Hi PryingMiMi,
I would say, “I’m seeing someone.” This will go less awkwardly than you might imagine. He will say, “Oh! Well, OK then! Congratulations!” and maybe you guys can be friends and meet up AS friends one day. (Hey, it does happen!)
However, I would first make sure Guy #2 is the Real Deal. Tell Guy 2, “I’ve been talking to someone even before we met, and he wants to meet. But I don’t want to tell him I’m seeing anyone unless we’re actually Official.” He will either immediately confirm your relationship, or he will get a little pissy. But this conversation first needs to happen.
If Guy #2 hems and haws, or won’t commit, keep talking to and even meet up with Guy #1. And you won’t even have to tell the two guys anything!
Best,
Inky