Second Circuit Denies Coinbase, Kalshi Temporary Injunctions in Connecticut, New York Cases

Attorneys general in Connecticut and New York are free to continue with their civil lawsuits against Coinbase, Kalshi, and other designated contract market operators after a three-judge panel from the United States Second Circuit Court of Appeals denied Coinbase's and Kalshi's requests for injunctive relief on Tuesday. The panel has consolidated appeals of three cases in which Coinbase or Kalshi is the claimant.

The panel has yet to rule on the merits of Coinbase's and Kalshi's appeals. This denial of temporary protection from state law enforcement may force both prediction market exchange operators to assess their approaches in the state.

Coinbase, Kalshi left susceptible to litigation in Connecticut and New York

The panel's Nov. 3, 2026 decision wastes no words. It simply states that Coinbase and Kalshi "have failed to make the required showing that an injunction pending appeal is warranted." Had the panel granted the motion, it would have temporarily prevented authorities in Connecticut and New York from enforcing their gambling laws against the designated contract market (DCM) operators.

The ruling means that Connecticut Attorney General William Tong and New York Attorney General Letitia James can move forward with their lawsuits against several DCMs. Tong sued Kalshi in August.

James has taken a broader approach, filing lawsuits against Coinbase, Gemini Prediction, Kalshi, and Polymarket. Coinbase and Kalshi have legal maneuvers left to pull on this issue, but the benefits of doing so may prove negligible.

The path forward for Coinbase, Kalshi at the Second Circuit and beyond

The overarching interest for Coinbase, Kalshi, and other DCMs in this litigation is to be able to offer event contracts of all types in Connecticut and New York without fear of penalties from either state government. There are several paths to that end at this point in time.

Coinbase and Kalshi could ask the full Second Circuit for an en banc hearing of the panel's decision on the injunction pending appeal. However, the Second Circuit is under no obligation to grant that hearing, much less within any specific time frame.

It's possible that the panel could rule on the merits of Coinbase's and Kalshi's appeal before such review would take place or independently of that. That decision could be in Coinbase's and Kalshi's favor.

Intervention from the Supreme Court of the United States (SCOTUS) remains conceivable at this juncture as well. The timeliness of that is a big question, though, as SCOTUS has not yet announced whether it will hear any of the three petitions involving disputes between DCMs and state governments currently before it.

Other paths involve Coinbase and Kalshi winning their cases against James and Tong at the district court level. The US Commodity Futures Trading Commission (CFTC) also has active lawsuits against both state governments that could afford the DCMs relief.

The disparate ongoing litigation in the Second Circuit's jurisdiction means that Coinbase and Kalshi may adopt the approaches of other DCMs.

Other DCMs have limited offerings in Connecticut

To date, Gemini, Prophet X, and WeBull have stopped offering sports event contracts to people in Connecticut. They were three of the recipients of cease-and-desist (C&D) demands from Connecticut regulators in September.

The C&Ds targeted sports contracts specifically. In New York, though, the state's litigation has taken a broader approach including contracts settling on cultural and political events.

That broader scope could motivate Coinbase, Kalshi, and others to spend resources on litigation rather than adopting the cautious approach that other DCMs have taken in Connecticut. The denial of the injunction pending appeal may prove to be insufficient to move the needle for those DCMs who have not already limited their markets in Connecticut, though.

In other legal news, Iowa officials and Kalshi have agreed to await direction from a different appellate court.

Iowa, Kalshi submit joint bid for stay

Also on Tuesday, Kalshi and Iowa Attorney General Brenna Bird asked the US District Court for the Southern District of Iowa to stay Kalshi's lawsuit against Bird while a panel from the 8th Circuit considers Kalshi's appeal of the district court's denial of Kalshi's request for preliminary injunctive relief. Kalshi sued Bird and other Iowa officials in August after a meeting with Bird.

Bird has not taken any legal action against any DCMs nor publicly committed to doing so. Kalshi's lawsuit in Iowa is one of several that seeks to preemptively ward off any enforcement.

Bird may reassess the situation if the 8th Circuit panel affirms the district court's decision. The Second and 8th circuits are merely two of several that DCM operators are active in at this time, with decisions that could significantly affect the future of event contract trading pending.