The U.S. Court of Appeals for the Second Circuit has denied Kalshi's request for temporary injunctions against New York and Connecticut authorities, alongside a similar request from Coinbase in Connecticut. In a ruling issued on November 3, a three-judge panel determined that the prediction market companies cannot prevent state regulators from pursuing enforcement actions as their cases progress.
This decision follows federal court rulings this summer in both New York and Connecticut that were unfavorable to Kalshi, prompting lawsuits against the company in state courts aimed at shutting down its sports event contracts.
The court’s order cleared the path for state officials to intensify enforcement against Kalshi. In New York, the litigation includes the New York State Gaming Commission, while in Connecticut, the state’s Department of Consumer Protection is involved, along with Connecticut Attorney General William Tong. The order did not provide details on the decision's reasoning, simply stating that Kalshi and Coinbase did not sufficiently demonstrate the need for an injunction pending appeal.
Kalshi's legal challenges began earlier this year when federal courts in New York and Connecticut ruled against the company. In July, Judge Analisa Torres in New York found the state gambling laws were not overridden by the Commodity Exchange Act (CEA). Soon after, in August, Judge Vernon Oliver ruled that the contracts did not qualify as swaps under the CEA.
Kalshi’s appeals consolidated these two cases along with Coinbase's appeal concerning its involvement with Kalshi's offerings. Following the federal rulings, both states swiftly commenced action against Kalshi in state courts. New York Governor Kathy Hochul and Attorney General Letitia James filed suit against Kalshi on July 31, seeking roughly $36 billion in penalties, targeting disgorgement, customer restitution, and fines. Connecticut's AG Tong and Governor Ned Lamont followed with their own lawsuit against Kalshi a month later.
Kalshi attempted to move these cases to federal court, but both states countered with motions to keep the proceedings in state courts. Significant for Kalshi, the recent election cycle saw Hochul, James, Tong, and Lamont secure re-election on the same day the Second Circuit delivered its decision.
The denial from the Second Circuit adds to a growing list of judicial decisions against prediction markets this year. In late August, the Ninth Circuit unanimously rejected Kalshi’s appeal regarding Nevada, and in a ruling favoring California tribes in September, that court ruled the event contracts violated the Indian Gaming Regulatory Act (IGRA). The Sixth Circuit also issued a unanimous decision, allowing Ohio and Tennessee to initiate enforcement actions against Kalshi.
On Wednesday, the Ninth Circuit also dismissed Kalshi’s request for an en banc review of its earlier ruling regarding Nevada. The only notable ruling favoring prediction markets came from the Third Circuit in April when it sided with Kalshi in its case against New Jersey. New Jersey has since petitioned the Supreme Court to hear the case, which has led to an extension for Kalshi, giving it until December 7 to respond.
