Federal Court Blocks Minnesota Prediction Market Felony Law

A federal judge temporarily stopped Minnesota from enforcing a new prediction market felony law against federally regulated exchanges like Kalshi and Polymarket US. Judge Katherine Menendez granted a preliminary injunction requested by the Commodity Futures Trading Commission and the exchanges, preventing state officials from enforcing the statute until the case reaches a final decision.

The judge found that the plaintiffs are likely to prove that federal law overrides parts of the state statute. Federal rules give the CFTC exclusive oversight over swap transactions on designated contract markets, which can include event contracts tied to economic or commercial outcomes. However, the ruling does not cover every type of contract. The judge noted that political elections and major sports outcomes likely qualify as swaps, while pop culture bets appear less likely to be protected.

While the ruling protects federally registered platforms, it does not shield individual users, outside service providers, or independent advertisers from the statute. Polymarket welcomed the decision, while the Minnesota Attorney General stated the state will continue defending the law. This ruling contrasts with a recent New York court decision that denied Kalshi interim protection from state gambling enforcement, leaving the broader national question of state versus federal authority open.