Federal Court Enjoins Minnesota Enforcement Against Prediction Markets

The U.S. District Court for the District of Minnesota preliminarily enjoined state officials from enforcing a new prediction market ban against two CFTC-registered exchanges, finding the law is likely preempted by the Commodity Exchange Act (see prior coverage).

Ruling on consolidated claims by the CFTC, the United States, Kalshi, and Polymarket US in United States v. Minnesota, KalshiEX LLC v. Ellison, and QCX LLC v. Ellison, Judge Menendez held plaintiffs are likely to succeed on express preemption. The CEA gives the CFTC "exclusive jurisdiction" over swaps traded on designated contract markets, and many event contracts on elections, sports, and other outcomes qualify as swaps under the CEA's broad definition. The ruling temporarily blocks the state statute, which was set to take effect August 1, 2026.

The court stressed this is not a final merits ruling: contracts predicting popular-culture outcomes with no discernible financial consequence may fall outside the swap definition and remain subject to state regulation. But because the state law would bar exchanges from offering swaps within the CFTC's exclusive jurisdiction, it is likely preempted in many respects.

The court also found (i) the CFTC showed likely injury in fact for standing, based on testimony that state enforcement diverted agency staff from core oversight; (ii) the exchanges face irreparable harm from felony prosecution risk, unrecoverable losses from canceled Minnesota trades, and reputational damage; and (iii) because the state's interest in enforcing a likely-preempted law is diminished, the balance of harms and public interest favor an injunction. It declined to reach implied-preemption or First Amendment claims, resolving the motions solely on express preemption.