Judge Blocks Minnesota Felony Law for CFTC-Designated Exchanges

A federal judge issued a preliminary injunction on July 27 that prevents Minnesota officials from applying the state’s new felony prediction‑market statute to exchanges designated as contract markets by the Commodity Futures Trading Commission. The order will remain in place until the cases reach a final merits decision.

The injunction resolved motions filed by the CFTC, KalshiEX and QCX, the registered entity operating as Polymarket US. The judge’s order blocks enforcement of Minn. Stat. § 609.7615, enacted as Chapter 118, against CFTC‑designated contract markets for crimes alleged to occur on or after the statute’s Aug. 1 effective date.

Chapter 118 makes creating or operating a covered prediction market a felony when done for consideration and as part of a business. The law also targets certain service providers, data suppliers, geolocation and payment services that enable prohibited wagers and includes a provision that crim inalizes advertising or marketing that promotes prohibited transactions.

Judge Katherine Menendez found the plaintiffs likely to succeed on an express‑preemption claim. She explained that the Commodity Exchange Act grants the CFTC exclusive jurisdiction over swap transactions on designated contract markets and that the CFTC’s swap definition can encompass some event contracts whose outcomes have a reasonably connected potential financial, economic or commercial consequence. The judge noted that a trader’s possible profit alone does not automatically convert an event contract into a swap.

The order does not treat all event contracts as swaps. Menendez listed several markets she viewed as likely to qualify as swaps — including contracts tied to a Senate election, the World Cup winner, a possible LeBron James signing and traffic in the Strait of Hormuz — and expressed skepticism that other markets, such as a 20‑point‑lead line, the winning couple on Love Island USA, or specific words used by World Cup announcers, would meet the test. She warned that a permanent injunction could cover fewer contracts than the preliminary order.

The injunction applies only to CFTC‑designated contract markets and does not automatically shield customers, independent advertisers or outside service providers from state enforcement. The court has not resolved the plaintiffs’ implied‑preemption arguments or First Amendment claims.

Minnesota Attorney General Keith Ellison disputed the ruling and intends to continue defending the law as the record develops. Polymarket US welcomed the order and expects to keep serving Minnesota users.

A New York court denied Kalshi interim protection from that state’s gambling enforcement earlier in July. Both cases remain open, leaving unresolved how federal registration and CFTC designation will interact with state gambling laws nationwide.