A federal judge blocked Minnesota’s first-of-its-kind prediction market ban Monday, halting the law just days before it was scheduled to take effect. The ruling came after federal agencies and prediction market operators sued to stop the ban.
Federal Law Preempts Minnesota Prediction Market Ban
U.S. District Judge Katherine Menendez issued a preliminary injunction, stating the plaintiffs demonstrated a likelihood of success on their claims that federal law preempts the state ban. She also found they face irreparable harm if the law were enforced.
The order specifically prohibits enforcing the ban against entities already registered as designated contract markets with the Commodity Futures Trading Commission (CFTC). This move preserves the status quo while legal arguments continue.
Lawsuits Challenge Minnesota's Prediction Market Restrictions
The U.S. Department of Justice, the CFTC, and prediction market firms Kalshi and Polymarket US filed lawsuits challenging the ban. They argued that federal law, which grants the CFTC exclusive authority to regulate event contracts on federally registered exchanges, supersedes Minnesota's law.
Judge Menendez noted that while the Minnesota statute might not be preempted in all applications, it is likely preempted in many respects. She emphasized the injunction allows for further development of these issues.
The CFTC had previously urged the court for an expedited decision, indicating plans to escalate the matter to the appellate court. The agency initially requested a ruling by July 17, though the court acknowledged the need for prompt action during a July 2 hearing.
Polymarket and Kalshi contended that the Minnesota ban would inflict irreparable harm by disrupting a "nationally uniform market" and potentially violating First Amendment rights to advertise. The court, however, did not rule on the First Amendment claims at this stage.
Broader Context of Prediction Market Regulation
Minnesota's ban, embedded within a broader public safety bill, characterized prediction markets as gambling and a public health issue. State Representative Emily Greenman defended the measure, stating gambling has historically been recognized as a public health and safety concern.
Minnesota is not alone in its scrutiny of prediction markets. Arizona previously filed criminal charges against Kalshi, which a federal judge blocked, ruling federal law preempted state gambling laws. Nevada has also extended a temporary ban on Kalshi, and Utah recently prohibited proposition betting, impacting prediction markets.
