Court’s Refusal to Halt Connecticut Proceedings Keeps Coinbase Prediction Markets Facing Regulatory Challenge

Key Facts

The U.S. Court of Appeals for the Second Circuit on Nov. 3, 2026, denied Coinbase Financial Markets’ request to halt Connecticut state proceedings while its appeal is considered. The decision allows the state to continue its proceedings over the company’s prediction markets, but does not resolve the broader dispute over whether federal rules take precedence over local gambling laws. The request before the court also did not cover Coinbase in New York. Coinbase therefore remains subject to the state proceedings in Connecticut, while the federal legal question remains open. The decision comes as Coinbase expands its activity in the product and reports rapid revenue growth.

Coinbase said in its third-quarter earnings announcement that prediction-market revenue exceeded $200 million on an annualized basis. It added that the product’s revenue had recorded compound quarterly growth of 82% since its launch. That gives the activity growing weight in the company’s business as it faces state-level regulatory proceedings. The continuation of Connecticut’s proceedings does not mean the court has decided how these contracts should be classified or which authority has final jurisdiction. According to the decision’s details, the appeal ruling was limited to the request to halt the proceedings while the case is considered.

The company also reported that the number of daily traders in its prediction markets rose by more than 60% in the third quarter compared with the second quarter. On Sept. 10, Connecticut’s governor said the Department of Consumer Protection had issued 9 cease-and-desist orders to companies operating prediction markets, and Coinbase was among those addressed. The state said the orders require the platforms concerned to stop advertising or making sports-event contracts available to residents. These actions put sports contracts at the center of the state’s regulatory dispute. Their impact on Coinbase’s business remains tied to the course of the case, as the appellate decision did not resolve whether federal law takes precedence.

The regulatory dispute also extends to New York, where the state sued Coinbase and Gemini in April, seeking to bar them from operating their platforms until they obtain licenses from the Gaming Commission. But Coinbase’s request, denied by the appeals court on Nov. 3, concerned Connecticut proceedings and did not cover the company in New York. On federal rules, the Commodity Futures Trading Commission said it expects to move forward with rules that strengthen regulatory obligations related to prediction markets. That leaves federal rulemaking among the developments ahead, without changing the scope of the latest court decision. The decision did not issue a final ruling on whether federal law takes precedence.

In trading on Nov. 6, Coinbase shares closed at $134.76, compared with a close of $136.82 in the previous session, Nov. 5. The trading record reports the two closing prices without linking the share move to the court decision. The close came two days after the appellate decision was issued on Nov. 3. These prices remain an indication of the stock’s trading in the two sessions cited, not evidence of a direct response to the ruling. The available facts did not provide an explanation for the share move during that period.