Kalshi and Coinbase Denied Protection Pending Appeal

The Second Circuit denied Kalshi and Coinbase’s injunction requests on Nov. 3, leaving them without the requested protection against state enforcement over sports event contracts. The decision concerns Kalshi’s disputes in New York and Connecticut and Coinbase Financial Markets’ Connecticut case. It does not itself order an immediate trading shutdown or resolve the underlying appeals.

Court Rejects Protection Across Three Appeals

A three-judge panel considered the requests together. Kalshi sought protection against New York gaming officials and Connecticut consumer-protection officials, while Coinbase sought protection against Connecticut Attorney General William Tong and other officials.

The court said that the companies failed to make the required showing that an injunction pending appeal is warranted. It provided no further explanation of its reasoning.

An injunction pending appeal would have temporarily restricted state enforcement while the companies challenged earlier rulings. Without it, access to sports contracts in the affected states remains subject to further enforcement actions and court decisions. The order does not specify changes to customers’ existing positions.

Commodity Exchange Act Is Central to Dispute

Kalshi and Coinbase argue that the Commodity Exchange Act prevents states from applying gambling restrictions to the sports contracts at issue. Their position would allow those products to operate under federal derivatives oversight without the disputed state restrictions.

Connecticut’s federal district court previously rejected their requests for preliminary protection. In Coinbase’s case, the judge concluded that the company had not shown it was likely to establish either that the contracts qualified as swaps or that federal law displaced Connecticut’s gambling laws.

The practical stakes concern where the companies can offer sports contracts and which rules apply. The litigation addresses those products, rather than Coinbase’s cryptocurrency trading business generally.

Coinbase Acts as an Intermediary

The Connecticut court described Coinbase as providing access to derivatives listed on Kalshi’s marketplace. Coinbase provides customer access to those contracts rather than operating the exchange on which they are listed.

The ruling distinguishes Coinbase Financial Markets’ role as a futures commission merchant from Kalshi’s role as the exchange listing the contracts. Both operate under Commodity Futures Trading Commission oversight, but the district court rejected Coinbase’s request for preliminary protection.