U.S. District Judge Katherine Menendez granted a preliminary injunction on July 27 to the Commodity Futures Trading Commission, Kalshi and Polymarket US, preventing Minnesota from enforcing its first-in-the-nation prediction market statute against CFTC-registered designated contract markets. According to reports from AP, the injunction remains in effect until the district court reaches a final decision, with the ruling blocking Minnesota's prediction market ban that was scheduled to take effect on Saturday, just days before the law was set to go into effect. The court found that the CFTC's exclusive jurisdiction probably covers a 'considerable swath' of contracts offered by the platforms, though the platforms had not shown that every listed event contract meets the federal definition of a swap. 'The law would have made it a crime to create or operate prediction markets or help administer nearly any activity connected to one,' as reported by AP. The law was scheduled to take effect Saturday and would have made it a crime to create or operate prediction markets or help administer nearly any activity connected to one.
Governor Tim Walz responded with Executive Order 26-09 on July 31, prohibiting covered state employees, including the governor, lieutenant governor and agency commissioners, from using nonpublic or confidential government information to trade prediction-market contracts for private benefit. As reported by crypto.news, the order does not cover the legislature, courts, independent elected officials or several boards and commissions, and becomes effective 15 days after publication in the State Register. The executive action comes as the CFTC has also taken enforcement action, ordering former U.S. Representative George Santos to disgorge $17,569.98 and pay a $17,500 penalty over manipulative activity in a State of the Union event contract.
According to crypto.news reports, Kalshi has introduced employer disclosures, risk scoring and expanded surveillance for higher-risk contracts, blocking more than 100 potential insider trades and making 20 law-enforcement referrals during the first quarter of 2026. The platforms' response to the Minnesota ruling reflects their interpretation of federal law, with Kalshi stating that 'States cannot ban things that they don't have jurisdiction over' and Polymarket arguing that 'States cannot ban things that they don't have jurisdiction over'. Polymarket's chief legal officer Neal Kumar said in a statement that 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 in a statement that 'states cannot ban things that they don't have jurisdiction over.' The injunction only covers the new prediction market statute as applied to CFTC-registered markets and does not decide whether Minnesota can apply older gambling laws to individual sports or entertainment contracts.
As reported by crypto.news, the ruling could influence political arguments surrounding crypto lawmakers and PACs, with Fairshake holding approximately $126.97 million in cash at the end of June and having spent $74.25 million during the current two-year reporting period. The case involves conflicting state cases, with New York suing Kalshi on July 31, alleging the platform operates as unlicensed gambling, while courts have not produced a nationwide answer on prediction market regulation. The CFTC's proposed prediction-market rule, which would define 'gaming' and establish public-interest review factors, has a public comment period that closed on July 27, though the commission has not issued a final rule. 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.
The Minnesota ruling represents the latest clash between President Donald Trump's administration and states over who regulates operators such as Kalshi and Polymarket. A tangle of lawsuits is growing as states try to use their gambling laws to shut down 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 American Gaming Association estimates states have lost more than $1.2 billion in tax revenue from wagers since prediction markets began offering sports event contracts. Minnesota Attorney General Keith Ellison disagreed with the court's decision, stating his office 'disagrees with the court's decision that the 'proper 'status quo' to maintain is one that allows predatory gambling apps to proliferate.' However, Ellison said the legal issues are complex and that he planned to continue defending the state's law. A Kalshi spokesperson, Elisabeth Diana, said in a statement that 'states cannot ban things that they don't have jurisdiction over.'
