In May 2026, Minnesota became the first U.S. state to outlaw prediction markets such as Kalshi and Polymarket. However, on Monday, July 28th, 2026, a federal court issued a preliminary injunction preventing Minnesota from enforcing this ban.

District Judge Katherine Menendez ruled that the Commodity Futures Trading Commission (CFTC), the federal agency regulating prediction markets, and the platforms themselves were "likely to succeed" on claims that they faced "a threat of irreparable harm." She found that federal law expressly preempts Minnesota's ban and that the "balance of harms and the public interest" justified the injunction.

This decision followed a letter from the CFTC, Kalshi, and Polymarket requesting a "temporary administrative stay" and warning they would seek appellate relief if the court did not decide before the law's effective date of August 1, 2026.

CFTC Chairman Mike Selig described the ruling as a "halt to aggressive state overreach" of federally regulated markets. Ben Sperry, senior scholar at the International Center for Law & Economics, stated that most contracts targeted by lawmakers fit the federal definition of a swap.

Judge Menendez noted potential limits to the CFTC's jurisdiction, remarking it would be "hard pressed" to consider a trade on the winner of the eighth season of Love Island USA as a swap due to its lack of "financial, economic, or commercial consequence."

Neal Kumar, chief legal officer of Polymarket, said the injunction clarifies that prediction markets on CFTC-registered exchanges are governed by federal law rather than a patchwork of state regulations.

Minnesota Attorney General Keith Ellison, however, called the platforms "gambling, plain and simple," and affirmed his office's intention to continue litigating and defending the state's law.

Emma Greenman (D–Minneapolis) had previously stated the state should determine appropriate regulations for prediction markets.

This ruling may signal that similar bans in other states could face legal challenges based on federal preemption.

Sources