases and federal preemption claims. Courts are already deciding whether state gambling regulators can act before the CFTC completes a final rule.
What comes next?
The next milestones are procedural and appellate. Wisconsin’s federal case remains pending before Judge Griesbach in the Eastern District of Wisconsin, with the CFTC’s preliminary-injunction motion and intervention motions listed on the court’s public case page. New York’s case is positioned for Second Circuit review after Kalshi’s July 2026 district-court loss, while the Third Circuit’s April 6 decision remains the industry’s strongest appellate authority.
For operators, the business risk is immediate: access can differ state by state even when contracts are listed through federally regulated markets. For regulators, the stakes are jurisdictional. The courts must decide whether the CFTC’s authority over swaps blocks state gambling enforcement, and whether that answer changes when the contract is tied to sports, elections, entertainment, or economic events.
Tags: CFTC, Kalshi, Polymarket, Wisconsin, Minnesota, Nevada
Market platform: none-if-cross-platform
Category: Regulation
