Second Circuit: NY, CT Can Enforce Gambling Laws on Sports Contracts

Kalshi and Coinbase took a big hit out East on Wednesday.

The U.S. Court of Appeals for the Second Circuit has rejected a request from the operators to block New York and Connecticut from enforcing gambling laws on their sports prediction markets. The order was brief, but said the duo failed to show that a temporary injunction was needed. 

While the US Supreme Court will ultimately decide whether states can regulate sports markets, the Second Circuit’s ruling will stand until then. This puts Coinbase and Kalshi in a tricky spot as they decide on their next moves.

If the operators continue offering sports markets in Connecticut and New York, state regulators can begin to assess fines and other penalties. The states could also follow Utah’s lead by filing criminal charges against leaders from both companies for violating gambling laws.

The Commodity Futures Trading Commission, which is fighting to maintain sole regulatory authority over the industry, has not yet released an official statement on the ruling. The regulator has aggressively pushed back against states, filing lawsuits against several to block the enforcement of gambling laws. 

While Coinbase has been willing to exit some markets, a quick Kalshi review shows they have been far less willing to concede.

Losses Are Piling Up

While the Second Circuit didn’t deliver a full ruling on sports prediction markets, it marks yet another loss for the industry at the second-highest level of the US legal system.

The Third Circuit ruled in the industry's favor, leading New Jersey to appeal to SCOTUS. This allows platforms to continue operating while they await the appeal's outcome.

The favorable ruling wouldn’t last long, as the Sixth and Ninth Circuits both ruled against the industry. The Fourth Circuit is also considering an appeal over Kalshi sports markets, but has expressed doubts about the operator’s arguments.

Losing these rulings was made worse during the 2026 Midterm Elections, where Democrats took back both the House and Senate. The party has criticized the industry, but Republicans have largely blocked action because of President Trump's support. 

With that roadblock now removed, leaders from prediction platforms could soon find themselves answering difficult questions in congressional hearings.