CumberlandA federal judge ruled that Minnesota's law criminalizing prediction markets would probably violate the federal Commodity Exchange Act.
Kalshi, Polymarket win pause against Minnesota's prediction market ban
A federal judge ruled that Minnesota's law criminalizing prediction markets would probably violate the federal Commodity Exchange Act.
A federal judge ruled that Minnesota’s law banning prediction markets likely runs afoul of the Commodity Exchange Act, granting a preliminary injunction against the law to Kalshi, Polymarket and the Commodity Futures Trading Commission.
Judge Katherine Menendez, of the U.S. District Court for the District of Minnesota, ruled Monday that Minnesota’s recently passed law that would ban prediction market operators from offering their products in the state seems to be preempted by the federal CEA, and that the companies and federal regulator “are likely to succeed” in showing so after a full trial.
Kalshi, Polymarket and the CFTC sued Minnesota earlier this year after the state passed the law criminalizing the operation of prediction markets, arguing that the statute violated the CFTC’s jurisdiction to oversee “swaps,” which prediction market contracts are structured as.
In her ruling, Judge Menendez said that the three parties had shown they were likely to succeed in their arguments that the law underpinning U.S. commodities exchanges preempts the state law, that the CFTC has jurisdiction over these products and that the plaintiffs would likely succeed on the merits of the case.
“The Court finds that Plaintiffs have met their burden to show they are likely to succeed on the merits of their express-preemption claims, at least as to the application of Minnesota’s law to many of the trades listed on Kalshi’s and Polymarket US’s platforms,” the ruling said. “Specifically, it appears that whether the Minnesota statute is expressly preempted turns on whether the state law attempts to regulate trades in event contracts that qualify as ‘swaps’ within the meaning of the CEA.”
Some of the contracts on prediction markets might fit within the Minnesota law, the judge said, pointing to predictions about who might win the TV program “Love Island” as an example, but it would be difficult to target a preliminary injunction just to those issues.
Not granting a halt of the law would also cause “irreparable harm” to Kalshi and Polymarket, the ruling added.
The preliminary injunction will last until “a final decision on the merits is reached,” the judge said.
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Why it matters:
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