A federal judge has temporarily blocked Minnesota’s first-in-the-nation law banning prediction markets, preventing it from taking effect just days before its scheduled implementation. U.S. District Judge Katherine Menendez ruled that the U.S. Commodity Futures Trading Commission (CFTC), along with corporate operators Kalshi and Polymarket, would likely succeed in their challenge to the state law. This decision allows these markets to continue operating, causing “irreparable harm” to the operators if the ban were enforced.
The Minnesota law, set to become active on Saturday, aimed to criminalize the creation, operation, or administration of nearly any activity connected to prediction markets. Now, it remains blocked as the lawsuit proceeds, effectively nullifying the state's attempt to regulate these activities within its borders.
Kalshi, Polymarket, and the federal CFTC seek a permanent block on the state law. They argue that federal law grants the CFTC exclusive jurisdiction to regulate “event-contract transactions” like those offered by the two companies. States, however, contend that the vast majority of business on these platforms constitutes sports betting, which falls under their regulatory authority. They assert this is distinct from the commodities and futures contracts historically regulated by the federal commission.
Undermining Local Control
Minnesota Attorney General Keith Ellison stated on Tuesday that prediction markets are “gambling, plain and simple.” He emphasized Minnesota’s right “to keep predatory gambling out of our communities.” Ellison expressed disagreement with the court’s decision, which he believes maintains a “status quo” allowing “predatory gambling apps to proliferate.” Despite the legal complexities, his office plans to continue defending the state’s law, representing a clear stand for state sovereignty against federal overreach.
Neal Kumar, Polymarket’s chief legal officer, declared that the decision clarifies that prediction markets on commission-registered exchanges “are governed by federal law, not a patchwork of state rules.” Kalshi spokesperson Elisabeth Diana echoed this, stating that “states cannot ban things that they don’t have jurisdiction over.” These statements highlight the corporate and federal push to centralize control, overriding local legislative efforts.
This federal intervention follows a declaration made in February of the same year by Trump’s appointee atop the Commodity Futures Trading Commission. The appointee stated the agency “will no longer sit idly by” while states attempt to regulate or ban prediction markets, claiming such actions “undermine the agency’s exclusive jurisdiction.” This reveals a bipartisan elite consensus on expanding federal power at the expense of state autonomy.
The Cost to Communities
A growing tangle of lawsuits illustrates the federal government's aggressive stance. States are attempting to use their gambling laws to shut down operators like Kalshi and Polymarket, labeling them unlicensed and illegal gambling entities. In April of the same year alone, the federal government sued Connecticut, Arizona, and Illinois, challenging their regulatory efforts. New York also sued Coinbase and Gemini, two newer players in this expanding industry.
The American Gaming Association, representing commercial casinos, estimates that states have lost over $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 sporting events, elections, and other outcomes constitutes unlawful gambling. This lost revenue directly impacts state budgets, diverting funds that could support public services and local communities.
Meanwhile, the Commodity Futures Trading Commission has initiated a rulemaking process. This process aims to determine which event contracts it would deem “contrary to the public interest,” thereby barring them from being listed through a prediction market it regulates. This move solidifies the federal agency’s intent to establish a centralized regulatory framework, further eroding state authority over local economic and social policy.