Prediction Markets Are Winning the War Against Them

The industry scored a major victory over one state’s efforts to regulate firms that critics worry will become a hotbed of insider trading.

Minnesota lawmakers enacted a statewide ban on prediction market in May. The first-of-its-kind law had been scheduled to go into effect on August 1. Now, that ban is on hold after the top two prediction markets, as well as the federal agency tasking with regulating them, persuaded a federal judge to temporarily block the law on Monday.

Judge Katherine Menendez granted the preliminary injunction after concluding that Minnesota’s ban was likely pre-empted by the CFTC’s exclusive regulatory authority, a position that the agency had forcefully advanced in the lawsuit alongside the two best-known brands in the nascent industry, Kalshi and Polymarket. While Menendez noted that at least some of the contracts offered by the companies fall outside the CFTC’s jurisdiction, she opted for a broad injunction for now and emphasized that the final judgment may be different.

Monday’s ruling is not the end of the legal battles surrounding prediction markets. Other jurisdictions have had some success in regulating or restricting Kalshi, Polymarket, and similar companies. But it is a striking testament to the prediction market industry’s success in regulatory capture—and the need for more concrete restrictions from Congress.

Kalshi, for its part, took a victory lap after the ruling. “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,” a company spokesman told reporters yesterday. “Today’s decision makes it clear: States cannot ban things that they don’t have jurisdiction over.”

Their celebratory defiance is par for the course these days. The modern age of gambling began in 2018 after the Supreme Court struck down a federal ban on sports betting on Tenth Amendment grounds. Sportsbooks like DraftKings and FanDuel are largely regulated at the state level, following the longstanding tradition of regulating gambling as a public-health matter. More than two dozen states now allow betting on sports in some capacity.

Prediction markets also allow customers to wager money on the outcome of future events. Instead of........

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