Minnesota lost to Kalshi and Polymarket in the first round

Minnesota's forecast market ban still suspended

On August 2, Minnesota's forecast market ban remained blocked one day after it was scheduled to take effect.

Summary of Events

A temporary injunction issued on July 27 allowed Kalshi and Polymarket to continue operating while Minnesota's priority case remains pending in court.

Governor Voltz prohibits state employees from using confidential information to conduct predictive market transactions for personal gain.

Fairshake reported holding $126.97 million in cash as of June, expanding the influence of cryptocurrencies in national elections.

Court ruled to protect federal markets, but only temporarily

U.S. District Court Judge Katherine Menendez granted a preliminary injunction on July 27 against the Commodity Futures Trading Commission, Kalshi and Polymarket US. The order prevents Minnesota from enforcing its new regulations on designated contract markets registered with the CFTC while three related cases are pending.

Under Minnesota law, a business creating, operating or intentionally supporting a regulated forecasting market will be a felony. The law also covers certain data providers, payment services and advertising. Judge Menendez argued that the plaintiff had a chance of winning at least part of its federal priority claim because many event contracts could meet the definition of a swap under the Commodity Exchange Act.

The ruling did not resolve the dispute. Judge Menendez argued that the exclusive jurisdiction of the CFTC could cover a "significant portion" of the contracts offered by Kalshi and Polymarket. However, she also said the platforms had not proved that all event contracts they listed met the federal legal definition of swaps. As a result, any permanent ban may protect fewer products than the current order.

Minnesota Attorney General Keith Ellison said predicting markets is "a gamble, simple and straightforward." This remains the state's legal position, not the final court decision. Kalshi responded: "States cannot prohibit conduct for which they have no jurisdiction." The company's statement also reflects its interpretation of federal law rather than the final outcome of the case.

This ban applies only to new forecast market regulations for markets registered in the CFTC. It did not rule on whether Minnesota could apply its existing gambling laws to individual sports or entertainment contracts. The state's Department of Public Safety has not yet said whether it believes these platforms are illegal under existing legal provisions or whether other enforcement actions are being carried out.

It has been previously reported that unless subsequent orders or appeals are changed, current legal remedies will remain in effect until the District Court makes a final decision. Courts may ultimately distinguish between contracts with financial or economic consequences and products that are more similar to ordinary bets.

Volz shifts Minnesota's focus to insider trading

Gov. Tim Voltz signed Executive Order 26-09 a day after the ruling. The order prohibits certain state employees, including governors, lieutenant governors and agency commissioners, from using non-public or confidential government information to trade predictive market contracts for personal gain.

The order does not cover legislative bodies, courts, independently elected officials, and certain committees and committees. Volz encouraged these agencies to adopt similar policies. The order will take effect 15 days after it is published in the State Gazette and submitted to the Secretary of State.

A new federal enforcement case also shows that CFTC regulation does not completely allow market manipulation. On July 31, the agency ordered former U.S. Rep. George Santos to hand over $17,569.98, pay a $17,500 fine and accept a three-year trading ban for manipulation in a State of the Union Incident contract. The CFTC order stated that Santos made a trade on whether he would attend while making misleading public statements about his plans to attend the speech. The agency said the statements moved contract prices in a direction that favored its positions.

Meanwhile, according to media reports, Kalshi has introduced employer disclosures, risk scoring and expanded monitoring of high-risk contracts. The company said it blocked more than 100 potential insider trading cases in the first quarter of 2026 and filed 20 reports with law enforcement. These are still data reported by the company itself.

U.S. politics may involve cryptocurrency lawmakers in battle with Political Action Committees

Minnesota's ruling may provide another argument for pro-cryptocurrency lawmakers that the country's financial markets need a unified federal framework. The CLARITY Act does not directly regulate the forecasting market, but its supporters are also seeking to give the CFTC a greater role in U.S. digital asset regulation. After the Senate Banking Committee advanced the measure in May, Senate lawmakers released an updated market structure text on July 22.

The court dispute also provides counter-arguments for lawmakers who are wary of expanding the committee's powers. On July 21, a Senate letter asked the Government Accountability Office to review the 25% reduction in CFTC staffing and weakening law enforcement activities. Critics may argue that Congress should not expand its responsibilities without ensuring that the regulator has enough staff to oversee digital assets and fast-growing event markets. This is a political inference based on the agency's growing workload and staffing issues raised by Congress.

The case does not involve Fairshake or other cryptocurrency political action committees, but it could still affect the campaign debate surrounding industry-backed candidates. Federal Election Commission records show Fairshake held approximately $126.97 million in cash at the end of June and spent $74.25 million during the current two-year reporting period. In related reports, Protect Progress spent more than $2 million on the campaign in Michigan's 13th District, where challenger Donovan McKinney linked cryptocurrency lobbying to President Donald Trump's business interests. Similar campaign attacks could link support for expanding CFTC power to the Trump family's predicted market relationships.

Kalshi appointed Donald Trump Jr. as strategic adviser in January 2025. When his investment company 1789 Capital took a stake in Polymarket, Polymarket subsequently included it on its advisory board. These corporate relationships have been confirmed, although they have not proved that the White House directed the CFTC's lawsuit against Minnesota.

Sports law lawyer Daniel Wallach described the change in federal policy as a "classic regulatory capture." This is his personal assessment, not a judicial or regulatory conclusion. However, these family connections could provide opponents of pro-cryptocurrency candidates with a clearer campaign message, involving industry access, federal power and potential conflicts of interest.

State cases conflict, national rules remain pending

Minnesota is part of a larger federal-state battle. The CFTC has filed lawsuits against multiple states to defend its so-called exclusive jurisdiction over registered forecasting markets. However, the court did not give a unified answer across the country. Minnesota's ban favors platforms, while rulings involving Wisconsin and Washington allow state gambling challenges to continue.

New York State sued Kalshi in a separate case on July 31, accusing its platform of operating as unlicensed gambling. The state seeks injunctions, damages, fines and forfeiture of alleged proceeds. The charges remain charges and Kalshi can contest them in court.

The forecast market rules proposed by the CFTC are another key aspect. The public comment period ended on July 27. The proposal would define "gambling", establish elements of public interest review, and establish a 90-day review process for certain event contracts. The committee has not yet issued final rules.