A new Minnesota law banning prediction markets has been blocked by a United States federal judge, who said the state likely lacks jurisdiction over markets that are already regulated at the federal level.
On Monday, Judge Katherine Menendez of the District Court of the United States granted a preliminary injunction requested by the Commodity Futures Trading Commission. Minnesota’s statute signed into law by the governor in May would have been the first law in the United States that banned prediction markets.
According to Judge Menendez, the event contracts offered on platforms regulated by the CFTC could likely be regarded as swaps and thus be subject to the regulation of the CFTC instead of individual states.
The decision allows both Kalshi and Polymarket to continue offering prediction contracts to users in Minnesota for the time being.
The case is reflective of a wider feud concerning whether prediction markets should just fall under federal derivatives laws or whether states have the right to limit them based on their gambling laws.
The lawsuit comes as prediction markets emerge vigorously in the USA, attracting billions of dollars in trading through contracts linked to markets, sports, elections, and other events. Also, the rise in popularity of prediction markets led to an increase in regulations concerning this sector because of worries related to gambling addiction and consumer protection.
As per the reports provided in the court documents, by the end of May, Kalshi had more than 90,000 users from Minnesota with residents exchanging contracts worth millions of dollars on the system. Minnesota officials claimed that the ban was needed for consumer protection because regular gambling has been banned in Minnesota.