Minnesota’s first-in-the-nation law banning prediction markets is halted in federal court

HARRISBURG, Pa. (AP) — A federal judge has temporarily blocked Minnesota’s first-in-the-nation law banning prediction markets just days before it was to take effect, the latest clash between President Donald Trump’s administration and states over who regulates operators such as Kalshi and Polymarket.

Monday’s decision is the latest setback for states trying to outlaw or regulate fast-growing prediction market platforms.

U.S. District Judge Katherine Menendez in Minnesota found that the U.S. Commodity Futures Trading Commission, Kalshi and Polymarket were likely to succeed in their challenge to the law and that letting it take effect would cause “irreparable harm” to the operators.

The law was scheduled to take effect Saturday. It would have made it a crime to create or operate prediction markets or help administer nearly any activity connected to one. The law will remain blocked while the lawsuit proceeds.

Kalshi, Polymarket and the Commodity Futures Trading Commission want the law permanently blocked and argue that federal law gives the CFTC exclusive jurisdiction to regulate the type of “event-contract transactions” offered by Kalshi and Polymarket.

States argue that the vast majority of the business on prediction market platforms is sports betting, which they are empowered to regulate, and that is completely different from the commodities and futures contracts that the commission has historically regulated.

In a statement Tuesday, Minnesota Attorney General Keith Ellison said prediction markets are “gambling, plain and simple.”

“And Minnesota has every right to keep predatory gambling out of our communities,” Ellison said.

Ellison said his office disagrees with the court’s decision that the “proper ‘status quo’ to maintain is one that allows predatory gambling apps to proliferate.” But Ellison said the legal issues are complex and that he planned to continue defending the state’s law.

Neal Kumar, Polymarket’s chief legal officer, said in a statement that the decision makes clear that prediction markets on commission-registered exchanges “are governed by federal law, not a patchwork of state rules.”

A Kalshi spokesperson, Elisabeth Diana, said in a statement that “states cannot ban things that they don’t have jurisdiction over.”

Menendez’s decision follows a declaration in February by Trump’s appointee atop the Commodity Futures Trading Commission that the agency “will no longer sit idly by” while states aim to regulate or ban prediction markets and “undermine the agency’s exclusive jurisdiction.”

A tangle of lawsuits is growing, as states try to use their gambling laws to shut down Kalshi, Polymarket and other prediction market operators, declaring them to be unlicensed and illegal gambling operators.

In April alone, the federal government sued Connecticut, Arizona and Illinois, challenging their efforts to regulate prediction market operators, while New York sued Coinbase and Gemini, two of the newest players in the prediction market industry.

The American Gaming Association, which represents commercial casinos, estimates states have lost more than $1.2 billion in tax revenue from wagers since prediction markets began offering sports event contracts.

Native American tribal leaders and gambling regulators also contend that betting on things like sporting events, elections and other outcomes is unlawful gambling.

In the meantime, the Commodity Futures Trading Commission has begun a rulemaking process to consider what sorts of event contracts it would consider to be “contrary to the public interest” and bar them from being listed through a prediction market that it regulates.

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Follow Marc Levy at http://twitter.com/timelywriter.