A federal judge has stopped Minnesota from banning prediction markets in the state, arguing the Commodity Futures Trading Commission (CTFC) has “exclusive jurisdiction to regulate transactions” on event contracts.
The decision, made on Monday, 27 July, arrived just days before legislation that would have criminalised the creation or operation of prediction markets was due to come into force.
In the 44-page ruling, judge Katherine Menendez concluded that the plaintiffs, the CFTC, Kalshi and Polymarket, proved they were “likely to prevail on their claims that Minnesota’s prediction market statute is at least in part expressly preempted by 7 U.S.C. § 2(a)(1)(A)’s exclusive jurisdiction prevision”.
Per that code, the derivatives regulator, which operates at a federal level, has authority over US futures and other derivatives markets.
Menendez ruled: “The court concludes that Kalshi and Polymarket US have demonstrated at least some threat of irreparable harm to support preliminary injunctive relief.
“Defendants have not disavowed any intent to enforce the prediction market statute against Kalshi and Polymarket US once the Minnesota law goes into effect, so they face the possibility of criminal prosecution.”
She went on to highlight that if the ban in Minnesota was to be brought in and the state was to pursue enforcement damages against the event contract platforms, due to a “large volume of activity on these platforms conducted by Minnesotans”, both Kalshi and Polymarket would face “substantial liability” to traders if they had to cancel trades.
Adding that neither Kalshi nor Polymarket would be able to recover damages from the state due to sovereign immunity, should the pair prevail in the lawsuit, further enforcement of the prediction market ban could lead to customers losing confidence in the platforms and “deter new users from entering event contracts”.
The ruling added: “The court also finds that the CFTC faces a threat of irreparable harm in the absence of preliminary injunctive relief.
“As discussed above, the court has found that Minnesota’s prediction market statute is likely at least partially preempted by the CEA [Commodity Exchange Act] because the CFTC has been given exclusive jurisdiction over transactions involving swaps traded on DCMs.
“Infringement on that exclusive authority can be irreparable harm.”
Commenting on the ruling to local news website MPRnews.org, Minneapolis democrat Emma Greenman hit out at the judge’s ruling: “If it walks like a duck and if it quacks like a duck, it’s gambling. It’s a duck and we should be able to regulate it in the public interest.”
Judge Menendez’s ruling arrived on the same day Kalshi came to an agreement with the Nevada Gaming Control Board to introduce third-party geofencing that would prevent those physically located in the state from using the platform.
Last week, two Nevada congressman unveiled a bill, the Prediction Markets are Gambling Act, that aims to prevent platforms from offering sports and casino-style event contracts.
The post Federal judge blocks Minnesota’s proposed prediction markets ban first appeared on EGR Intel.
Katherine Menendez rules the CFTC has “exclusive jurisdiction” to regulate event contracts and that block would cause “irreparable harm” to Kalshi and Polymarket
The post Federal judge blocks Minnesota’s proposed prediction markets ban first appeared on EGR Intel.