The US Court of Appeals for the Second Circuit has denied requests from Kalshi and Coinbase for injunctions pending appeal against New York and Connecticut, removing a federal shield the prediction market operators had sought while they challenge the states’ authority over sports event contracts.

A three-judge panel heard arguments on 3 November from Kalshi, Coinbase and the Commodity Futures Trading Commission (CFTC), with counsel for both states opposing the motions. The appeals of the two companies and the CFTC had been combined. The panel ruled the same day, stating that the “appellants have failed to make the required showing that an injunction pending appeal is warranted”. Its full reasoning had not been published at the time of writing.

Two district court losses

The appeals stem from defeats in both states earlier this year. In New York, Judge Analisa Torres of the Southern District denied Kalshi’s preliminary injunction in July, finding that New York gambling laws as applied to its sports event contracts are not preempted by the Commodity Exchange Act. In Connecticut, Judge Vernon D. Oliver summarily denied Kalshi’s motion in August, reasoning that the contracts do not meet the statutory definition of a swap.

Both states moved quickly once those rulings landed. New York filed an enforcement action at one minute past midnight on 31 July, the earliest point it legally could, according to Sports Betting Dime, proposing a $100,000 penalty for each offer of unauthorised sports wagering plus forfeiture and restitution. Connecticut followed in August with a suit in state Superior Court seeking an injunction against Kalshi’s sports contracts.

“Sports event contracts are no different than sports betting,” Connecticut Attorney General William Tong said at the time.

Federal government on the other side

The CFTC’s presence alongside the operators reflects the agency’s increasingly direct role in the fight. The CFTC and the Department of Justice sued Utah last month to block its crackdown on prediction markets, arguing that federal law leaves event contracts on registered exchanges outside state gambling regimes. The Second Circuit’s order is a setback for that position in two of the country’s largest betting markets, at least at the interim stage.

Gaming lawyer Daniel Wallach said on social media that the states were now “one remand order away from state court civil enforcement”.

Why it matters

The ruling does not decide the merits, and the appeals will continue. But it leaves Kalshi and Coinbase exposed to state enforcement in New York and Connecticut while they argue them, adding to pressure from Utah, Arizona and other states. With Kalshi and the New Jersey regulator also heading towards the US Supreme Court on the same preemption question, the split between federal and state treatment of sports event contracts looks increasingly likely to be settled at the top.

Nebraska voters have rejected both ballot measures that would have legalised online sports betting in the state, according to election-night returns reported by Nebraska Public Media and the Nebraska Examiner, ending a campaign that national sportsbook operators had funded heavily.

Initiative 440 was a constitutional amendment authorising online wagering, while Initiative 441 set out the regulatory framework that would have governed it. The two were designed to work together, so the defeat of both leaves sports betting in Nebraska confined to in-person wagering at the state’s racetrack casinos.

What was on the table

Under the proposals, each licensed racetrack casino operator could have offered up to two online platforms, allowing as many as 12 mobile sportsbooks across six current or planned gaming facilities. National brands would have needed agreements with a licensed Nebraska operator, and platforms would have had to run a gaming server inside the state.

Online sportsbook revenue would have been taxed at the existing 20% rate for in-person gaming, with 70% of proceeds directed to property tax relief, the same share that applies to casino taxes. The Nebraska Racing and Gaming Commission would have been required to adopt rules by 1 June 2027. A study cited by the campaign group, Tax Relief Nebraska, estimated around $238m in total tax relief over ten years.

Money and opposition

The campaign raised close to $22m by late October, according to Covers, with the bulk coming from sportsbook operators. FanDuel and Roar Digital, the MGM-linked entity, gave more than $3.5m between them to Tax Relief Nebraska, Nebraska Public Media reported. WarHorse Casinos also backed the petitions, which gathered more than 201,000 signatures for the amendment and 146,000 for the statutory measure.

Opposition came from a coalition called Save Nebraska Sports and from the Nebraska Family Alliance. “This was never about lowering property taxes, this was never about helping Nebraska families,” said Nate Grasz, executive director of the Nebraska Family Alliance.

Lynne McNally of WarHorse argued the state was losing tax revenue and warned that without regulation it would “continue to be the Wild West out there”.

The campaign’s funding also drew a complaint. The Legal Accountability Center asked the Nebraska Accountability and Disclosure Commission in August to investigate the FanDuel and Roar Digital donations, arguing that both companies are owned by firms based in Ireland and the UK. Nebraska Public Media said there was no indication the complaint had been resolved.

What happens next

Retail sportsbooks at Nebraska’s racetrack casinos, which have operated since summer 2023, continue unaffected, as does the restriction on wagers involving Nebraska college teams playing in the state. Nebraskans who voted for expanded racetrack gaming in 2020 have now drawn a line at mobile wagering.

Supporters could return to the legislature, where online betting has previously stalled, or begin another petition drive. Covers noted that even in the best case, mobile betting could not launch before 2029. In the meantime, Nebraskans retain access to sports event contracts offered by federally regulated prediction markets, a gap the result does nothing to close and one that is likely to feature in any future campaign.

Sporttrade has been registered by the US Commodity Futures Trading Commission as both a designated contract market (DCM) and a derivatives clearing organisation (DCO), giving the former state-licensed betting exchange a federal route to offer sports event contracts nationwide.

The Philadelphia-based company announced the approvals in a statement released on 2 November. It said the exchange and clearing functions would be rolled out in phases, starting with selected flow and liquidity providers, with a pipeline of brokers and institutional partners to follow in the coming months.

Broker-led model

Sporttrade is positioning itself as market infrastructure rather than a consumer brand. As a DCM it can support intermediated trading through futures commission merchants, as well as direct-access participants, introducing brokers and independent software vendors. Its DCO registration allows it to clear and settle trades for self-clearing members and intermediaries on a fully collateralised basis, and to clear for other DCMs. The company said it is in clearing discussions with several exchanges.

The dual registration matters because it lets Sporttrade operate both the trading venue and the clearing house behind it. Many newer prediction market entrants have instead had to partner with an existing exchange or clearing member, which adds cost and limits control over product design and settlement.

Fliff, the social sportsbook, is among the brokers being onboarded and will route customer order flow to the exchange, pending regulatory approval.

“Receiving our DCM and DCO registrations from the CFTC is a true full circle moment for our company,” said chief executive Alexander Kane.

From state licences to federal oversight

The approvals complete a pivot that Sporttrade began earlier this year. The company filed its DCM and DCO applications in February and, while awaiting a decision, wound down its betting exchange in the five US states where it held sports wagering licences, with operations ending by 26 June, according to contemporaneous reports.

The decision arrives at a busy moment for the CFTC’s prediction markets agenda. The regulator has moved to define event contracts as swaps while carving out traditional sportsbooks, and last month it ordered Novig and ProphetX not to list self-certified sports contracts. Sporttrade is one of a number of applicants that have sought their own exchange and clearing registrations in the past year.

The roughly nine months between filing and approval is in line with the faster review times the CFTC has shown for event-contract venues this year, as the agency under its current leadership has taken a more permissive view of sports contracts than state regulators.

Why it matters

Sporttrade’s licence gives sportsbook-style brands another option for accessing federally regulated sports contracts without building their own exchange. Several US operators have launched prediction products through tie-ups with existing DCMs, and a clearing-capable venue that markets itself to brokers adds competition on spreads and execution, which Sporttrade has made the centrepiece of its pitch.

The approval does not settle the wider fight between federally regulated event-contract venues and state gaming regulators, several of which continue to argue that sports contracts are wagers subject to state law. How quickly Sporttrade can move from its initial liquidity providers to a broad broker network will indicate how much appetite there is for another sports exchange in an increasingly crowded field.