Second Circuit Refuses Kalshi and Coinbase Interim Relief From New York and Connecticut Enforcement

Kalshi and Coinbase have lost their bid for temporary protection from state enforcement in New York and Connecticut. The US Court of Appeals for the Second Circuit declined to block those states from enforcing gambling laws against the companies' sports event contracts, according to a trade-press account of an order dated 3 November. The three-judge panel said the companies had not shown sufficient grounds for interim relief, and the order offered little further explanation.

The ruling does not settle the underlying dispute. It does not require either company to stop trading or unwind existing positions. Both must now defend their position on the merits without the pause they sought. Kalshi is contesting actions by New York's Gaming Commission and Connecticut's Department of Consumer Protection, while Coinbase faces action from Connecticut Attorney General William Tong. The companies argue their sports products are swaps under the Commodity Exchange Act, which would place them under the CFTC and, they say, limit state gambling law. New York and Connecticut treat the same contracts as unlicensed sports betting.

The case sits inside a widening split. The Third Circuit sided with Kalshi in a New Jersey dispute, while the Sixth and Ninth Circuits have backed state regulators in other cases. A federal judge in Tennessee ruled in February that Kalshi's sports contracts are swaps. New York's lawsuit, filed in July, seeks financial penalties that the trade report puts at $36 billion; that is the state's claimed figure, not a finding by a court.

Analysis: an interim denial with thin reasoning is not a verdict on preemption, but it shifts practical pressure. Platforms now carry enforcement risk in the meantime, and the costs are visible in Kalshi's Nevada settlement, which followed allegations of continued access despite a court order and exposure to $120,000 a day in penalties for weak geofencing. The people who bear the most immediate cost are likely to be users in the affected states, whose access may narrow, and the companies themselves; Coinbase has said its prediction-market business generates more than $200 million in annualised revenue. The question that matters is whether appellate courts will resolve the Commodity Exchange Act issue quickly enough for the split to stop shaping what customers can use. This analysis relies on a trade-press description of the order, not on the order itself.