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A federal judge on Monday blocked Minnesota from carrying out a ban on prediction market trades within the state that allow site users to wager on everything from sports to politics to world events.

The ruling comes just days before Minnesota’s first-of-its-kind law was to take effect and is a response to an aligned legal challenge from the Commodity Futures Trading Commission and industry power players, KalshiEX and Polymarket US.

Judge Katherine Menendez determined that the federal regulatory agency and the prediction market companies proved they were likely to prevail at least in part in their lawsuit. The judge said because “they face a threat of irreparable harm,” she would prevent enforcement of the law while the case plays out.

“Kalshi and Polymarket US are designated contract markets, so the CFTC has exclusive jurisdiction to regulate transactions involving those `swaps,’” Menendez wrote in her 44-page ruling. 

That includes trades on things such as which NBA team would sign LeBron James or when traffic will return to normal in the Strait of Hormuz, the judge concluded.

Menendez said in her order that it is possible that some event contracts offered on the site could still be subject to challenge and the injunction could eventually be narrowed. Menendez said examples of those could be which couple wins “Love Island USA” because those are events in pop culture that might not be precisely within the CFTC’s domain.

“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 added.

The state attorney general defended the law on behalf of the Department of Public Safety, which regulates gambling in Minnesota. 

Prediction markets have exploded in popularity and have gotten around traditional restrictions on sports betting or other forms of event gambling. That’s because users trade contracts where the value is based on someone correctly guessing the outcome of a specified event or occurrence. 

Minnesota lawmakers moved this year to bar them as a way to prevent addiction by users, especially young adults, and also to head off concerns over insider trading. Tribal nations joined in defense of the law, arguing that the markets are a direct threat to gambling done inside casinos they operate.

The CFTC contended that the Minnesota law went outside of the purview of state authority because it has specific regulatory charge over commodity futures trades. The Trump administration has lodged similar cases against other states that tried to restrict or otherwise curb the sites, although none of those states had gone to the extent of Minnesota.

The law passed this year with bipartisan backing makes it a felony to host or advertise the prediction markets. They’re arguing the federal government — not the states — is the one permitted to regulate the sites.  

Detractors of the law said the way it was structured would also impair free speech.

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Dana Ferguson (NPR)

Minnesota’s law barring prediction markets has been put on hold while a lawsuit plays out. A judge sided with a federal regulatory board and companies that facilitate trades that resemble gambling wagers.

The prediction market app Kalshi is displayed on a mobile phone

Federal judge halts Minnesota law meant to bar prediction markets within state

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