Kalshi suffers two appeals court setbacks over state rules

Without court protection, regulators in Nevada, New York and Connecticut can continue enforcement while the broader legal challenges proceed.

Key takeaways:

• The Ninth Circuit rejected Kalshi’s petitions for a panel rehearing and a rehearing en banc over its Nevada ruling, and no judge called for a vote on full-court review.
• The Second Circuit denied Kalshi and Coinbase injunctions that would have blocked state enforcement of gambling laws against their sports event contracts while their appeals continue.
• The order covered Kalshi’s cases against the New York State Gaming Commission and Connecticut’s Department of Consumer Protection, and Coinbase’s case against Connecticut Attorney General William Tong.

US.- Kalshi has suffered two setbacks in federal appeals courts as it contests state efforts to regulate prediction markets. The Ninth Circuit refused to reconsider a ruling involving Nevada, while the Second Circuit denied requests from Kalshi and Coinbase to temporarily block enforcement actions in New York and Connecticut, leaving the companies without judicial protection while legal challenges proceed.

Ninth Circuit declines to revisit Nevada ruling

The Ninth Circuit rejected Kalshi’s petition for both a panel rehearing and a rehearing en banc in a ruling dated November 3. The latter would have put the case before a larger group of judges from the appeals court.

Kalshi has maintained that its event contracts are federally regulated financial products and that allowing states to classify them as gambling would expose the company to overlapping regulatory requirements. It has argued that the Nevada ruling could leave it facing civil and criminal liability despite operating under federal oversight.

With the requests denied, the company has 90 days to petition the Supreme Court to review the decision. Until then, the appeals court’s ruling remains in effect, leaving Nevada regulators able to pursue enforcement against the company’s sports markets.

Kalshi and Coinbase denied temporary protection

In a separate case, the Second Circuit denied requests by Kalshi and Coinbase for injunctions that would have prevented state authorities from enforcing gambling laws against their sports event contracts while appeals continue. The order covered three disputes: Kalshi’s cases involving the New York State Gaming Commission and Connecticut’s Department of Consumer Protection, and Coinbase’s challenge against Connecticut Attorney General William Tong.

The companies asked for legal protection while their appeals remained pending, arguing that state enforcement could cause harm before the courts had ruled on the underlying legal questions. However, the three-judge panel concluded that the companies had not demonstrated that temporary injunctions were warranted. The decision means that New York and Connecticut can continue enforcement action while the cases move through the appeals process.

Frequently asked questions (FAQs)

• What did the Ninth Circuit decide in Kalshi’s Nevada case? The Ninth Circuit denied Kalshi’s petitions for a panel rehearing and a rehearing en banc, so its earlier ruling stays in effect. That ruling allows Nevada regulators to pursue enforcement against Kalshi’s sports markets. No judge called for a vote on whether the full court should reconsider it.
• Can Kalshi appeal to the U.S. Supreme Court? Yes. With the rehearing requests denied, Kalshi has 90 days to petition the U.S. Supreme Court to review the decision. Until then, the Ninth Circuit’s ruling remains in effect.
• What did the Second Circuit rule on Kalshi and Coinbase? A three-judge panel denied their requests for injunctions that would have blocked state enforcement while their appeals continue. It concluded they had not shown that temporary injunctions were warranted and gave no further detail in its order.
• Does Kalshi have to shut down in New York or Connecticut? No. The Second Circuit order does not require the companies to shut down their platforms or dismiss their appeals. It also does not decide whether the contracts fall under federal derivatives regulation or state gambling laws. New York and Connecticut authorities can continue enforcement while the cases proceed.