Just days before Minnesota was set to become the first state in the country to completely ban prediction markets, a federal judge hit the pause button.
The ruling is another significant victory for Kalshi, Polymarket, and the broader prediction market industry as the legal battle over who regulates event contracts continues to play out across the United States.
Minnesota's law, which was scheduled to take effect this week, would have made it illegal to operate, host, or assist prediction market platforms within the state. Instead, a preliminary injunction will allow Kalshi and Polymarket to continue serving Minnesota users while the lawsuit works its way through federal court.
Major Victory for Exchanges
The decision in Minnesota represents much more than a temporary legal victory. Prediction markets have been living in court, and every win sets a precedent favoring exchanges.
The primary question for nearly every legal battle revolves around who should oversee prediction markets. Minnesota believes they should be federally regulated, at least for now.
The debate will continue, but the court ruling in favor of prediction markets is noteworthy, and this should strike fear in other states, even though the case will continue.
Judge Katherine Menendez concluded that the challengers were likely to succeed on key legal arguments, finding that federal law may preempt Minnesota's attempt to regulate the contracts. The court also determined that allowing the ban to begin before the case is resolved could cause irreversible harm to the companies involved.
Kalshi has used the same type of argument in nearly every legal battle, and it has helped them delay and continue to creat revenue.
The company maintains that its event contracts fall under the exclusive oversight of the Commodity Futures Trading Commission. Kalshi argues individual states cannot create their own rules governing the same product because exchanges should be federally regulated.
Minnesota and all states would tend agree. Minnesota Attorney General Keith Ellison has continued to argue that prediction markets amount to gambling, regardless of how the contracts are structured, and believes the state has every right to prevent what it considers unlicensed wagering within its borders.
The state plans to continue defending the law as litigation moves forward, but it’s starting to look like prediction markets may have the upper hand. This isn’t something many people would have thought when these legal battles began.
Changing Landscapes
The legal landscape of prediction markets has changed drastically over the years. Minnesota became the first state to pass legislation specifically targeting prediction markets, rather than relying on sports betting legislation. As of right now, it has done them no good.
For traders, the ruling means business continues as usual, and Minnesota can’t put their legislation in place.
Users in Minnesota can continue participating on federally regulated platforms while the courts determine whether states have the authority to prohibit those markets altogether. Whatever the court decides could impact every state around the country as we would have some type of legal precedent.
Prediction market companies are already battling regulators in multiple jurisdictions, with lawsuits stretching across the nation. Every new ruling that favors prediction markets makes the states’ argument more miniscule.
The Commodity Futures Trading Commission has also begun examining which categories of event contracts should remain available and whether certain markets should be considered contrary to the public interest. This, combined with legal cases, has created an interesting time for prediction markets, but they’re still generating revenue while these decision are being processed.
The Trade Handle Prediction Markets Take
Despite facing lawsuits, cease and desist orders, and new legislation throughout 2026, platforms like Kalshi and Polymarket have repeatedly managed to secure court victories that allow operations to continue while larger legal questions remain unresolved.
Minnesota hoped to become the first state to completely shut the door on prediction markets, but they failed for now. This means it’s business as usual once again for prediction markets.