It depends if you have Instant Book activated or not. (Check your settings.)
If you are asked to accept or decline no 2, then it sounds like you don’t have Instant Book, and you can decline. Not great, but not a big issue, unless you decline several bookings.
If you were on Instant Book, #2 would already have a confirmed booking, and you would not be able to decline, you would have your cancel, if you wanted to accept #1. Cancelling should definitely be avoided.
I suggest you
1) Urgently contact #1 and explain that the special offer does not reserve the dates, you have another request, and if they want to book, they need to do so by x o’clock (1 hour before the deadline to accept/decline #2)
2) Urgently contact #2 and explain that
you have another request, and will not be able to accept/decline until latest at y o’clock (deadline). Just so the guest knows it may take a while till he/she hears from you. Some guests don’t understand request to book, and think that they already have a confirmed booking.