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Judge blocks Minnesota's ban on prediction markets

Created at 28 Jul · 6:37 PM1 source↑ Market-relevant
IN SHORT

A federal judge has blocked Minnesota's law that would have banned prediction markets, ruling that the state ban likely violates federal law. The judge found that many prediction market trades qualify as 'swaps' under federal law, giving the CFTC exclusive regulatory authority.

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Key Numbers

August 1effective date of Minnesota ban

Who's Involved

Katherine Menendez
US District Judge in Minnesota
Minnesota Attorney General Keith Ellison
stated prediction markets are gambling
CFTC
argues it has exclusive authority to regulate prediction markets
Kalshi
prediction market sued by Minnesota
Polymarket
prediction market sued by Minnesota
Judge blocks Minnesota's ban on prediction markets

↳ Why This Matters

The ruling impacts the regulatory landscape for prediction markets nationwide, potentially establishing federal oversight by the CFTC over these platforms and setting a precedent for other states considering similar bans.

Key facts

  • A federal judge blocked Minnesota's law banning prediction markets.
  • The ban was scheduled to take effect on August 1.
  • The judge found that many prediction market trades likely qualify as 'swaps' under federal law.
  • The CFTC has exclusive authority to regulate 'swaps'.
  • Not all prediction market bets may meet the definition of swaps, allowing for potential partial bans.
  • Minnesota's Attorney General Keith Ellison stated the state will continue to defend the law.

    • A federal judge has temporarily blocked Minnesota's law that would have banned prediction markets, ruling that the state's prohibition likely violates federal law. The law, set to take effect on August 1, was challenged by the Trump administration and two major prediction markets, Kalshi and Polymarket.

    US District Judge Katherine Menendez stated that many trades on platforms like Kalshi and Polymarket appear to be "swaps" under the Commodity Exchange Act, a category regulated exclusively by the US Commodity Futures Trading Commission (CFTC). The judge issued a preliminary injunction, preventing the enforcement of the total ban until a final decision is reached.

    However, Menendez indicated that Minnesota might still be able to prohibit certain types of prediction market bets if they do not meet the federal definition of swaps. For instance, bets on the outcome of reality television shows like Love Island USA were cited as examples that may not qualify as swaps, suggesting a potential for a narrower, partial ban.

    Minnesota Attorney General Keith Ellison expressed disagreement with the ruling, calling prediction markets "predatory gambling apps" and stating the state's intention to continue defending the law. The case highlights ongoing legal battles over the classification and regulation of prediction markets across different states.

    Frequently asked questions

    A prediction market is a platform where users can bet on the outcome of future events, such as political elections or economic indicators.

    Minnesota lawmakers viewed prediction markets as a form of gambling and sought to prohibit them to protect communities from predatory practices.

    The Commodity Futures Trading Commission (CFTC) argues it has exclusive authority to regulate 'swaps,' which it contends many prediction market contracts fall under.

    Under the Commodity Exchange Act, a swap is broadly defined to include contracts dependent on the occurrence of an event with potential financial, economic, or commercial consequences.

    What Happens Next

    01Minnesota may appeal the preliminary injunction.
    02The case will proceed to a final decision on the merits.
    03The court may issue a permanent injunction that is narrower than the original ban.

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    Cadence

    How It Developed

    Minnesota enacted a law to ban prediction markets.
    The Trump administration, Kalshi, and Polymarket sued Minnesota.
    A federal judge issued a preliminary injunction blocking the ban.
    The judge ruled that many prediction market trades are likely 'swaps' under federal law.
    The judge stated Minnesota may be able to prohibit some types of prediction market bets.
    Minnesota's Attorney General stated the state will continue to defend the law.

    Sources

    T1
    Judge blocks first state law that would have banned prediction marketsvar abtest_2165103 = new ABTest(2165103, 'impression');Ars Technica

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