MINNEAPOLIS — Tim Walz signed Minnesota’s prediction market ban into law in May. On Monday, a federal judge took it off the table three days before it was set to take effect.
U.S. District Judge Katherine Menendez issued a preliminary injunction blocking enforcement of Minnesota’s SF 3432, the country’s most sweeping attempt to criminalize prediction markets at the state level. The law would have made it a crime to create, operate, host, assist, or advertise platforms like Kalshi and Polymarket inside Minnesota. Under Menendez’s order, those platforms stay online in the state while the underlying legal case proceeds to a full merits hearing.
The ruling turns on a question that has split state and federal regulators for eighteen months: whether the federal Commodity Exchange Act preempts state gambling law when the product being regulated is classified as an event contract. “The Court finds that Plaintiffs have met their burden to show they are likely to succeed, at least in part, on their express-preemption claims,” Menendez wrote in Monday’s order.
The plaintiffs in the case include Kalshi, Polymarket, and the Commodity Futures Trading Commission itself. The CFTC’s decision to join prediction market platforms as a co-plaintiff against a state government reflects a posture the agency has maintained across multiple jurisdictions: its authority over event contracts under federal law, the commission argues, leaves no room for state-level criminal prohibition.
That posture has now prevailed in a preliminary sense in Minneapolis. Whether it survives a full merits hearing is still open, and the state of Minnesota has not yet said whether it will appeal Menendez’s order to the Eighth Circuit.
Minnesota’s law was not a regulatory measure. It was a criminal ban. SF 3432 would have made operating or hosting a prediction market a criminal offense under state law, treating platforms that hold active CFTC registration identically to unlicensed gambling operations. Walz, who attracted national attention during the 2024 presidential campaign as Kamala Harris’s running mate, signed the legislation in May arguing that event contracts on political and sporting outcomes were indistinguishable from gambling and that federal regulators had failed to draw a clear line.
The state’s argument did not persuade Menendez. The injunction signals the court’s preliminary view that Minnesota overstepped the space Congress carved out for the CFTC when it enacted the Commodity Exchange Act. That statute defines a class of products traded on CFTC-regulated exchanges that states may not prohibit under a federal preemption framework. Prediction markets have argued that their event contracts fall inside that definition. The court, at the preliminary stage, found that argument more likely than not to succeed.
The ruling is narrow in one important respect. Menendez’s written order notes that not all event contracts offered on platforms like Kalshi necessarily qualify as federally protected swaps under the Commodity Exchange Act. Some contracts may fall outside the preemption umbrella, meaning Minnesota could still enforce other state statutes against specific products that do not meet the federal definition. Gaming lawyers said the distinction leaves the state with limited options, but not zero.
Monday’s ruling arrived on a day when the broader state-versus-federal battle over prediction markets showed signs of hardening on both sides. A coalition of 44 state attorneys general submitted comments to the CFTC arguing that the commission lacks statutory authority to override state gambling laws through its rulemaking process, urging the agency to rewrite its proposed sports event contract rules. The National Council of Legislators on Gambling and Sports separately called on Congress to pass legislation explicitly classifying prediction markets as illegal gambling at the federal level, a step that would render the preemption argument moot by removing the federal protection on which Kalshi and Polymarket have relied in court after court.
The courts have not moved in one direction uniformly. In June, Polymarket lost an injunction bid in Michigan, widening a court conflict that now spans half a dozen states. Nevada’s gaming board filed a contempt motion against Kalshi after state investigators succeeded in purchasing prohibited event contracts from inside the state eight times despite an existing court order. The CFTC sued Kentucky in federal court the same month to shield Kalshi and Polymarket from state gambling enforcement, an action built on the same federal preemption theory that prevailed in Minneapolis on Monday.
The economic stakes in these rulings extend beyond the platforms themselves. BetMGM chief executive Adam Greenblatt named prediction markets as the primary pressure on his company’s sportsbook business in second-quarter results released Tuesday, indefinitely delaying his company’s $500 million annual profit target as a consequence of competition that licensed sportsbooks cannot legally match under existing state frameworks. The Minnesota ruling is the clearest signal yet that those frameworks may not hold.
Minnesota’s next move is not yet known. The state could appeal Menendez’s injunction to the Eighth Circuit, seek to narrow the scope of SF 3432 around contracts the court flagged as outside the preemption argument, or wait for the full merits hearing and press its case there. What Monday’s ruling closed off, at least temporarily, is the option of enforcing a criminal ban against platforms operating under federal registration while the courts decide whether that federal registration protects them from state law.
Whether it stays closed is the question the Eighth Circuit, and ultimately perhaps the Supreme Court, may still have to answer.
