The US Court of Appeals for the Second Circuit has refused to block New York and Connecticut from taking action against prediction market operators Kalshi and Coinbase while their appeals are decided.

In a short order issued on Tuesday 3 November, the same day it heard argument, a panel of Circuit Judges John M. Walker Jr., Dennis Jacobs and Joseph F. Bianco denied three motions for an injunction pending appeal. The court said the companies “have failed to make the required showing that an injunction pending appeal is warranted”. The order gives no further reasons.

Three appeals, one ruling

  • KalshiEX v. Robert Williams, Executive Director of the New York State Gaming Commission (26-1835), appealed from the Southern District of New York.
  • KalshiEX v. Bryan T. Cafferelli, Commissioner of the Connecticut Department of Consumer Protection (26-2239), appealed from the District of Connecticut.
  • Coinbase Financial Markets v. William Tong, Attorney General of Connecticut (26-2297), also from the District of Connecticut.

The court considered the three appeals together. The ruling only covers the requests for interim relief: the appeals themselves are still pending, but the companies have no court order stopping the states from acting in the meantime.

How the New York case got here

  • In July, Judge Torres in the Southern District of New York denied Kalshi a preliminary injunction against New York gaming regulators.
  • On 31 July, Governor Kathy Hochul and Attorney General Letitia James announced that New York had sued Kalshi, alleging that it runs an illegal gambling operation in the state.
  • Kalshi argues that its event contracts are swaps regulated by the Commodity Futures Trading Commission (CFTC), which would put them beyond state gambling laws. States say sports event contracts are bets.

The Second Circuit’s decision adds to pressure on prediction markets from the states. Polymarket has agreed to pull sports event contracts from Michigan, and operators went into the US midterms with fewer advertising options.

Read the Second Circuit order (PDF).