Judge Freezes Ban — Prediction Markets Keep Rolling

A federal judge just slammed the brakes on Minnesota’s first-in-the-nation ban on prediction markets, warning the state it cannot trample federal authority or shut down lawful financial speech.

Story Snapshot

Judge Katherine Menendez blocked Minnesota’s prediction market ban days before it took effect.
The court said federal law likely overrides the state’s attempt to treat these markets as gambling.
President Trump’s administration and federal regulators joined Kalshi and Polymarket to fight the ban.
The ruling signals other blue-state crackdowns on prediction markets may also be illegal.

Judge Stops Minnesota From Turning Financial Speech Into a Felony

U.S. District Judge Katherine Menendez issued a preliminary injunction on Monday, stopping Minnesota from enforcing its new ban on prediction markets just days before it was set to start on August 1. The law would have made operating or advertising platforms such as Kalshi and Polymarket a felony in the state, even though they are supervised as legal financial markets under federal law. The judge’s order keeps these platforms running in Minnesota while the case moves forward and the law gets a full constitutional review.

President Trump’s administration, the federal Commodity Futures Trading Commission (CFTC), and the platforms themselves all joined forces to sue Minnesota and stop the law. They argue that Congress already put prediction markets under federal financial regulation, mainly through the Commodity Exchange Act, and that states cannot simply call them “gambling” and criminalize them anyway. The judge agreed the challengers showed they were likely to win on that argument and would suffer serious harm if the ban took effect, including shutting down lawful trading and silencing market-based speech about politics, policy, and economics.

Federal Law vs. State Overreach: What the Judge Actually Said

In her written decision, Judge Menendez found that federal law gives the Commodity Futures Trading Commission “exclusive jurisdiction” over trades in certain event contracts known as “swaps,” when those contracts are listed on federally regulated exchanges like Kalshi and Polymarket. She explained that Minnesota’s statute appears to reach into that federal space by trying to ban trading in these contracts outright, creating a direct conflict with the Commodity Exchange Act and the federal regulatory framework Congress set up. That conflict is why she ruled that federal law likely preempts, or overrides, Minnesota’s ban, at least for the platforms and contracts now before the court.

The judge also stressed that this fight is not only about one state’s gambling policy but about who controls the rules for modern financial markets. She said that “the balance of harms and the public interest” favor an injunction, because letting Minnesota go first with a broad ban could invite a patchwork of state rules that undermine national financial oversight and confuse everyday Americans using these platforms to hedge risk or express views about future events. At the same time, she noted that Minnesota might still be able to regulate some activity at the edges, such as wagers that truly fall outside federally defined swaps, but those details must be sorted out later in the case.

Why This Matters Far Beyond Minnesota – And What Comes Next

Minnesota was the first state in the country to pass a sweeping, total ban on prediction markets, and it did so under the banner of “consumer protection” and anti-gambling politics. Almost right away, the Commodity Futures Trading Commission responded with a lawsuit, warning that if Minnesota could crush federally regulated exchanges, other states would try the same and gut the national system Congress created for derivatives and event contracts. Judge Menendez’s injunction sends the opposite message: states cannot simply erase federally supervised markets because politicians dislike new technology or fear competition with local casinos.

For conservatives, this ruling is an important check on state-level overreach that threatens free markets and free expression. Prediction markets let citizens back their judgment about elections, policies, energy prices, and more with real money, creating honest signals about where the country is headed. By siding with federal law and the Trump administration against Minnesota’s ban, the court defended a core constitutional principle: when Congress clearly assigns a subject to national regulation, states cannot hijack it with moral panic or partisan agendas disguised as “protecting” the public.