Minnesota Prediction Market Ban SF 3432 Blocked by Judge

Jonathan Rodriguez

Written by: Jonathan Rodriguez

Published: Wed Jul 29, 2026, 8:00 am ET

Read Time: 4 minutes

Minnesota Prediction Market Ban SF 3432 Blocked by Judge

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A federal judge has temporarily blocked Minnesota from enforcing its first-in-the-nation ban on prediction markets. The ruling allows platforms such as Kalshi and Polymarket to continue operating in the state.

U.S. District Judge Katherine Menendez issued a preliminary injunction on July 27. The order came days before the law was scheduled to take effect on August 1.

The decision followed lawsuits from the Commodity Futures Trading Commission (CFTC), Kalshi, and Polymarket. They argued that federal commodities law preempts Minnesota's attempt to regulate prediction markets.

As a result, the ruling preserves the existing market while the broader legal dispute continues. It also adds another major development to the growing conflict between state gambling laws and federally regulated prediction markets.

Why Did Judge Katherine Menendez Block the Law?

Judge Menendez determined that the challengers were likely to succeed, at least partly, on their federal preemption claims.

The CFTC, Kalshi, and Polymarket argued that the Commodity Exchange Act gives the federal government exclusive jurisdiction over certain event contracts.

Menendez agreed that several contracts offered by Kalshi and Polymarket appear to qualify as federally regulated swaps. Therefore, Minnesota could face limits on its ability to regulate those transactions under state gambling laws.

"The Court finds that Plaintiffs have met their burden to show they are likely to succeed, at least in part, on their express-preemption claims, that they face a threat of irreparable harm, and that the balance of harms and the public interest weigh in favor of entering a preliminary injunction barring enforcement of Minnesota's prediction market statute until a final decision on the merits is reached," Judge Menendez wrote.

The judge also considered the potential harm to the platforms if Minnesota enforced the law. She found that the injunction would preserve the status quo while the court examines the underlying legal questions.

Still, Menendez did not rule that every prediction market contract receives federal protection. Some contracts may not satisfy the federal definition of a swap.

That distinction could become important during later stages of the litigation. The judge indicated that a permanent injunction could eventually cover a narrower group of contracts.

The decision therefore does not permanently invalidate Minnesota's law. Instead, it prevents enforcement until the court reaches a final decision on the merits.

Why Did Minnesota Pass SF 3432?

Minnesota lawmakers passed SF 3432, which created the state's first direct ban on prediction markets.

The Minnesota Senate approved the legislation by a 56-10 vote on April 30. Gov. Tim Walz later signed the measure into law in May.

Lawmakers targeted prediction markets because they viewed many event contracts as gambling products. They argued that sports contracts, in particular, closely resemble traditional sports wagering.

The legislation would make it a felony to create, operate, manage, or control a prediction market platform. It would also target certain companies that knowingly provide data or verification services supporting wagers.

The law covers wagers involving sports, weather, popular culture, war, death, and other real-world events. It also prohibits advertising prediction markets within Minnesota.

Minnesota has not legalized traditional online sports betting, making the prediction market issue especially significant. Lawmakers wanted to prevent prediction markets from effectively offering sports betting outside the state's existing gambling framework.

The legislation would have made Minnesota the first state to outright ban the prediction market sector. Other states have challenged individual operators under existing gambling laws instead.

What Happens Next for Minnesota Gambling?

The legal battle will now continue while Kalshi and Polymarket remain available to Minnesota users.

The CFTC and the operators will seek to establish that federal law prevents Minnesota from regulating federally authorized event contracts. Meanwhile, Minnesota Attorney General Keith Ellison has vowed to continue defending the state's law.

Ellison maintains that prediction markets constitute gambling and that Minnesota should retain authority over gambling within its borders.

For the Minnesota gambling industry, the ruling creates a complicated regulatory landscape. Traditional operators remain subject to state gambling restrictions, while prediction markets currently operate under federal protection.

That distinction could become increasingly important as prediction markets expand their sports offerings. Their contracts can compete directly with products offered by US online sportsbooks.

The ruling could also influence other states considering similar restrictions. Several jurisdictions have challenged prediction markets through legislation, regulatory action, or litigation.

Consequently, the Minnesota case could become an important test of federal preemption across the wider prediction market industry.

For now, Minnesota cannot enforce SF 3432 against the affected prediction markets. The state could regain enforcement authority if it ultimately wins the case.

The latest ruling therefore represents a significant short-term victory for Kalshi, Polymarket, and the CFTC. Yet the broader question remains unresolved.

The courts must still determine how far federal authority extends over prediction markets and where state gambling jurisdiction begins.

Jonathan Rodriguez
Jonathan Rodriguez

Jonathan is an avid basketball fan, and is often looking forward to the next upcoming NBA season when not checking players' stats during games. He also likes to keep his ears on the ground for the latest rumblings in the online casino industry.

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