Friday’s preliminary injunction barring Minnesota from implementing its unique law banning all prediction markets chalks another tally for Kalshi, Polymarket and the Commodity Futures Trading Commission (CFTC) on the ever-expanding U.S. court scoreboard.
While leading prediction markets took a similarly preliminary victory lap, the order stops far short of resolving the most relevant issues in the ongoing lawfulness debate. In fact, District Court Judge Katherine Menendez reveals the current temperature, in at least one judiciary, on the outstanding questions likely to advance to the U.S. Supreme Court in the coming months.
Within the 48-page order, Menendez scolds both sides for their monochromatic views and expresses skepticism that either side ultimately will win total victory. The Biden appointee also appears to echo another federal judge in determining that states must hold fire on criminal penalties until courts clear up the unresolved battles central to the legality of prediction markets.
Here are some notable passages from the Minnesota prediction markets ruling:
Must prediction markets, Minnesota fight from the fringes?
The clearest indication of how far the sides see their battle going appears in Menendez’s rebuke on how they both lay out their stances.
“Regrettably, although the briefing from all parties here is excellent, both sides have treated the issues before the Court as all-or-nothing propositions—either the CEA preempts any enforcement of the Minnesota law or it doesn’t. That framing provides little guidance on how the Court ought to navigate the reality that Kalshi and Polymarket US list many event contracts likely falling within the CFTC’s exclusive jurisdiction to regulate swaps on DCMs, and many falling outside of it. How does the Court craft a precise preliminary injunction in such a scenario?
“It would be illusory to enjoin Defendants from enforcing Minnesota’s prediction market statute to the extent that Kalshi and Polymarket US list event contracts that qualify as swaps. And providing no injunctive relief whatsoever because the Minnesota statute might have some permissible reach would, as discussed below, threaten Plaintiffs with irreparable harm.”
All Kalshi, Polymarket swaps are not created equal
Basically, it appears Menendez is calling the Minnesota law too broad in scope because an undetermined amount of the markets available on Kalshi and Polymarket appear to be legal without question.
“The Court pauses to note that the Minnesota statute may not, ultimately, be preempted in all respects, even as to Kalshi and Polymarket US. Aside from the preliminary nature of this Court’s assessment of the likelihood of success, Plaintiffs have not shown that every event contract listed on Kalshi and Polymarket US fits the statutory definition of a “swap.” If they don’t fit, Plaintiffs have much weaker claims that the CFTC is the only authority that can regulate them. After all, as relevant here, the exclusive jurisdiction Congress gave to the CFTC extends to transactions involving swaps that are conducted on DCMs, not to every conceivable event contract that Kalshi, Polymarket US, or any other DCM might host.
“If, as appears to be the case, Kalshi and Polymarket US are listing at least some event contracts that don’t meet the CEA’s definition of swaps, any permanent injunctive relief may be much narrower. But given the unique nature of Minnesota’s prediction market statute, the posture of these cases, and the imminent effective date of Minnesota’s statute, a preliminary injunction maintaining the status quo until the merits of this case can be fully resolved is appropriate.”
Menendez further makes clear that she is not weighing in on how prediction market operators fit into related laws before the 2026 one.
“Again, the Court notes that in this case, it need not decide whether Minnesota may enforce its existing gambling laws against the sports-related event contracts offered by Kalshi and Polymarket US. The Court is, instead, asked to consider the prediction market statute that applies to a broad array of wagers on events.”
Love Island prediction markets are swaps? Judge doubts it
The judge uses a timely example to make clear what markets she sees as likely to fall outside Congressional intent.
“For example, Kalshi’s trades predicting which couple will win season eight of Love Island USA seems to fall within the Minnesota law’s prohibition on contracts involving “events in popular culture.” Minn. Stat. § 609.7615, subd. 1(e)(8). Kalshi’s markets concerning what announcers would say during broadcasts of World Cup games also appear to be prohibited by the Minnesota statute. Id. § 609.7615, subd. 1(e)(9).
“However, one is hard pressed to imagine the financial, economic, or commercial consequence of the occurrence or outcome of these events unless the words of limitation in 7 U.S.C. § 1a(47)(A)(ii) are stretched so broadly that they impose no limit on the CFTC’s jurisdiction at all.”
Making trading criminal is criminal, it appears
One issue that it looks like courts will agree on, at least for now, is that criminalizing prediction market operation or participation before the Supreme Court likely weighs in will not stand.
“For purposes of its motion for preliminary injunctive relief, the CFTC has sufficiently demonstrated an imminent threat of an injury in fact. At least one other court has reached that conclusion under similar circumstances. KalshiEX LLC v. Johnson, No. CV-26-01715-PHX-MTL, 2026 WL 1223373, at *3 (D. Ariz. May 5, 2026) (concluding at the preliminary injunction stage that the CFTC “has standing to seek to enjoin Arizona’s enforcement of its gambling laws against event contracts traded on DCMs”).”
