Judge blocks first state law that would have banned prediction markets

A federal judge has issued a preliminary injunction against Minnesota, effectively halting a state law that aimed to ban prediction markets. The law, which was scheduled to take effect on August 1, would have made Minnesota the first state to prohibit platforms such as Kalshi and Polymarket. The court ruling marks a significant moment in the ongoing conflict between state gambling laws and federal regulatory authority.

The case moved to federal court after the Trump administration and operators of major prediction markets sued the state. The central legal dispute hinges on whether event contracts qualify as swaps under the Commodity Exchange Act. Judge Katherine Menendez noted that the Commodity Futures Trading Commission holds exclusive authority over swaps, and many contracts offered on these platforms fit that definition.

While the judge blocked the total ban, the ruling leaves room for Minnesota to potentially regulate specific types of bets. The court suggested that while contracts involving financial or economic consequences fall under federal jurisdiction, bets on entertainment outcomes—like reality television—might not meet the legal threshold for swaps. This nuance indicates that a future final ruling could allow the state to restrict some forms of wagering while protecting others.

Attorney General Keith Ellison expressed strong disagreement with the decision, maintaining that prediction markets represent a form of predatory gambling. He stated that the state will continue to defend its position in court. Meanwhile, the legal teams involved are preparing for further proceedings to determine which specific contract types remain under federal control and which, if any, the state can legally prohibit.

The outcome of this litigation could set a precedent for how other states approach prediction market oversight. As federal and state jurisdictions continue to clash over the nature of these digital markets, the Supreme Court may eventually need to intervene to provide a final resolution on the scope of the Commodity Exchange Act in this context.