A federal judge has blocked Minnesota's first-in-the-nation law that would have banned prediction markets, just days before it was set to take effect on August 1. The ruling by US District Judge Katherine Menendez issued a preliminary injunction, preventing the state from enforcing the ban. The lawsuit was filed by the Trump administration and major prediction markets Kalshi and Polymarket, arguing that the federal Commodity Futures Trading Commission (CFTC) has exclusive authority to regulate these platforms.

Judge Menendez stated that Minnesota's total ban likely violates federal law because many trades on Kalshi and Polymarket qualify as "swaps" under the Commodity Exchange Act, which the CFTC regulates. She noted that contracts tied to events with clear financial or economic consequences, such as election outcomes or sports championships, fall under the CFTC's purview. However, Menendez suggested that Minnesota might still be able to prohibit certain types of prediction-market wagers that do not meet the definition of swaps, like those on reality TV show outcomes.

Minnesota Attorney General Keith Ellison stated his intent to defend the law, calling prediction markets "gambling." He disagreed with the court's decision to allow these markets to continue operating but acknowledged the complexity of the legal issues. The case may proceed to a final decision, potentially leading to a narrower injunction that blocks only specific types of prediction market contracts.