The U.S. Court of Appeals for the Second Circuit rejected requests from Kalshi and Coinbase to pause state enforcement actions in New York and Connecticut.
On November 3, the U.S. Court of Appeals for the Second Circuit refused to grant temporary injunctions sought by prediction‑market platform Kalshi and cryptocurrency exchange Coinbase, allowing state regulators in New York and Connecticut to proceed with their lawsuits. The three‑judge panel, composed of John M. Walker Jr., Dennis Jacobs and Joseph F. Bianco, issued a two‑page order stating the companies “have failed to make the required showing that an injunction pending appeal is warranted.”
New York’s gaming regulator sued Kalshi in July, alleging that its sports‑event contracts fall under state gambling law and could expose the state to damages exceeding $36 billion. Connecticut’s attorney general followed with a separate consumer‑protection suit in August. Coinbase is contesting a Connecticut lawsuit filed by Attorney General William Tong, which similarly targets its prediction‑market offerings.
Both Kalshi and Coinbase argue that the Commodity Exchange Act (CEA) places their contracts under the jurisdiction of the Commodity Futures Trading Commission (CFTC), thereby preempting state gambling and consumer‑protection statutes. A Manhattan district judge earlier this year rejected a request to block New York’s suit, and a Connecticut district judge denied similar injunction requests in August. The Second Circuit’s order did not address the merits of the preemption claim, leaving the question unresolved.
The denial means state enforcement actions can move forward while the appeals continue. The CFTC has been granted permission to intervene as a friend of the court in Kalshi’s New York case, according to The PM Pulse. Coinbase highlighted the financial importance of its prediction‑market business, noting over $200 million in annualized revenue in its recent earnings report. The outcomes of these cases could shape the regulatory landscape for crypto‑based prediction markets nationwide.
Observers will monitor the appellate courts’ eventual rulings on the preemption issue, as well as any settlement discussions between the firms and state regulators. Additional filings from the CFTC could influence the courts’ analysis, and a decision could set precedent for how other crypto and prediction‑market platforms navigate state versus federal oversight.
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