Kalshi court losses pile up as judges refuse to block state gambling laws

A plaintiff seeking a preliminary injunction must show that it is likely to succeed on the merits of its case, and judges decided that Kalshi had not done so. The Second Circuit appeals court considered Kalshi’s losses to New York and Connecticut in a single case and upheld the lower-court decisions.

“Appellants have failed to make the required showing that an injunction pending appeal is warranted,” a three-judge panel ruled on Tuesday. The judges also refused to overturn Coinbase’s loss against Connecticut in a case that presented the same legal issues.

Kalshi lost another significant case in September when an appeals court determined that Ohio and Tennessee can enforce their gambling laws against the prediction market. A three-judge panel in the US Court of Appeals for the Sixth Circuit ruled unanimously against Kalshi in that one.

Trump admin on Kalshi’s side

The Trump administration is simultaneously pursuing litigation against states trying to enforce gambling laws against prediction markets. The CFTC, claiming sole authority to regulate platforms like Kalshi and Polymarket, has sued Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island, Utah, and Wisconsin.

Kalshi’s biggest win came in April in the Third Circuit, where the appeals court ruled that New Jersey cannot regulate sports bets on prediction markets. Judges there decided that wagers on Kalshi meet the federal definition of swaps, defined under US law as contracts in which payment “is dependent on the occurrence, nonoccurrence, or the extent of the occurrence of an event or contingency associated with a potential financial, economic, or commercial consequence.”

“Kalshi’s sports-related event contracts are swaps traded on a CFTC-licensed DCM [designated contract market], so the CFTC has exclusive jurisdiction,” Third Circuit judges wrote.

But other courts that ruled against Kalshi found that at least some kinds of wagers on the prediction market are not swaps and that US law allows regulation of prediction markets by both state and federal governments. New Jersey asked the Supreme Court to reverse its loss in the Third Circuit, and 39 other states and the District of Columbia filed a brief supporting New Jersey’s petition.