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Thank you Gerry!

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I don’t have an answer to this, but I’m very interested to hear how it turns out!
Don’t volunteer the information until they ask. Same with your reference... you never know you might get away with it with out lying!
Ummm, it’s pretty weird for a company to ask for references from the company you’re currently (as far as they know) working for. This feels like a bit of a red flag to me
Well they said “current or recent” but I’m only two years out of college and this was my first job out the gate
You can just ask the references you provide not to say anything about your current status unless directly asked. Don’t ask them to lie, just not to volunteer the info unless they have to.
due to lack of client work. now the start up is asking for references from place I was just laid off from. My references will speak highly of me, but do I tell the start up that I’m not working there anymore?
I’m in a similar boat, in interviewing stages but just laid off today. Life is weird.
Get the reference, and ask them not to say anything
Did you get laid off on bad terms? If not, then find people willing to vouch for you such as CDs etc. It's the least they can do if they liked working with you.
Tell them you don't feel comfortable providing references from your current company. That's completely understandable. If they require it anyways, you probably shouldn't work for them.