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 placing a more traditional wager against a sportsbook’s odds, customers at a prediction market effectively bet against one another. In practical terms, they buy an “event contract” that predicts a binary outcome for an event—say, for example, that the Los Angeles Dodgers will win the 2026 World Series—within a certain period of time.If the Dodgers secure a threepeat this October, the contract’s seller would pay the buyer the amount specified in the contract. If the Chicago White Sox win the Fall Classic instead, the contract’s buyer gets nothing. Contracts can be bought and sold on prediction markets, with prices fluctuating depending on the market’s perception of an event’s likelihood. In that sense, prediction markets can somewhat resemble derivatives markets for publicly traded stocks.Prediction markets justify their existence in a number of ways. One is by claiming to offer some otherwise unobtainable insight into the future. “Our markets reflect accurate, unbiased, and real-time probabilities for the events that matter most to you,” Polymarket class on its website. “Markets seek truth.” Kalshi, for example, claims that its “inflation and federal [interest] rate forecasts have been more accurate than economists, pundits, and traditional news outlets over the past year.” Another increasingly common justification for a prediction market’s existence is that it allows customers to “hedge” their futures on specific outcomes. “For example, if you have student debt and are worried about relief not passing, you can purchase a contract and get a payout even if it doesn’t pass,” Kalshi claims on its website. “If you’re worried about the economic fallout of the government shutting down, you can place a trade to hedge against it.” This resembles the role that derivatives often play in financial markets: allowing large funds to “hedge” their stock purchases.For that reason, prediction markets are currently regulated by the Commodity Futures Trading Commission, a federal agency that oversees the nation’s derivatives markets. The Biden-era CFTC sought use its rulemaking power to broadly forbid prediction markets from taking bets on sports-related events, but the change in administration produced a much friendlier regulatory landscape.Michael Selig, the CFTC’s current chairman, is a Trump appointee who previously worked for crypto companies and prediction markets. He wields immense power over the regulatory process as the commission’s sole member at the moment; Trump has declined to put forward nominees for the other vacancies.