Second Circuit Refuses Kalshi and Coinbase Injunctions, Leaving the Merits Open
By Antonina Tupikova · Founder, iGaming Times2 min read
A federal appeals panel took hours to deny Kalshi and Coinbase protection from New York and Connecticut while their appeals run. The order gives no reasons and decides only interim relief, although two judges voiced doubts about the swaps theory in court.
- A Second Circuit panel denied Kalshi and Coinbase injunctions pending appeal on 3 November, hours after argument, without giving reasons
- The order does not decide whether sports contracts are swaps or whether federal law preempts state gambling law, and the three appeals continue
- Judges John M. Walker Jr. and Joseph F. Bianco questioned the swaps argument at the hearing, according to InGame, but none of that appears in the order
- Nothing in the order tells Kalshi to stop trading, but the New York Gaming Commission and Connecticut remain unrestrained by any federal injunction
- Kalshi's response to New Jersey's Supreme Court petition is now due on 7 December
A One-Sentence Ruling on Interim Relief Alone
Judges Walker, Dennis Jacobs and Bianco heard the motions on Tuesday morning and denied them that afternoon. The order covers three appeals considered in tandem: KalshiEX LLC v. Williams, No. 26-1835, from New York; KalshiEX LLC v. Cafferelli, No. 26-2239, and Coinbase Financial Markets, Inc. v. Tong, No. 26-2297, both from Connecticut.
It is an unsigned motion order, not an opinion. It says the motions are denied "because Appellants have failed to make the required showing that an injunction pending appeal is warranted", citing Agudath Israel of America v. Cuomo, which states the test for enjoining government action under a statute: irreparable harm, likelihood of success and the public interest. It does not say which element failed.
The appeals themselves, which challenge Judge Analisa Torres' 7 July refusal of a preliminary injunction in New York and Judge Vernon D. Oliver's 10 August refusal in Connecticut, continue. New York filed its brief on 30 October, and Connecticut's is due on 20 November. No merits argument date appears on the dockets.
Two Judges Pressed the Swaps Theory From the Bench
InGame quoted Walker as saying "I don't see how sports betting in its entirety is a swap", and Bianco as saying "It feels like we're trying to fit a square peg into a round hole here." Bianco also questioned how a sports contract could be a swap without sweeping in sportsbook trades, the report said.
Walker also asked New York whether it could keep holding off enforcement: "Why couldn't you continue that?" New York has told the court the attorney general's non-enforcement before 31 July was voluntary. The Commodity Futures Trading Commission (CFTC) argued for the platforms.
Enforcement Now Runs Through Other Courts
No order on these dockets bars Kalshi from New York or Connecticut, and New York's 30 October brief says it "continues to flout" state gaming law. The Gaming Commission's subpoena petition is before the state Supreme Court, which signed an order to show cause on 29 October.
Attorney General Letitia James' suit, which the CFTC says seeks at least $36 billion in compensatory damages and a halt to event contracts offered from New York, was removed to federal court. Her remand motion has been fully briefed since 28 August before Judge Vernon S. Broderick. On 11 August the CFTC directed Kalshi to keep operating normally despite her restraining order request.
Connecticut's Hartford suit, also removed, is paused: Oliver stayed its deadlines on 17 September until remand is decided.
Where the Circuits Stand
The Third Circuit ruled 2-1 for Kalshi on 6 April. The Sixth Circuit ruled 3-0 against it on 25 September; Kalshi sought en banc rehearing on 9 October, and the states were told on 28 October to respond. The Ninth Circuit ruled against it on 28 August, and Kalshi has asked that court for en banc review too. The Seventh Circuit has the Wisconsin appeal and now Illinois' appeal.
The Order Is Not a Third Vote Against Swaps
The order could rest on the merits, irreparable harm or the public interest. New York argued that Kalshi's harms are monetary and that it operates successfully despite being enjoined elsewhere, which would suffice without any view on swaps. Questions from the bench predict; they do not bind. The Second Circuit has not yet joined the split.
The Bench Still Points Towards the Sixth and Ninth Circuits
Walker's reported emphasis on events with economic consequences tracks the test the Sixth and Ninth Circuits applied, though this panel may not be the one that decides the merits. A win for the states would leave the Third Circuit isolated.
The Injunction May Have Mattered Less Than the Remand Rulings
New York argued that an injunction could not have reached James, who is not a defendant in Kalshi's case. Her suit carries the immediate threat to the exchange, and it turns on Broderick's remand ruling. Sent back to state court, it could produce the direct clash between a state order and the CFTC's direction that the litigation has so far avoided.
Kalshi lost an interim motion, not its appeals. It remains without federal cover in its home state, and the next decisive steps belong to a remand judge and, eventually, the Supreme Court.
