Kalshi and Polymarket Score a Key Court Win With Minnesota Ban Put on Hold

TL;DR

• Injunction: A federal judge paused Minnesota’s SF 3432, giving Kalshi and Polymarket temporary relief. At the same time, the court reviews whether the law is preempted.
• Swap Question: The ruling hinges on whether certain event‑based contracts qualify as swaps under federal law, with the judge finding some markets offered by Kalshi and Polymarket meet that threshold, and others do not.
• Broader Fight: Minnesota pushed back against the decision as the CFTC continues to sue states over similar laws, with Kalshi and Polymarket joining the Minnesota case shortly after federal agencies filed their challenges.
  

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A federal judge has temporarily stopped Minnesota from enforcing SF 3432, the first state law designed to criminalize prediction markets, giving Kalshi and Polymarket a significant early victory. The preliminary injunction, granted Monday, pauses the statute just days before it was set to take effect and marks a pivotal moment for the platforms and the Commodity Futures Trading Commission, which jointly challenged the measure.

Judge Finds Preemption Claims Likely to Succeed

U.S. District Judge Katherine Menendez concluded that Kalshi and Polymarket are likely to prevail on express‑preemption arguments, noting that the law could cause irreparable harm if allowed to proceed. Her 44‑page order blocks Minnesota from enforcing the statute against exchanges registered with the CFTC as designated contract markets, preserving the status quo until a full decision on the merits. The ruling turns on whether certain trades qualify as swaps under the Commodity Exchange Act. Menendez found that contracts tied to Senate races, the World Cup winner, or the reopening of the Strait of Hormuz meet that definition because they involve events with clear economic or commercial consequences.

By contrast, she wrote that Kalshi and Polymarket markets on Love Island USA outcomes or announcer commentary likely do not. That distinction matters because the CFTC’s challenge is facial, requiring proof that the law is invalid in all circumstances. Menendez determined the statute may not be preempted across the board, yet still issued the injunction to avoid what she described as “all‑or‑nothing propositions” from both sides.

State Pushes Back as Federal Pressure Mounts

Minnesota Attorney General Keith Ellison said the state “respectfully disagree[s]” with the court’s interpretation of the status quo, arguing it enables what he called predatory gambling apps. His office maintained that Kalshi and Polymarket could comply with federal rules while limiting offerings in the state. The injunction arrives amid a broader federal campaign. The CFTC has sued multiple states, including Illinois, Arizona, Connecticut, Wisconsin and Minnesota, often filing within hours of new laws taking effect.

Kalshi and Polymarket joined the Minnesota case shortly after the DOJ and the agency filed their complaints. The order also landed one day before a deadline set by the CFTC, which warned it would seek interim relief from the Eighth Circuit absent a timely ruling. Kalshi and Polymarket said they would follow the same path.