Quick Take
1. A federal judge granted a preliminary injunction on Monday against the Minnesota prediction market ban, four days before it was due to take effect as the first felony law of its kind in the country.
2. It matters because the ruling turns on federal preemption — Minnesota's statute made no exception for CFTC-registered exchanges, and that single omission is what the court found likely fatal.
3. The open question is not whether states may regulate prediction markets, but which contracts they are still permitted to reach — and the judge has already signalled her answer will be narrower than Monday's order.
The first state in the country to make prediction markets a felony spent seventy days watching its own law approach the calendar, and lost it with four days to spare. Judge Katherine Menendez of the U.S. District Court for the District of Minnesota granted a preliminary injunction on Monday against a statute written to take effect on 1 August. The order runs forty-four pages, and the reasoning inside it matters considerably more than the result.
The Minnesota prediction market ban: seventy days from signature to injunction
The ban was Article 8 of SF4760, an omnibus public safety bill that became Chapter 97 of the Laws of Minnesota 2026. That provenance matters: this was not a standalone act that argued its way through the legislature on its own terms. It arrived as an amendment from Representative Emma Greenman of Minneapolis on 30 April, folded into a much larger vehicle and carried along with it. Final votes were 100–32 in the House and 57–9 in the Senate on 12 May. Governor Tim Walz signed it on 18 May.
The text created a new subdivision under Minnesota Statutes section 609.76 and made a felony of six activities performed for consideration as part of a business: creating a prediction market, operating a platform, facilitating operations by identifying events or handling funds, providing data services, offering supportive services, and advertising products that promote the prohibited transactions. Payment processors joined the list the moment they kept processing after a cease-and-desist from the Attorney General. Convictions carried a ten-year bar from any Minnesota gaming licence.
The carve-outs show where the pressure came from. Insurance contracts survived. Weather and agricultural hedging survived, added late after the farm sector objected. Private social bets and pari-mutuel horse racing survived. Elections did not. And there was no exemption whatsoever for entities registered with the Commodity Futures Trading Commission.
That last omission is the entire lawsuit. The CFTC sued on 19 May, within twenty-four hours of the signature. Kalshi filed around 28 May, Polymarket US on 4 June.
The Love Island line, and the part the winners won't enjoy
Menendez found the plaintiffs 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." Read the qualifier. Many of the trades. This is not a ruling that Minnesota lacks power here; it is a ruling that the state cannot criminalise everything on Saturday while the question of which contracts are federally regulated swaps remains open.
Then the sentence the exchanges will be reading hardest: "If, as appears to be the case, Kalshi and Polymarket US are listing at least some event contracts that don't meet the CEA's definition of swaps, any permanent injunctive relief may be much narrower." She reportedly pointed at contracts on the outcome of Love Island.
That is the whole regulatory fight compressed into one reality-television example. A contract on the Federal Reserve's next rate decision is a recognisable financial instrument with a hedging use anyone can articulate. A contract on the final of a dating show is a bet with a settlement source. No court has yet drawn the line between them — which is exactly why an exchange listing both is exposed in a way an exchange listing only the first would not be.
Worth flagging, because most coverage has not: the CFTC's public position is that the law "turns lawful operators and participants into felons overnight." The statute's operative language reaches a person acting for consideration as part of a business, and the Minnesota House's own plain-language summary lists offences for operators, facilitators, data providers, advertisers and processors — not for someone holding a $200 position on their phone. Whether the law reaches ordinary traders is a contested reading, not a settled one. It is also the reading that would frighten a market maker out of the state.
No sportsbooks, one felony ban
Minnesota is one of eleven states with no legal sports betting. It has tribal casinos, two horse tracks, a lottery, charitable gaming, and by industry estimate between $1.5bn and $3.8bn wagered illegally inside its borders every year. A legalisation bill went nowhere again this session, after six years of work.
So a state that could not pass a sports betting bill in six years passed a felony ban in a single session, attached to an omnibus. Kalshi's spokesperson called that "peak hypocrisy," and whatever one makes of the source, the sequencing is difficult to defend on its own terms.
The tribal position is more interesting than it is usually reported. There is no public record of the Minnesota Indian Gaming Association endorsing this bill. What is on the record is its executive director, last September, calling prediction markets "sports bets" by another name — and then arguing for legalising and regulating sports betting as the remedy, on the theory that consumers abandon unregulated products once a legal one exists. Minnesota's tribes wanted a market. They got a prohibition instead.
Nine states, four circuits, one closed comment period
The comment period on the CFTC's proposed prediction markets rule closed on Monday, the same day the injunction issued. The rule contemplates case-by-case public interest review rather than categorical prohibition, permitting most sports contracts while barring those on player injuries, referee decisions, military conflicts, assassinations and terrorist acts.
The appellate map, meanwhile, is split down the middle:
CourtStatusOutcomeThird CircuitDecided 6 AprSports contracts are swaps; CEA preempts New Jersey law, 2–1S.D.N.Y.Decided early JulSavings clause preserves state jurisdiction; Kalshi appealed 8 JulNinth CircuitArgued 16 AprNo ruling; stay motions denied 21 MayFourth CircuitArgued 7 MayNo rulingD. Minn.Injunction 27 JulPreemption likely; permanent relief flagged as narrower
Nine states have now been sued by the CFTC, and every operator is behaving accordingly. Kalshi pulled its sports, entertainment and politics markets for Nevada the same day a restraining order landed in March. Michigan has ordered geofencing by 12 August. Polymarket began blocking VPN-linked addresses around 1 June, the clearest evidence available that users in restricted states had been routing around the blocks. The pattern is consistent: these platforms geofence within hours when a court orders it, and not at all while a federal injunction protects them. Minnesota has just moved into the second category.
The volumes explain why anyone is fighting this hard. Kalshi recorded $31bn in notional volume in June, $22.42bn of it on the World Cup, and the Spain–Argentina final became the largest single prediction market ever traded at over $1.27bn. Across all 104 World Cup matches, every legal sportsbook in the United States handled an estimated $2.8bn to $4.3bn combined.
Nothing happens on 1 August, which is the point. The injunction holds until the merits are resolved, no trial date has been set, and the state has not announced an appeal. But the route to resolution was never going to run through Minneapolis — it runs through enough circuit disagreement to force the Supreme Court's hand, or a CFTC rule specific enough that the swap-or-wager line stops being a matter of judicial taste. Menendez has already described the narrow version of her own ruling. The Minnesota prediction market ban failed on timing; the question it raised is the one the industry has spent a year avoiding.
What people are saying
Greenman, the amendment's author, was not conceding the argument on Monday — only the timing.
"If it walks like a duck and if it quacks like a duck, it's gambling. It's a duck and we should be able to regulate it in the public interest." — Rep. Emma Greenman (DFL-Minneapolis), 27 July
Attorney General Keith Ellison's statement was notably more measured than his May remarks, and stopped short of announcing an appeal.
"Prediction markets are gambling, plain and simple, and Minnesota has every right to keep predatory gambling out of our communities. We respectfully disagree with the Court's determination. However, we also acknowledge that the Court has been presented with complex legal issues that are difficult to decide quickly." — AG Keith Ellison, 27 July
The CFTC's framing has been the same everywhere since April: this is a federal jurisdiction question, and states are trespassing.
"This Minnesota law turns lawful operators and participants in prediction markets into felons overnight. Governor Walz chose to put special interests first and American farmers and innovators last." — CFTC Chairman Michael Selig, 19 May
Kalshi's public argument leans on the analogy it uses in every state.
"It's illegal to ban federally regulated exchanges — imagine one single state banning access to the New York Stock Exchange. This move would hurt Minnesotans and push them to offshore, unsafe markets." — Elisabeth Diana, Kalshi, 19 May
And the most human detail in the record belongs to a legislator who did his own product testing.
Sen. Matt Klein of Mendota Heights placed a $50 bet on a prediction market himself, concluding it "points to the need for clearer rules and regulations for these types of markets." Fifty dollars is not a research budget, but it is more first-hand experience than most of the members who voted on this bill brought to it.
