Minnesota Judge Temporarily Blocks Prediction Market Felony Law

A federal judge in Minnesota has temporarily blocked the state’s new prediction-market felony law from being enforced against federally regulated exchanges like Kalshi and Polymarket US. This injunction comes days before the law’s scheduled effective date of August 1, 2026.

What Happened

On July 27, 2026, Judge Katherine Menendez granted preliminary-injunction motions filed by the Commodity Futures Trading Commission (CFTC), KalshiEX, and QCX (doing business as Polymarket US). This order prevents named Minnesota officials from enforcing Minn. Stat. § 609.7615 against CFTC-designated contract markets until a final merits decision is reached in the cases, according to CryptoSlate.

The ruling temporarily protects CFTC-designated exchanges from the felony law, which was slated to take effect on August 1, 2026, for crimes committed on or after that date. The statute, Chapter 118, replaced prior prediction-market provisions enacted under Chapter 97 (according to CryptoSlate).

Key Details

• The injunction specifically protects federally regulated exchanges designated by the CFTC as contract markets, including Kalshi and Polymarket US, from enforcement of Minnesota’s new prediction market felony law, CryptoSlate reported.
• Judge Menendez found the plaintiffs likely to prove that the Commodity Exchange Act (CEA) expressly preempts part of Minnesota’s law, as federal law grants the CFTC exclusive jurisdiction over swap transactions on designated contract markets, according to CryptoSlate.
• The order states that creating or operating a covered prediction market, or intentionally facilitating it through specified activities for consideration as part of a business, constitutes a felony under the Minnesota law, as detailed by CryptoSlate.
• The ruling applies only to qualifying event contracts that meet the definition of a swap. Markets tied to a Senate election, World Cup winner, a LeBron James signing, and Strait of Hormuz traffic were identified as likely swaps, while contracts on a 20-point-lead market or entertainment outcomes appeared unlikely to qualify, according to CryptoSlate.

Why It Matters

This preliminary injunction addresses the interplay between state gambling laws and federal regulation of designated contract markets. The decision indicates that federal preemption under the Commodity Exchange Act may shield certain federally regulated prediction markets from state-level felony prohibitions.

The ruling’s scope is currently limited, as it does not explicitly protect customers, independent advertisers, or outside service providers of prediction markets. Furthermore, the court has not yet decided on the plaintiffs’ implied-preemption or First Amendment claims, according to CryptoSlate, indicating further legal developments may impact the broader regulatory landscape for prediction markets.

What’s Next

Polymarket US stated it welcomed the ruling and expected to continue serving Minnesota users, according to CryptoSlate. Conversely, Attorney General Keith Ellison indicated that the state disagreed with the ruling and would continue defending the law as the record develops. The injunction protects CFTC-designated contract markets only until the cases reach a final merits decision. Any permanent injunction resulting from these proceedings could potentially narrow the scope of contracts covered, according to CryptoSlate.

Originally reported by CryptoSlate·Published 28 Jul 2026, 15:50