Kalshi and Polymarket Win Legal Challenge Against Minnesota's Prediction Market Ban

A federal judge has ruled in favor of Kalshi and Polymarket, temporarily blocking a Minnesota law that criminalizes prediction markets. The ruling, issued by Judge Katherine Menendez of the U.S. District Court for the District of Minnesota, suggests that the state law likely conflicts with the federal Commodity Exchange Act (CEA).

This decision follows a lawsuit filed earlier in 2026 by Kalshi, Polymarket, and the Commodity Futures Trading Commission (CFTC), who argued that the Minnesota law infringes on federal jurisdiction. The plaintiffs contend that the law undermines the CFTC's authority to oversee contracts classified as “swaps,” which includes prediction market contracts.

In her ruling, Judge Menendez stated that the plaintiffs demonstrated they are likely to succeed in showing that Minnesota's law is preempted by federal legislation governing commodity exchanges. She noted, "The Court finds that Plaintiffs have met their burden to show they are likely to succeed on the merits of their express-preemption claims..." This implies that the law's application to event contracts, such as those predicting outcomes on popular television shows, may pose jurisdictional issues.

The judge also highlighted that failing to enforce a halt on the ban could inflict “irreparable harm” on the plaintiffs. The preliminary injunction will remain in effect until a final ruling is made on the case's merits, indicating ongoing legal battles over the regulation of prediction markets.

Why It Matters

The ruling is significant for the future of prediction markets, particularly as they navigate the complex regulatory environment in the United States. The outcome of this case could set a precedent for how prediction markets operate under federal and state laws. In her ruling, Judge Menendez referenced the potential impact of the Minnesota law on trades that may fall within the federal definition of swaps, demonstrating the intricate balance between state legislation and federal regulatory authority.

What to Watch

• Monitor the progression of this case for implications on prediction markets and federal jurisdiction.
• Watch for responses from Minnesota officials and any potential appeals or amendments to the law.
• Keep an eye on how this ruling may influence other states considering similar legislation against prediction markets.