- U.S. District Judge Katherine Menendez enjoined Minnesota Statute 609.7615 on July 27, five days before its Aug. 1 effective date.
- The order protects only CFTC-registered exchanges and found the state law likely preempted for contracts qualifying as federal swaps.
- Kalshi told the court it had more than 90,000 verified Minnesota users with millions of dollars in open positions.
- Menendez wrote that pop-culture contracts, like Love Island USA winner markets, likely fall outside federal jurisdiction.
MINNEAPOLIS – U.S. District Judge Katherine Menendez blocked Minnesota on Monday from enforcing a state law that makes operating a prediction market a felony, five days before the ban was set to take effect Aug. 1.
Three Lawsuits, One Order
Menendez, of the U.S. District Court for the District of Minnesota, granted preliminary injunctions in three related cases in a single 44-page order: United States and CFTC v. Minnesota, KalshiEX LLC v. Ellison and QCX LLC v. Ellison, the last brought by QCX doing business as Polymarket US.
The defendants include the state of Minnesota, Gov. Tim Walz, Attorney General Keith Ellison, the Minnesota Department of Public Safety and Jon Anglin, director of the department’s Alcohol and Gambling Enforcement Division.
Walz signed the ban in May, and the CFTC sued Minnesota the day after the signing. Kalshi and QCX filed within days of it. The statute, adopted through SF 3432 and codified at Minnesota Statute 609.7615, imposes criminal penalties on creating, operating or advertising a prediction market in the state.
The plaintiffs are likely to prevail “at least in part” on their preemption claims, Menendez found, because the Commodity Exchange Act grants the CFTC “exclusive jurisdiction” over swaps traded on designated contract markets and that grant likely displaces the state law. The court waived any bond requirement, and the injunction runs until a final decision on the merits.
What The Injunction Covers
The order bars enforcement of the statute only against entities registered with the CFTC as designated contract markets, the federal designation both Kalshi and Polymarket US hold. It does not declare the entire statute invalid.
Menendez wrote that contracts tied to a U.S. Senate election, the World Cup winner, which NBA team would sign LeBron James, and when Strait of Hormuz traffic would return to normal are likely swaps under the federal definition because each is connected to a potential financial, economic or commercial consequence.
Contracts on which couple wins Love Island USA, or on what announcers say during World Cup broadcasts, likely are not, the order said, leaving those markets within the Minnesota law’s reach on a final ruling. The judge faulted both sides for briefing the case as an all-or-nothing proposition and said any permanent relief may be much narrower once the litigation sorts qualifying contracts from the rest.
Why The Court Found Irreparable Harm
Kalshi represented that it had more than 90,000 verified users in Minnesota as of May 26, with millions of dollars in unsettled open positions. Forced cancellation of those trades could create substantial liability the exchanges could never recover from the state because of sovereign immunity, the order said.
The defendants had not disavowed prosecuting the exchanges once the law took effect, exposing both platforms to felony charges.
What Happens Next
The order is not a final determination, and Menendez noted the Sixth Circuit has questioned whether the Commodity Exchange Act preempts state gambling enforcement even for sports contracts that qualify as swaps.
Minnesota is one of several states in federal litigation over event contracts, a docket that includes the CFTC’s suit against New Mexico and Nevada’s contempt bid against Kalshi and that will decide where state authority over legal sports betting ends and federal exchange regulation begins. If the state prevails on the merits, the order says, enforcement of the felony statute can begin.
