A US federal judge has temporarily blocked Minnesota from enforcing its new prediction market ban against CFTC-regulated platforms Kalshi and Polymarket US.

In a July 27 court order granting the plaintiffs’ motions for preliminary injunctions, US District Judge Katherine Menendez found that the plaintiffs were likely to succeed, at least in part, on claims that the Commodity Exchange Act preempts the Minnesota statute.

The judge said several event contracts offered by the platforms appeared to qualify as swaps, which would give the Commodity Futures Trading Commission exclusive jurisdiction over transactions involving those contracts on designated contract markets. That federal-state split is central to the case, since prediction markets have increasingly run into state-level restrictions even as some platforms argue their contracts fall under federal commodities law.

Minnesota’s law, which was scheduled to take effect on Aug. 1, would have prohibited the creation, operation and advertising of prediction markets and imposed criminal penalties for supporting them.

The preliminary injunction allows Kalshi and Polymarket US to continue operating in Minnesota while the court considers their challenge to the state law.

However, Menendez cautioned that the injunction could eventually be narrowed, since the plaintiffs had not shown that every event contract listed by Kalshi and Polymarket US meets the legal definition of a swap.

The order said a preliminary injunction was appropriate to maintain the status quo until the merits of the case can be fully resolved.

Related: Prediction markets legal battles heat up in Minnesota, Rhode Island