Prediction markets have dodged a bullet in Minnesota, at least for the time being.
- A federal judge temporarily blocked Minnesota from enforcing its new law banning sports-related prediction markets while the legal challenge continues.
- The court found the challengers are likely to succeed on claims that federal regulation by the CFTC may preempt Minnesota's law and that enforcement could cause harm.
- The ruling preserves the status quo before the law's Aug. 1 start date, but Minnesota could still enforce the legislation if the state ultimately wins the case.
U.S. District Court Judge Katherine Menendez on Monday granted a preliminary injunction against the state that blocks local officials from enforcing recently passed anti-prediction market legislation.
“The Court finds that Plaintiffs have met their burden to show they are likely to succeed, at least in part, on their express-preemption claims, that they face a threat of irreparable harm, and that the balance of harms and the public interest weigh in favor of entering a preliminary injunction barring enforcement of Minnesota’s prediction market statute until a final decision on the merits is reached,” Judge Menendez wrote.
The Minnesota matter is a twist on the numerous lawsuits that have popped up involving prediction markets.
In short, those lawsuits usually involve a fight over whether or not states can restrict the operations of the exchanges, or if federal legislation and regulation by the Commodity Futures Trading Commission (CFTC) preempt those state-level enforcement efforts.
Today, a Minnesota federal court put a halt to aggressive state overreach seeking to ban federally regulated derivatives markets. This is the second time a court has granted an injunction in favor of the agency in defense of its jurisdiction over prediction markets. The @CFTC…
— Mike Selig (@ChairmanSelig) July 27, 2026
These lawsuits also typically involve prediction market operators, state gambling regulators, and the CFTC in various combinations. In Minnesota, state regulators, Kalshi, Polymarket, and the CFTC are locked in litigation, as Minnesota is one of nine states that the federal agency has sued.
Bill coming due
The stakes increased in Minnesota after lawmakers passed unique legislation this May that would make it a felony to offer sports-related prediction markets, the most popular of all event contracts offered for trading by the exchanges.
Minnesota has not legalized sports betting, and the law was intended to stop what lawmakers view as sports betting by another name. The new law was supposed to take effect Aug. 1.
That changed Monday, when the court blocked the law from taking effect. While the prediction markets and the CFTC want Minnesota permanently blocked from restricting the exchanges, the legislation could still be enforced if Minnesota ultimately wins out in court.
Judge Menendez wrote that "it appears likely" Minnesota's prediction market law will regulate transactions the CFTC claims it has "exclusive jurisdiction" over. However, the judge could still ultimately find that this is not the case.
“If Plaintiffs prevail on the merits, Defendants will not be harmed because the preliminary injunction would simply have prevented enforcement of a state law that is preempted by the (federal Commodity Exchange Act),” Judge Menendez wrote. “And if Defendants ultimately prevail, the preliminary injunction will no longer be effective, and Defendants can begin enforcing the prediction market statute against those who violate it.”
The decision followed the CFTC's request for a temporary stay of the law on Friday, which the agency said would allow it and prediction market operators to "adapt to the law and to allow opportunity" for an appeal if needed.
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Clock's ticking, your honor
“With the August 1 effective date just a week away, it is essential for the CFTC, regulated entities, and market participants to have resolution,” the letter from the CFTC’s counsel to the court said. “Absent a decision or a temporary stay by close of business on Tuesday, July 28, the CFTC will view its Motion as constructively denied. The Commission is confident in the success of its Motion and thus hopes to avoid this scenario, but this would allow the Commission to seek interim appellate relief.”
But Monday’s decision postpones that appeal, at least for now, and slams the brakes on the efforts of would-be Minnesota sports betting regulators to curtail prediction market activity in their backyard.
Those efforts via legislation were a first in the U.S., and one that the state intended to press on with.
“As prediction markets and online trading in event contracts have exploded in popularity in recent months, Minnesota lawmakers grew concerned that many event contracts were indistinguishable from gambling, raising the potential for both manipulation and the negative effects of problem gambling, particularly for young people,” Monday’s decision said. “Against that backdrop, Minnesota lawmakers enacted the prediction market statute that Plaintiffs now seek to enjoin.”
Yet hitting the pause button on the law, Judge Menendez wrote, “will preserve the status quo until the merits of Plaintiffs’ claims can be fully adjudicated.”
“The Court’s determination is not a final determination of the merits of the parties’ claims and defenses, but reflects a preliminary assessment of the issues,” she added.
