Categories: Technology

Second Circuit denies Kalshi and Coinbase interim relief against New York and Connecticut

The Second Circuit has refused to shield Kalshi and Coinbase from New York and Connecticut while their appeals proceed. The ruling lets both states press state-court cases against the companies' sports event contracts and deepens a circuit split headed for the Supreme Court.

A federal appeals panel has left Kalshi and Coinbase without interim protection in two Northeastern states. The Second Circuit found that the companies had not made the showing needed for an injunction pending appeal. The order did not say which part of that showing they failed to meet.

The ruling came a few hours after the panel heard lawyers for Kalshi, Coinbase, the CFTC, New York and Connecticut. The court took up Kalshi’s two appeals together with Coinbase’s appeal of Judge Oliver’s August decision. That decision allowed Connecticut to keep pursuing its claim that Coinbase’s sports event contracts are illegal gambling.

Both states can now press their cases in state court

The order lets both states keep enforcing their gambling laws. They are pursuing state-court suits to force the sports event contracts offline. Gaming attorney Daniel Wallach called the ruling a major win for both states. He said one remand order now separates them from returning the cases to state court and seeking preliminary injunctions there.

Kalshi had already lost at the district level. Federal courts refused it a preliminary injunction in New York in July and in Connecticut in August. On July 31, 2026, New York sued KalshiEX, accusing it of running an illegal gambling operation through its prediction market. Attorney General Letitia James had sued Coinbase and Gemini in April 2026 on similar illegal gambling claims.

The stakes in New York are high. InGame reported that the state case seeks billions of dollars in damages, and that the CFTC has told Kalshi to disobey the state-court order if it ever takes effect.

Connecticut moved earlier. In December 2025, the Gaming Division of its Department of Consumer Protection ordered Kalshi and two other sites to stop offering unlicensed online sports wagering. On August 26, 2026, Attorney General William Tong, Consumer Protection Commissioner Bryan T. Cafferelli and Gov. Ned Lamont announced a lawsuit to stop Kalshi offering unlicensed sports wagers in the state. Gov. Kathy Hochul, James, Tong and Lamont each won re-election on the day the order was issued.

Circuit split sharpens ahead of the Supreme Court fight

The decision joins a lengthening list of circuit court rulings siding with states against prediction markets in 2026. It cuts against Kalshi’s argument that its contracts are “swaps” that only the CFTC can regulate. That argument prevailed at the Third Circuit, which ruled that New Jersey cannot regulate sports bets on prediction markets.

The federal regulator has also gone to court against states. On April 2, 2026, the CFTC sued Arizona, Connecticut and Illinois over their actions against CFTC-registered designated contract markets. On April 24, 2026, it sued New York in the Southern District of New York. It asked that court to declare that federal law gives it exclusive authority over event contracts. It also asked for a permanent bar on the state enforcing preempted laws.

The outcome matters for state sportsbook markets and for the reach of CFTC jurisdiction. With the circuits now split, attention turns to Washington. New Jersey’s petition seeks review of the Third Circuit’s April 6, 2026 decision in case 25-1922. Kalshi is preparing to file its response to that petition.