A federal judge delivered a significant victory for prediction market operators Tuesday, temporarily blocking Minnesota's unprecedented ban on the platforms just days before it would have criminalized their operations. U.S. District Judge Katherine Menendez ruled that the U.S. Commodity Futures Trading Commission, Kalshi and Polymarket are likely to succeed in their challenge to the state law, finding that enforcement would cause "irreparable harm" to the operators.
The law was scheduled to take effect Saturday. It would've made it a crime to create or operate prediction markets or help administer nearly any activity connected to one. The ruling keeps the ban blocked while the lawsuit proceeds, preserving the status quo for platforms that argue they're operating under federal regulatory authority.
The Jurisdictional Battle
Kalshi, Polymarket and the CFTC want the law permanently blocked, arguing that federal law gives the commission exclusive jurisdiction to regulate the "event-contract transactions" their platforms offer. This isn't theoretical regulatory turf. It's about whether states can use gambling laws to shut down federally regulated markets.
Minnesota Attorney General Keith Ellison said in a statement Tuesday that prediction markets are "gambling, plain and simple." He added that "Minnesota has every right to keep predatory gambling out of our communities." Ellison said his office disagrees with the court's decision that the proper status quo "is one that allows predatory gambling apps to proliferate," but acknowledged the legal issues are complex and pledged to continue defending the state's law.
States argue that the vast majority of business on prediction market platforms is sports betting, which they're empowered to regulate. They contend it's completely different from the commodities and futures contracts the commission has historically regulated. Neal Kumar, Polymarket's chief legal officer, said the decision makes clear that prediction markets on commission-registered exchanges "are governed by federal law, not a patchwork of state rules." A Kalshi spokesperson, Elisabeth Diana, said that "states cannot ban things that they don't have jurisdiction over."
Federal-State Clash Intensifies
Menendez's decision follows a declaration in February by Trump's appointee atop the Commodity Futures Trading Commission that the agency "will no longer sit idly by" while states aim to regulate or ban prediction markets and "undermine the agency's exclusive jurisdiction." That statement signaled a more aggressive federal posture on protecting these markets from state interference.
A tangle of lawsuits is growing as states try to use their gambling laws to shut down Kalshi, Polymarket and other prediction market operators, declaring them to be unlicensed and illegal gambling operators. In April alone, the federal government sued Connecticut, Arizona and Illinois, challenging their efforts to regulate prediction market operators, while New York sued Coinbase and Gemini, two of the newest players in the prediction market industry.
The Revenue Argument
The American Gaming Association, which represents commercial casinos, estimates states have lost more than $1.2 billion in tax revenue from wagers since prediction markets began offering sports event contracts. Native American tribal leaders and gambling regulators also contend that betting on things like sporting events, elections and other outcomes is unlawful gambling. That's a substantial sum that explains why established gambling interests want these platforms shut down or regulated like traditional sportsbooks.
In the meantime, the Commodity Futures Trading Commission has begun a rulemaking process to consider what sorts of event contracts it would consider to be "contrary to the public interest" and bar them from being listed through a prediction market that it regulates.
Why This Matters:
This case represents a fundamental question about regulatory authority and federalism. If states can use gambling laws to override federal market regulation, they can fragment national markets and create compliance chaos for businesses operating across state lines. The $1.2 billion revenue figure cited by the gaming industry reveals what's really at stake: established gambling interests seeking to eliminate competition through state regulatory power rather than market competition. The federal government's aggressive defense of CFTC jurisdiction suggests the Trump administration views prediction markets as legitimate financial instruments deserving uniform national regulation, not state-by-state prohibition. The outcome will determine whether innovation in financial markets can proceed under federal oversight or whether states can veto federally approved trading platforms by reclassifying them as gambling.