Prediction markets secured a legal victory in Minnesota, blocking the state’s plan to ban most event contracts. However, on the same day the judge issued the ruling, former Sen. Chris Dodd clarified that the rule he cited should be used to prohibit sports-event contracts.
In the ruling, Judge Katherine Menendez cited the Special Rule in the Commodity Exchange Act (CEA), which gives the CFTC authority to block contracts that involve gaming.
However, she appeared to view the rule as unclear and said Kalshi, Polymarket, and the CFTC “have met their burden to show they are likely to succeed, at least in part, on their express-preemption claims.”
She added that the CFTC’s current rule-revision process lends weight to the argument that sports event contracts are not prohibited. Last month, the CFTC said it intends to clarify the term “gaming” to essentially permit companies such as Kalshi and Polymarket to offer sports contracts.
Sen. Dodd Makes Congress’s Intention Clear
The Special Rule was established by the Dodd-Frank Act in 2010. Former Senator Chris Dodd clarified that Congress had no intention of authorizing sports-event contracts when it wrote the rule.
“We did not amend the Commodity Exchange Act to override the established system for states to develop their own policies and laws regulating gaming,” Dodd wrote in comments to the CFTC in response to its proposed rules.
He further added that Congress specifically included the term “gaming” to prohibit sports-related event contracts that are viewed as sports gambling.
“The term ‘gaming’ was included in the Special Rule to prevent things like sports wagering and other similar wagers through regulated ‘event contracts.’ ‘Gaming’ is a legal term of art that Congress has used in statutes when regulating what is commonly known as ‘gambling,’” he stated.
In his view, judges such as Menendez are misinterpreting the CEA and should rule against prediction markets.
“The explosion of prediction markets — especially sports wagering and event contracts — represents the type of rampant speculation we sought to prohibit with the Dodd-Frank bill,” Dodd added.
Sports prediction markets have reached new heights, trading billions of dollars a day during the World Cup.
Dodd urged the CFTC to revise its newly proposed rules and reiterate that sports event contracts are illegal.
Kalshi Celebrates Minnesota Win
Successes in court for prediction markets have been rare recently, as judges increasingly agree with Dodd’s opinion: sports event contracts are sports betting.
Kalshi was quick to celebrate the victory, with spokesperson Elisabeth Diana stating, “Minnesota was the first state to pass a law banning prediction markets, and a court prevented it from being enforced less than two months later. Today’s decision makes it clear: States cannot ban things that they don’t have jurisdiction over.”
She added, “It runs directly against what Congress intended when it gave explicit, exclusive jurisdiction over financial markets to federal regulators, and it hurts the traders and everyday citizens who rely on these markets. We appreciate the court’s thoughtful consideration of this matter.”
She did not mention Dodd’s comments, which made it clear that Congress intended to prohibit sports event contracts.
Minnesota Proposed Widesweeping Ban
The ban on prediction markets was due to come into force in Minnesota on August 1. It would not only have seen sports markets prohibited, but also a wide range of other event contracts, including elections, weather, and mention markets.
In response to Governor Tim Walz signing off on the legislation, the CFTC sued the state, alleging the new law would have dire consequences for the state’s farmers.
“Minnesota farmers have relied on critical hedging products on weather and crop-related events for decades to mitigate their risks,” said CFTC Chairman Michael Selig. “Governor Walz chose to put special interests first, and American farmers and innovators last.”
Judge Menendez stressed that her ruling “is not a final determination of the merits of the parties’ claims and defenses, but reflects a preliminary assessment of the issues.”
The case remains ongoing, but for now, it blocks the new law against prediction markets coming into force. That means Minnesota residents can continue using Kalshi and Polymarket legally.
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Prediction markets secured a legal victory in Minnesota, blocking the state’s plan to ban most event contracts. However, on the same day the judge issued the ruling, former Sen. Chris Dodd clarified that the rule he cited should be used to prohibit sports-event contracts. In the ruling, Judge Katherine Menendez cited the Special Rule in
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