Minnesota loses first round against Kalshi, Polymarket

Minnesota’s prediction market ban remained blocked on Aug. 2, one day after the law was scheduled to take effect. 

U.S. District Judge Katherine Menendez granted a preliminary injunction on July 27 to the Commodity Futures Trading Commission, Kalshi and Polymarket US. The order prevents Minnesota from enforcing its new statute against CFTC-registered designated contract markets while three related cases continue.

The Minnesota law would make it a felony for businesses to create, operate or intentionally support covered prediction markets. It also reaches certain data providers, payment services and advertisements. Menendez found that the plaintiffs were likely to succeed on at least part of their federal preemption claim because many event contracts may qualify as swaps under the Commodity Exchange Act.

Court win protects federal markets, but only for now

The ruling does not settle the dispute. Menendez found that the CFTC’s exclusive jurisdiction probably covers a “considerable swath” of contracts offered by Kalshi and Polymarket. However, she also said the platforms had not shown that every listed event contract meets the federal definition of a swap. Any permanent injunction could therefore protect fewer products than the current order.

Minnesota Attorney General Keith Ellison said prediction markets are “gambling, plain and simple.” That remains the state’s legal position, not a final court finding. Kalshi responded that “States cannot ban things that they don’t have jurisdiction over.” The company’s statement likewise reflects its interpretation of federal law rather than the case’s final outcome.

The injunction only covers the new prediction market statute as applied to CFTC-registered markets. It does not decide whether Minnesota can apply older gambling laws to individual sports or entertainment contracts. The Department of Public Safety has not said whether it views the platforms as illegal under those existing provisions or whether another enforcement action is underway.

As previously reported, the current relief will remain in place until the district court reaches a final decision unless a later order or appeal changes it. The court could ultimately distinguish between contracts with financial or economic consequences and products that more closely resemble ordinary wagers.

Walz shifts Minnesota’s focus to insider trading

Governor Tim Walz responded one day after the ruling with Executive Order 26-09. It prohibits covered state employees, including the governor, lieutenant governor and agency commissioners, from using nonpublic or confidential government information to trade prediction-market contracts for private benefit.

The order does not cover the legislature, courts, independent elected officials or several boards and commissions. Walz encouraged those institutions to adopt similar policies. It becomes effective 15 days after publication in the State Register and filing with the secretary of state.

A new federal enforcement case also shows that CFTC oversight does not leave manipulation entirely unpoliced. On July 31, the agency ordered former U.S. Representative George Santos to disgorge $17,569.98, pay a $17,500 penalty and accept a three-year trading ban over manipulative activity in a State of the Union event contract.

The CFTC order said Santos traded on whether he would attend the speech while making misleading public statements about his plans. The agency said those statements moved contract prices in a direction that favored his positions.

Meanwhile, as crypto.news reported, Kalshi has introduced employer disclosures, risk scoring and expanded surveillance for higher-risk contracts. The company said it blocked more than 100 potential insider trades and made 20 law-enforcement referrals during the first quarter of 2026. Those remain company-reported figures.

U.S. politics could pull crypto lawmakers and PACs into the fight

The Minnesota ruling could give pro-crypto lawmakers another example for arguing that national financial markets need one federal framework. The CLARITY Act does not regulate prediction markets directly. However, its supporters are also seeking a larger CFTC role in U.S. digital asset oversight. Senate lawmakers released updated market-structure text on July 22 after the Banking Committee advanced the measure in May.

The court dispute also creates a counterargument for lawmakers wary of expanding the commission’s mandate. A July 21 Senate letter asked the Government Accountability Office to review a reported 25% reduction in CFTC staffing and weaker enforcement activity. Critics could argue that Congress should not widen the regulator’s duties without ensuring it has enough staff to oversee both digital assets and fast-growing event markets. This is a political inference based on the agency’s expanding workload and the staffing concerns raised in Congress.

The case does not involve Fairshake or another crypto PAC. Still, it could shape campaign arguments surrounding candidates supported by the industry. FEC records showed that Fairshake held approximately $126.97 million in cash at the end of June and had spent $74.25 million during the current two-year reporting period.

In related coverage, Protect Progress spent more than $2 million in Michigan’s 13th District race, where challenger Donavan McKinney tied crypto lobbying to President Donald Trump’s business interests. Similar campaign attacks could connect support for broader CFTC authority with the Trump family’s prediction-market relationships.

Kalshi named Donald Trump Jr. a strategic adviser in January 2025. Polymarket later added him to its advisory board when his investment firm, 1789 Capital, took a stake in the company. Those corporate relationships are confirmed, although they do not prove that the White House directed the CFTC’s Minnesota litigation.

Sports-law attorney Daniel Wallach described the change in federal policy as “classic regulatory capture.” That is his assessment, not a judicial or regulatory conclusion. However, the family relationships may give opponents of pro-crypto candidates a clearer campaign message about industry access, federal authority and possible conflicts.

Conflicting state cases keep national rules unsettled

Minnesota is one part of a wider federal-state contest. The CFTC has filed cases against several states to defend what it calls exclusive jurisdiction over registered prediction markets. Yet courts have not produced one nationwide answer. Minnesota’s injunction favored the platforms, while rulings involving Wisconsin and Washington allowed state gambling challenges to advance.

New York added another case on July 31 by suing Kalshi and alleging that its platform operates as unlicensed gambling. The state seeks an injunction, restitution, penalties and forfeiture of alleged gains. Those claims remain allegations that Kalshi can contest in court.

The CFTC’s proposed prediction-market rule is another key track. The public comment period closed on July 27. The proposal would define “gaming,” establish factors for public-interest reviews and create a process lasting as long as 90 days for certain event contracts. The commission has not issued a final rule.