Minnesota Prediction Market Ban Blocked by Federal Injunction

U.S. District Judge Katherine Menendez issued a preliminary injunction on July 27, blocking Minnesota’s prediction market ban from taking effect against CFTC-registered designated contract markets. This ruling allows Kalshi and Polymarket US to continue operations in the state while related legal cases proceed.

What Happened

On July 27, U.S. District Judge Katherine Menendez granted a preliminary injunction that prevents Minnesota from enforcing its new statute against CFTC-registered designated contract markets (according to Crypto News). This injunction, issued in response to a filing from the Commodity Futures Trading Commission (CFTC), Kalshi, and Polymarket US, kept Minnesota’s prediction market ban blocked as of August 2, one day after the law was scheduled to take effect (Chain Grid News, Crypto News).

The Minnesota law, if enacted, would criminalize the creation, operation, or intentional support of covered prediction markets, including provisions for data providers, payment services, and advertisements (Crypto News). Judge Menendez indicated that the plaintiffs are likely to succeed on at least part of their federal preemption claim, citing that many event contracts may qualify as swaps under the Commodity Exchange Act (Crypto News).

Key Details

• The injunction specifically protects CFTC-registered markets and does not determine whether Minnesota can apply older gambling laws to individual sports or entertainment contracts (Crypto News).
• Minnesota Attorney General Keith Ellison has stated that prediction markets constitute “gambling, plain and simple,” a position that remains the state’s legal stance (Crypto News).
• Kalshi has publicly responded, stating that “States cannot ban things that they don’t have jurisdiction over,” reflecting their interpretation of federal law (Crypto News).
• Governor Tim Walz issued Executive Order 26-09, prohibiting covered state employees from using nonpublic or confidential government information for private benefit in prediction market trading (Crypto News).
• The CFTC on July 31 ordered former U.S. Representative George Santos to pay a disgorgement of $17,569.98, a $17,500 penalty, and accept a three-year trading ban due to manipulative activity in a State of the Union event contract (Crypto News).
• Kalshi has reportedly implemented employer disclosures, risk scoring, and expanded surveillance for higher-risk contracts, blocking over 100 potential insider trades and making 20 law enforcement referrals in Q1 2026, according to company-reported figures (Crypto News).

Why It Matters

This ruling highlights an ongoing federal-state conflict regarding the regulation of prediction markets (Crypto News). The CFTC has initiated legal actions against multiple states to assert its exclusive jurisdiction over registered prediction markets, though judicial outcomes have varied nationally (Crypto News).

The case provides context for discussions among pro-crypto lawmakers who advocate for a unified federal regulatory framework for national financial markets (Crypto News). Concerns about the CFTC’s staffing and enforcement capacity have also been raised by some lawmakers, who argue against expanding the commission’s mandate without ensuring adequate resources (Crypto News).

The dispute may also influence political campaigns, particularly concerning candidates supported by the cryptocurrency industry (Crypto News). FEC records show that the PAC Fairshake held approximately $126.97 million in cash by the end of June, indicating significant financial influence within political landscapes (Crypto News).

What’s Next

The current relief provided by the preliminary injunction will remain active until the district court reaches a final decision, unless altered by a subsequent order or appeal (Crypto News). The court may eventually differentiate between contracts with financial or economic implications and those that more closely resemble traditional wagers (Crypto News).

New York State filed a separate case on July 31, suing Kalshi and alleging operation as unlicensed gambling, seeking an injunction, restitution, penalties, and forfeiture of alleged gains; these are currently allegations Kalshi can contest (Crypto News). The CFTC’s proposed prediction-market rule, for which the public comment period closed on July 27, would define “gaming,” establish public-interest review factors, and create a process for certain event contracts, though a final rule has not yet been issued (Crypto News).

Originally reported by Crypto News·Published 2 Aug 2026, 15:20