Judge Blocks Minnesota’s Ban on Prediction Markets
A federal judge preliminarily blocks Minnesota from enforcing its ban on prediction markets.
Why it matters: This ruling may shape how emerging prediction markets are regulated, clarifying federal versus state control over these financial instruments.
- On July 27, 2026, Judge Katherine Menendez granted a preliminary injunction against Minnesota's prediction market ban.
- Minnesota's law, effective August 1, 2026, would have criminalized operating or advertising prediction markets with penalties up to 5 years in prison and a $10,000 fine.
- The CFTC and Department of Justice sued Minnesota, arguing the ban conflicts with federal exclusive jurisdiction over derivatives markets.
- Kalshi and Polymarket also sued Minnesota, claiming the ban is preempted by federal law and violates the First Amendment.
On July 27, 2026, U.S. District Judge Katherine Menendez issued a preliminary injunction stopping Minnesota from enforcing its new ban on prediction markets. This decision allows platforms like Kalshi and Polymarket to continue operating within the state despite the ban.
The Minnesota law, scheduled to take effect on August 1, 2026, would have made it a felony to create, operate, host, or advertise prediction market platforms, imposing penalties of up to five years in prison and fines up to $10,000. The legislation reflects concerns over online betting and gambling activities. However, regulators and the companies argue it conflicts with existing federal frameworks.
Both the Commodity Futures Trading Commission (CFTC) and the U.S. Department of Justice filed suit against Minnesota, asserting that the state’s law unlawfully encroaches on the CFTC's exclusive authority to regulate derivatives markets, which includes prediction markets.
Kalshi and Polymarket also launched separate lawsuits challenging the ban on grounds that it is preempted by federal law and infringes upon First Amendment rights, as reported by Gambling Insider. A spokesperson for Polymarket emphasized that "Minnesota's ban runs counter to the federal government's established framework for regulating prediction markets."
This legal battle follows a significant precedent set in April 2025, when the Third Circuit Court of Appeals ruled that states cannot regulate sporting event contracts on prediction markets like Kalshi, granting exclusive regulatory authority to the CFTC.
The Minnesota injunction highlights ongoing tensions between state attempts to regulate emerging online financial instruments and the federally established regulatory regime. The outcome may influence future state legislation and regulatory approaches to prediction markets nationwide.
By the numbers:
- August 1, 2026 — Scheduled date for Minnesota's prediction market ban to take effect
- 5 years — Maximum prison sentence under Minnesota's law for operating a prediction market platform
- $10,000 — Maximum fine under Minnesota's law for operating a prediction market platform
What's next: Minnesota’s ban remains in legal limbo pending further court proceedings, with additional lawsuits from Kalshi and Polymarket ongoing.