Four more days, and running a Kalshi or Polymarket account in Minnesota could have landed you up to five years in prison. Governor Tim Walz signed the ban on May 18, branding prediction markets illegal gambling — a felony punishable by up to five years and a $10,000 fine, covering anyone who operated or even advertised the platforms. The law was due to take effect August 1. It never got the chance.
On July 27, U.S. District Judge Katherine Menendez issued a 44-page order granting a preliminary injunction that freezes the law while litigation continues. The plaintiffs weren't just the platforms — Kalshi and Polymarket US were joined by the CFTC, the federal derivatives regulator, and the Justice Department. Their argument: if a contract pays out based on the outcome of an event, it's a swap, and only the CFTC gets to regulate swaps, not individual states.
Menendez largely agreed. She wrote that the plaintiffs are likely to succeed on their claim that the Commodity Exchange Act expressly preempts Minnesota's law, since many contracts on these platforms are genuine derivatives tied to events with real economic and financial consequences. She left one door open — bets that are purely entertainment, like reality-show outcomes, might not enjoy the same federal shield — but decided carving those out narrowly wasn't practical, so she blocked the whole statute instead.
It's the strongest ruling the industry has landed so far. Courts had already sided with prediction markets in New Jersey and Tennessee, but neither state had gone as far as criminalizing the business outright. Minnesota was the first to try jail time, and the first to get stopped on these specific grounds. The broader picture is still messy, though: Kalshi has lost injunction fights in Nevada and Massachusetts, is racking up $120,000 a day in fines in Michigan, and the CFTC is currently suing at least nine states over the same jurisdictional question.
Minnesota officials say they'll keep fighting, insisting these are still bets on outcomes and belong under state gambling law, not federal finance rules. A full trial will settle it eventually. Until then, Kalshi and Polymarket keep taking Minnesota customers as if the ban never happened.
