Second Circuit Won’t Pause New York, Connecticut Actions Against Kalshi and Coinbase

Kalshi will not get federal court protection from New York and Connecticut regulators, and Coinbase will not get it from Connecticut, while they appeal, after the U.S. Court of Appeals for the Second Circuit turned down their requests on Tuesday, Nov. 3.

In a two-page order, Circuit Judges John M. Walker Jr., Dennis Jacobs and Joseph F. Bianco denied motions for an injunction pending appeal in three cases the court is hearing together. Two are Kalshi suits, one against New York’s gaming regulator and one against Connecticut’s consumer protection department. The third is Coinbase’s suit against Connecticut Attorney General William Tong. The judges wrote only that the companies “have failed to make the required showing that an injunction pending appeal is warranted.”

The appeals grew out of district court losses earlier this year. After a federal judge in Manhattan refused to block New York, Katherine Kirkpatrick Bos, head of legal at Chainlink Labs, said on Unchained’s DEX in the City that “Kalshi’s preemption argument has failed.” She added that the judge “found that state gambling regulation remains an area of traditional state authority.”

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Kalshi and Coinbase argue that the Commodity Exchange Act places their sports event contracts under the Commodity Futures Trading Commission, the federal derivatives regulator, and outside state gambling law. A district judge in Connecticut also denied both companies’ requests in August.

Tuesday’s order does not explain the panel’s reasoning or rule on that question. It also says nothing about contracts already open on either platform. The three appeals remain pending.

The CFTC, which has filed its own suits against both states, was cleared to argue as a friend of the court on Kalshi’s New York motion, the prediction-market newsletter The PM Pulse reported.

New York sued Kalshi in state court in July, and the state’s damages claim could total at least $36 billion. Connecticut’s attorney general followed with his own state-court suit against Kalshi in August.

For Coinbase, the stakes have grown quickly. The exchange said on Oct. 29, with its third-quarter results, that prediction markets now bring in more than $200 million in annualized revenue.

Related Listen: Everyone Wants a DCM. Why Is Kalshi Still Losing? – DEX in the City

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