diff --git a/fundingmanager.go b/fundingmanager.go
index a15456c1..d2c670c0 100644
--- a/fundingmanager.go
+++ b/fundingmanager.go
@@ -1718,6 +1718,16 @@ func (f *fundingManager) handleFundingLocked(fmsg *fundingLockedMsg) {
 		fndgLog.Infof("Received duplicate fundingLocked for "+
 			"ChannelID(%v), ignoring.", chanID)
 		channel.Stop()
+		channel.CancelObserver()
+		return
+	}
+
+	// With the channel retrieved, we'll send the breach arbiter the new
+	// channel so it can watch for attempts to breach the channel's
+	// contract by the remote party.
+	select {
+	case f.cfg.ArbiterChan <- channel:
+	case <-f.quit:
 		return
 	}
 
@@ -1731,15 +1741,6 @@ func (f *fundingManager) handleFundingLocked(fmsg *fundingLockedMsg) {
 		return
 	}
 
-	// With the channel retrieved, we'll send the breach arbiter the new
-	// channel so it can watch for attempts to breach the channel's
-	// contract by the remote party.
-	select {
-	case f.cfg.ArbiterChan <- channel:
-	case <-f.quit:
-		return
-	}
-
 	// Launch a defer so we _ensure_ that the channel barrier is properly
 	// closed even if the target peer is not longer online at this point.
 	defer func() {