Judge Temporarily Blocks Minnesota’s New Prediction-Market Felony Law for CFTC-Regulated Platforms
Temporary injunction: what just happened
A federal judge stepped in days before Minnesota’s new prediction-market felony law was set to take effect and put a pause on enforcement — but only against certain federally regulated platforms. On July 27, Judge Katherine Menendez granted a preliminary injunction that stops Minnesota officials from applying the statute to exchanges the Commodity Futures Trading Commission (CFTC) has designated as contract markets, including KalshiEX and Polymarket US, until the courts decide the full case.
The plaintiffs — including the CFTC and the affected exchanges — argued the federal Commodity Exchange Act likely preempts part of Minnesota’s law. The judge agreed there’s a strong chance the CFTC’s exclusive jurisdiction over swaps on designated contract markets overrides state efforts to criminalize those particular markets while the legal fight plays out.
Why this matters (and what’s still in play)
The federal law at issue gives the CFTC authority over swaps, and the definition of a swap can cover event-based contracts when the event’s outcome has a reasonably connected financial, economic, or commercial consequence. That doesn’t mean every silly bet becomes a federally regulated swap — the judge flagged examples that likely qualify (things tied to Senate elections, World Cup winners, a LeBron James signing, or Strait of Hormuz shipping activity) and examples that probably don’t (the winner of a reality-TV couple or a market based on announcer word choices). A few oddball markets fall into a gray zone.
Minnesota’s updated statute replaces an earlier version and is set to kick in for crimes committed on or after August 1. At its core, the law makes it a felony — when done for consideration and as part of a business — to create or operate a covered prediction market, or to intentionally facilitate one through listing, funding, settlement, pricing, or counterparty services. The law also targets people and companies who knowingly provide data feeds, geolocation, fund-transfer, or payment services to enable such markets, and it even reaches marketing that promotes prohibited transactions.
But the judge’s order only shields CFTC-designated contract markets from Minnesota’s enforcement for now. It doesn’t automatically protect individual users, outside advertisers, or third-party service providers. The state says it will keep defending the law as the record develops, while at least one affected exchange says it expects to continue serving users in Minnesota. Notably, a New York court denied similar interim protection to one of the same platforms earlier in July, so outcomes can vary by jurisdiction.
The case is far from over: the court has yet to rule on broader preemption or First Amendment claims, and any permanent relief would likely be narrowed to specific types of contracts rather than sweeping across every prediction market. Translation: temporary victory for the exchanges, but expect more legal rounds and eyebrow-raising arguments on what counts as a financial swap versus a funky side bet.
