A three-judge panel of the U.S. Court of Appeals for the Second Circuit on Nov. 3 denied Kalshi and Coinbase injunctions pending appeal, leaving them without appellate protection from New York and Connecticut enforcement of gambling laws against sports-event contracts.
The panel issued its order hours after hearing arguments from the companies, the Commodity Futures Trading Commission and both states. It gave no detailed reasoning, saying only that the appellants had failed to make the showing required for an injunction pending appeal.
The appeals combined challenges arising from district-court proceedings in New York and Connecticut. Coinbase was involved in the New York case, while the Connecticut injunction litigation concerned Kalshi. The states had prevailed in the lower courts and later brought state-court actions against Kalshi; those cases had been on hold during the appeals.
The hearing indicated judicial skepticism about the argument that sports contracts are swaps regulated exclusively under the Commodity Exchange Act. Judge John M. Walker Jr. said he did not see how sports betting in its entirety could qualify as a swap, whose underlying event must have potential financial, economic or commercial consequences. Judge Joseph F. Bianco said the statutory definition appeared designed for financial markets, likening its application to sports to fitting a square peg into a round hole.
Kalshi’s lawyer, Will Havemann, argued that New York’s requested state-court relief could shut down a federally regulated exchange nationwide and affect all event contracts, rather than sports products alone. Coinbase lawyer Yaira Dubin said the dispute concerned the core category of contracts predicting a game’s winner and argued that the Commodity Exchange Act contains no sports carve-out.
The CFTC’s lawyer, Henry Dickman, told the court that the agency was developing an event-contract framework and pursuing cases involving insider trading and market manipulation. He argued that state jurisdiction over prediction-market contracts could impair those enforcement efforts.
The ruling followed two adverse district-court decisions for Kalshi. In July, Judge Analisa Torres held that New York gambling laws applied to Kalshi’s sports-event contracts were not preempted by the Commodity Exchange Act, and found that the company had not made a clear or substantial showing that it was likely to succeed. In August, Judge Vernon D. Oliver concluded that Kalshi’s contracts did not meet the relevant statutory definition of a swap because they depended on event outcomes or discrete in-game occurrences, rather than whether an underlying sporting event occurred or occurred to a particular extent.
New York’s state action alleges that Kalshi operates an unlicensed gambling business and seeks at least $36 billion, including a $100,000 penalty for each unauthorized offer or attempted offer of sports wagering. The state also seeks forfeiture of gains and restitution to users. Its verified petition says the Gaming Commission issued Kalshi a cease-and-desist demand in October 2025, after which the company sued in federal court to block enforcement.
Connecticut’s action seeks to block Kalshi’s sports-event contracts. Attorney General William Tong has argued that the products are no different from sports betting and are not shielded from the state’s consumer-protection laws by federal law.
