- A federal judge paused Minnesota’s first-in-the-nation prediction market ban, days before the felony law was due to take effect.
- Judge Katherine Menendez found Kalshi, Polymarket and the CFTC likely to win on federal preemption grounds.
- The preliminary injunction bars enforcement against exchanges registered with the CFTC as designated contract markets.
A federal judge blocked Minnesota from enforcing SF 3432, the first state law to criminalize prediction markets, granting Kalshi, Polymarket and the Commodity Futures Trading Commission a preliminary injunction on Monday, with the statute due to take effect on Saturday.
U.S. District Judge Katherine Menendez found the three plaintiffs likely to succeed on express-preemption claims, and the platforms likely to suffer irreparable harm. Her 44-page order bars enforcement against exchanges registered with the CFTC as designated contract markets, and holds until a decision on the merits.
Whether Minnesota’s law is preempted, Menendez wrote, turns on whether the trades “qualify as ‘swaps’ within the meaning of the CEA.” Contracts on Senate races, the World Cup winner and the reopening of the Strait of Hormuz clear that bar, she found, because they concern events with “clear potential economic, financial, or commercial consequences.”
However, Kalshi markets on who wins Love Island USA, or on what announcers say mid-match, likely do not. The split matters because the CFTC confirmed its challenge is facial, which requires showing there is no set of circumstances in which the law would be valid.
Permanent relief, she wrote, “may be much narrower.” Ellison said the state “respectfully disagree[s]” with the court’s reading of the status quo, one he told Courthouse News “allows predatory gambling apps to proliferate.”
Consequently, the CFTC has sued multiple states, among them Illinois, Arizona, Connecticut, Wisconsin and Minnesota, where the DOJ and the agency filed within hours of the bill becoming law. The order landed a day before a deadline the agency set itself, as the CFTC told Menendez that absent a ruling by close of business Tuesday it would seek interim relief from the Eighth Circuit.
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