A federal judge has temporarily barred Minnesota from enforcing its new prediction-market felony law against CFTC-designated contract markets, days before the statute takes effect on Aug. 1. The protection covers KalshiEX and QCX, the registered entity doing business as Polymarket US, but not their customers or outside service providers.
Judge Katherine Menendez has barred named Minnesota officials from enforcing Minn. Stat. § 609.7615 against exchanges the Commodity Futures Trading Commission has designated as contract markets. She granted preliminary-injunction motions filed by the CFTC, KalshiEX and QCX, the registered entity doing business as Polymarket US. Her July 27 order holds until the cases reach a final merits decision.
Why the court found likely partial preemption
Menendez found the plaintiffs likely to prove that the Commodity Exchange Act expressly preempts part of Minnesota’s law. Federal law gives the CFTC exclusive jurisdiction over swap transactions conducted on designated contract markets.
That swap definition can include event contracts whose outcomes have a reasonably connected potential financial, economic or commercial consequence. A trader’s potential profit alone is not enough.
The order does not cover every event contract
But the order does not treat every event contract as a swap. Menendez identified markets tied to a Senate election, the World Cup winner, a LeBron James signing and Strait of Hormuz traffic as likely swaps.
She questioned a 20-point-lead market and said contracts on the winning Love Island USA couple or on words used by World Cup announcers appeared unlikely to qualify. Any permanent injunction could therefore apply to fewer contracts.
Customers and service providers remain exposed
Chapter 118 replaced the prediction-market provisions enacted earlier in Chapter 97, and the law is still scheduled to take effect Aug. 1 for crimes committed on or after that date. Its core offense makes creating or operating a covered prediction market a felony when done for consideration and as part of a business, as is intentionally facilitating one through specified listing, funds, settlement, counterparty or pricing activity.
Because the order protects only CFTC-designated contract markets, it does not expressly shield customers, independent advertisers or outside service providers. The court has not decided the plaintiffs’ implied-preemption or First Amendment claims.
Polymarket US welcomed the ruling and said it expected to keep serving Minnesota users. Attorney General Keith Ellison said the state disagreed and would continue defending the law as the record develops.
By contrast, a New York court denied Kalshi interim protection from existing state gambling enforcement earlier in July. Both cases remain open, and the opposite preliminary results do not settle how federal registration interacts with state gambling laws nationwide.
Source: CryptoSlate
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