A New York, US, federal judge has decided to reject an attempt by prediction market operator Novig to shield its sports contracts from state gambling laws, delivering yet another setback to companies looking to expand sports betting through federally regulated prediction markets.
What the Decision Means
In a 35-page ruling issued on Tuesday, November 10, US District Judge Colleen McMahon denied Novig’s request for a preliminary injunction against New York Attorney General Letitia James and state gaming regulators.
The decision allows New York to pursue enforcement action against the company that partnered with actress Sydney Sweeney for a new provocative ad in September, unless it obtains the necessary state gambling license or stops offering its products in the state.
Novig operates a peer-to-peer exchange where customers trade contracts based on sporting outcomes rather than placing wagers directly against a traditional sportsbook.
The company has argued that these products qualify as financial derivatives regulated by the Commodity Futures Trading Commission (CFTC), placing them under federal jurisdiction rather than state gambling laws.
Its parent company, Ludlow Exchange LLC, received designation as a contract market from the CFTC in June. Novig subsequently relied on the federal Commodity Exchange Act (CEA) to argue that New York could not regulate its sports contracts.
Judge McMahon, however, was not persuaded.
As a reminder, the prediction market operator filed a federal lawsuit against Wisconsin in August, turning the state into the fifth to face legal action from the company seeking protection from potential enforcement of sports betting laws.
The other four states are New Mexico, Massachusetts, Washington, and New York, respectively.
Little Difference Between Novig and Sportsbooks
The ruling focused on the nature of the contracts themselves. McMahon acknowledged that sporting outcomes can qualify as events or contingencies under federal commodities law, but said they do not carry the inherent financial or commercial consequences required to classify the contracts as swaps.
She also pointed to the similarities between Novig’s offerings and conventional sports betting products, including point spreads, player props and parlays.
One example cited in the decision was a four-game NFL parlay offering a potential payout of more than 111 times the original stake.
“The Court is not required to disregard common sense; Novig’s sports event contracts are sports betting,” McMahon wrote.
The judge also noted that Novig previously held a Colorado sports betting license before abandoning that model in favor of its federally regulated exchange structure.
CFTC Comes Under Judicial Scrutiny
McMahon also questioned the CFTC’s approach to distinguishing sports event contracts from traditional wagers, describing aspects of the agency’s recent regulatory positions as contradictory.
She also went on to raise concerns regarding its involvement in litigation involving prediction market operators.
The judge suggested that a separate CFTC order preventing another prediction platform from shutting down amid legal challenges “smacks of a collusive effort” to create a conflict between federal and state law.
Even if Novig’s contracts were classified as swaps, McMahon added, federal commodities legislation would not automatically override New York’s authority to regulate gambling.
A New York, US, federal judge has decided to reject an attempt by prediction market operator Novig to shield its sports contracts from state gambling laws, delivering yet another setback to companies looking to expand sports betting through federally regulated prediction markets. What the Decision Means In a 35-page ruling issued on Tuesday, November 10,