Woofun AI reports that U.S. District Judge Menendez issued a temporary restraining order halting Minnesota’s enforcement of its new prediction-market felony statute against Kalshi and Polymarket US, both designated as contract markets by the Commodity Futures Trading Commission. This judicial intervention occurred just days before the state law was scheduled to take effect on Aug. 1, effectively shielding these federally regulated entities from immediate criminal prosecution under the new state regime.

The legal foundation for this block rests on the Commodity Exchange Act, which Menendez determined likely preempts portions of Minnesota’s legislation. Federal law grants the CFTC exclusive jurisdiction over swap transactions executed on designated contract markets, a definition that can encompass event contracts with outcomes possessing a reasonably connected potential financial, economic or commercial consequence.

However, the judge clarified that a trader’s potential profit alone does not satisfy this threshold, meaning not every event contract qualifies as a swap under federal preemption logic.

Per Woofun AI, the court’s analysis distinguished between specific contract types, identifying markets tied to a Senate election, the World Cup winner, a LeBron James signing, and Strait of Hormuz traffic as likely swaps. Conversely, Menendez expressed doubt regarding a 20-point-lead market and deemed contracts on the winning couple or words used by World Cup announcers unlikely to qualify, suggesting any permanent injunction may cover fewer contracts. Crucially, because the order protects only CFTC-designated contract markets, it does not expressly shield customers, independent advertisers, or outside service providers, leaving the statute in force while implied-preemption and First Amendment claims remain undecided.

This ruling stands in stark contrast to a New York court decision in July that denied Kalshi interim protection from existing state gambling enforcement. Both cases remain open, and these divergent preliminary results fail to settle how federal registration interacts with state gambling laws nationwide. The conflicting judicial approaches highlight the ongoing regulatory fragmentation facing prediction markets across different jurisdictions.