Judge Blocks Minnesota’s Prediction Market Ban, Tribes Brace

A federal judge blocked Minnesota’s felony ban on prediction markets Monday, days before it was due to take effect, handing Kalshi, Polymarket and the Commodity Futures Trading Commission (CFTC, the federal agency that regulates derivatives and swaps) their cleanest court win yet in a fight that has now spread to at least eight states. U.S. District Judge Katherine Menendez ruled the plaintiffs are likely to succeed on their claim that federal law preempts the state statute, freezing enforcement while the case heads toward trial.

The ruling answers the urgent question the CFTC had put before the court just a day earlier. It does not answer the one nobody in the case was arguing: what happens to the eleven tribal nations whose casino compacts built Minnesota’s entire legal gambling market, and who were not a party to the lawsuit that just reshaped it.

Menendez Freezes Minnesota’s Felony Ban Days Before Deadline

Minnesota’s law, signed by Governor Tim Walz in May, would have made it a crime to operate, host or advertise a prediction market in the state starting August 1. It was the first statute of its kind in the country, and it reached further than the gambling laws other states have used against Kalshi and Polymarket, reaching weather and crop contracts along with sports and elections.

Menendez found that Kalshi, Polymarket US and the CFTC had “met their burden to show they are likely to succeed on the merits of their express-preemption claims, at least as to the application of Minnesota’s law to many of the trades listed on Kalshi’s and Polymarket US’s platforms,” according to her order. The injunction runs 44 pages and applies specifically to platforms registered with the CFTC as designated contract markets, not to prediction markets generally.

She did not go all the way. In a footnote, Menendez wrote that “the Minnesota statute may not be preempted in all its applications. But the Court finds the state law is likely preempted in many respects.” The state’s ban survives in theory for wagers that do not qualify as federally regulated swaps. Which ones those are remains an open question for trial.

The Preemption Theory That Persuaded Her

The CFTC sued Minnesota on May 19, a day after Walz signed the bill, arguing the state had no authority to override the Commodity Exchange Act, the 1974 law that gives the agency exclusive jurisdiction over swaps. Kalshi and Polymarket filed their own suit making the same argument and asked to join the CFTC’s case.

By late July, with no ruling in hand and the deadline four days out, the CFTC asked the court to move faster. The agency said it would treat silence as a constructive denial and go straight to the appeals court for emergency relief if Menendez did not act. She ruled Monday, before that had to happen.

CFTC Chairman Michael Selig had framed the stakes bluntly when the agency first filed suit. “This Minnesota law turns lawful operators and participants in prediction markets into felons overnight,” Selig said in a statement announcing the lawsuit. He added that “Minnesota farmers have relied on critical hedging products on weather and crop-related events for decades to mitigate their risks” and accused Governor Walz of putting “special interests first and American farmers and innovators last.”

Six Lawsuits Become Eight States in Ten Weeks

Minnesota was the sixth state the CFTC sued over prediction market restrictions when the agency filed in May. By mid-June, New Mexico had become the eighth. The results across those cases have not been uniform, and that inconsistency is exactly what makes Monday’s ruling matter more than a single state’s headline.

Arizona and Minnesota now anchor the CFTC’s strongest wins. New York stands as its clearest loss. Every other pending case will be argued against that split record.

Minnesota’s Tribes Never Got a Seat in This Case

Minnesota has no commercial casinos and no legal sports betting outside its tribal compacts. Every legal wager placed in the state today runs through one of eleven federally recognized tribal nations, a structure that traces back to 1992, when the Shakopee Mdewakanton Sioux Community signed the first tribal-state gaming compact in the country.

• 11 federally recognized tribes operate the entirety of Minnesota’s legal gambling market, with no commercial casino competing alongside them.
• 19 casinos across the state run roughly 20,000 slot machines and 275 table games, according to an industry analysis of the state’s tribal gaming footprint.
• $1.7 billion in annual economic activity flows from that gaming base, per a Minnesota Indian Gaming Association-commissioned study of 2023 data.
• Mystic Lake Casino Hotel and Treasure Island, owned by the Shakopee Mdewakanton and Prairie Island communities, sit closest to the Twin Cities and drive the largest share of that revenue.

None of those eleven tribes sued Minnesota, and none joined Kalshi, Polymarket or the CFTC in court. Yet a ruling built entirely around federal swaps law just determined, for now, that CFTC-registered platforms can keep selling sports-related contracts in a state where tribes hold the only other legal wagering franchise.

David Bean, chairman of the Indian Gaming Association, has made the tribes’ objection plain in testimony pushing back against the CFTC’s approach. “Tribal sovereignty is trampled on, and state sovereignty is trampled on. That’s the big issue,” Bean said, adding a challenge to regulators: “Pull up your Kalshi app for one second, and you’ll see the same bets that are offered in every other legal sportsbook.”

Patrice Kunesh, a visiting professor at the University of New Mexico School of Law and senior fellow at the Brookings Institution, has argued that prediction market platforms are expanding rapidly by operating outside the licensing and compact framework tribal casinos must follow, helped along by aggressive online marketing that tribal operators cannot match under state advertising rules. Tribal gaming’s stake in how these contracts get classified nationally has already been put at $44 billion before Congress.

The Trade Versus Bet Argument Stays Unresolved

The entire preemption fight turns on a single distinction: is an event contract a trade or a bet? The Hyperliquid Policy Center (HPC, a Washington policy nonprofit tied to the Hyperliquid crypto exchange) and Multicoin Capital, a crypto investment firm, put that distinction in writing on July 27, the same day Menendez ruled, in a joint comment filed with the CFTC.

A bet with a bookmaker is a wager against the house: the house sets the odds and wins when you lose. An exchange-traded contract is a trade between two willing participants at a market price, and the venue’s business is matching that trade for a fee, whichever side wins.

Hyperliquid Policy Center and Multicoin Capital wrote that in comments responding to the CFTC’s proposed Regulation 40.11 amendments, which would give the agency a public written test for approving event contracts. They said the trading volume behind that argument had already topped $50 billion in June across major platforms.

Not everyone reads the same contracts the same way. The people closest to this fight land in genuinely different places.

• Kalshi, Polymarket and the CFTC argue event contracts are federally regulated swaps, exchange trades between willing counterparties rather than bets against a house.
• Indian Gaming Association chairman David Bean argues the platforms offer functionally identical wagers to licensed sportsbooks, without the compact protections and consumer safeguards tribes operate under.
• Judge Menendez split the difference in her order, finding Minnesota’s statute likely preempted for many trades while leaving open that it “may not be preempted in all its applications.”

What Happens to Minnesota’s Compacts Now?

The injunction keeps Kalshi and Polymarket operating in Minnesota while the underlying case proceeds toward a full trial on the merits, a process that could run well into next year. Tribal nations are watching from outside a courtroom that just decided how much of their exclusivity survives.

A separate track is already moving in the Sixth Circuit, where Kalshi is appealing a rejected injunction bid in another state’s case. A coalition of tribes has filed amicus briefs there arguing that CFTC registration should not erase tribal and state enforcement power, and California Attorney General Rob Bonta joined a separate bipartisan amicus brief in the same proceeding. Neither filing came from a Minnesota tribe directly.

The CFTC’s own rulemaking, the one HPC and Multicoin commented on, is still open. How the agency writes the final version of Regulation 40.11 will shape every case still pending, including the ones Connecticut, Illinois and New Mexico have not yet had decided.

The preliminary injunction holds while Menendez’s court moves toward that full trial. Minnesota’s eleven tribes are not a party to it.

Frequently Asked Questions

Is Kalshi still legal in Minnesota right now?

Yes, for the moment. Judge Menendez’s injunction blocks Minnesota from enforcing its ban against platforms registered with the CFTC as designated contract markets, which covers Kalshi and Polymarket US specifically. A platform that is not CFTC-registered would not automatically get the same protection.

What is a designated contract market?

It is a CFTC-registered exchange authorized to list and trade futures, options or swap contracts under federal oversight. Kalshi and Polymarket US both hold that status, which is the specific legal hook Menendez’s ruling relies on rather than a broader finding about prediction markets as a category.

Have other states tried to block these platforms outside of CFTC lawsuits?

Yes. In January, a Massachusetts court moved to block Kalshi from offering sports-related contracts in that state after finding nearly 70% of its trading volume was tied to sports bets, a state court enforcement action rather than a federal preemption suit like Minnesota’s.

Could Minnesota’s tribes join the legal fight directly?

They have not filed in the Minnesota case itself. Tribal coalitions have instead used amicus briefs in a separate Sixth Circuit appeal over a different state’s ban, arguing CFTC registration should not override tribal-state gaming compacts, a strategy that keeps them adjacent to the fight without becoming a named party in it.

Disclaimer: This article is for informational purposes only and does not constitute legal, financial or gambling advice; prediction market regulation remains unsettled litigation, and readers should consult a qualified attorney before relying on the legal status described here, which is accurate as of publication.