Court Denies Coinbase and Kalshi Protection Against State Laws

The Second Circuit denied preliminary protection for Coinbase and Kalshi in Connecticut and New York. The judicial ruling does not require the suspension of trading or the closing of existing positions on the event contract platform.

Arkansas has filed a lawsuit against Kalshi for operating a betting platform without local regulation. Attorney General Tim Griffin claims the company violates the state's Deceptive Trade Practices Act by allowing sports and entertainment betting without the required licenses.

The Arkansas government is seeking financial restitution and the payment of back taxes. The lawsuit argues that the company uses responsible gaming tools as proof that its products carry risks similar to those of casinos.

Kalshi maintains that its event contracts fall under the exclusive federal jurisdiction of the Commodity Futures Trading Commission. Other states including Arizona and Massachusetts have also taken action against the company regarding compliance with state gambling laws.

The legal battle between federal and state entities increases regulatory uncertainty for platforms operating prediction markets. The fragmentation of local rules may raise operational risks for digital asset firms seeking to expand betting services.