THE APEX TIMES
A Second Circuit panel refused to grant interim relief requested by prediction-market operator Kalshi and Coinbase, leaving unresolved how federal law intersects with state actions brought by New York and Connecticut.
A federal appeals court in New York rejected a bid for interim relief that would have put on hold enforcement actions by New York and Connecticut targeting Kalshi and Coinbase, two names that have become central to the fast-moving legal fight over prediction markets.
In a brief two-page order issued Tuesday, the Second Circuit denied the companies’ request to pause the state litigation while they pursue a broader argument that federal law preempts the states’ claims. The court’s decision, according to the report, does not resolve that preemption question on the merits, meaning the underlying dispute is still headed for further legal briefing and proceedings.
The dispute centers on how prediction markets should be regulated. Kalshi operates contracts that allow users to trade on the outcomes of events. Coinbase provides the platform technology and, in this case, is among the defendants or closely involved parties named in the state suits, depending on how the claims are framed in the litigation.
The companies sought emergency relief from the appellate court, asking the Second Circuit to intervene quickly to stop the New York and Connecticut cases from moving forward. The denial indicates that, for now, the court is not ordering a pause that would halt discovery, motion practice, or other steps in the state actions.
While the order does not decide the larger legal question, it does announcement that at least this panel was not persuaded that the legal and practical factors justified an immediate hold. In litigation over preemption, parties often argue that state actions risk conflicting with federal regulatory choices. But the Second Circuit declined to step in at this stage.
For Coinbase, the stakes are partly about platform risk and litigation exposure. Coinbase has repeatedly described itself as a crypto exchange and trading platform, operating under a framework that depends on how regulators characterize digital asset activity and related market infrastructure. In this dispute, Coinbase’s involvement has tied it to the broader question of whether trading products that reference events can be treated the same way as other financial instruments, and what role, if any, federal regulation should play.
More broadly, the order highlights how prediction-market regulation is being contested across jurisdictions. New York and Connecticut are not the only states to examine the legality of these trading products. Federal preemption arguments are increasingly common in cases where technology and trading occur in a national market but are challenged by state-level enforcement priorities.
It is not yet clear from the reported court action what the next procedural milestones will be for each case, or how quickly the appellate process on the preemption issue could proceed. The companies also have not, in the information summarized in the report, been credited with any immediate alternative remedy. As the litigation continues, parties will likely focus on whether courts view prediction-market contracts as subject to a federal regulatory scheme and whether states can enforce their own laws without running into preemption constraints.
What to watch next is whether the states’ cases move quickly toward substantive rulings, and whether the companies pursue further appeals or renewed requests for relief. The central open question remains the scope of federal preemption, and Tuesday’s order suggests that question will not be decided on an emergency timetable.
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