Judge Refuses to Shield Novig From New York Gambling Enforcement

Novig lost its bid to hold New York gambling regulators at bay. U.S. District Judge Colleen McMahon denied the sports prediction exchange's request for a preliminary injunction on Nov. 10, finding its sports event contracts are not federally regulated swaps. That leaves New York free to require Novig to get a state gambling license or to bar the listing and trading of those contracts — though the ruling doesn't shut the platform down or settle the lawsuit.

Novig matches customers taking opposing positions on sporting outcomes instead of taking the other side of their bets. It received federal exchange designation in June and began offering sports contracts to New York customers in August, according to the opinion. It argued the Commodity Exchange Act put those contracts under the CFTC's exclusive authority, insulating them from state gambling laws. McMahon rejected that, saying Novig hadn't established a likelihood of success on the merits.

She agreed that sporting outcomes count as an “event or contingency” under the statute. But she found Novig's contracts failed the separate requirement that the event be tied to a potential financial, economic or commercial consequence, read in the context of a law aimed at managing price risk. Novig offered hypothetical examples of businesses hedging with sports contracts — no real-world ones, she noted — and she concluded it marketed to recreational bettors instead. “From the perspective of the customer, there is no qualitative difference between Novig's product and FanDuel's traditional sports bet,” McMahon wrote.

She offered a backup reason, too: even if the contracts were swaps, the act would not displace New York's application of its gambling laws to the betting activity on the exchange.

The opinion went after the CFTC's October actions — an interim final rule excluding sportsbook bets and casino-style gambling from the swap definition, alongside a proposed rule including sports event contracts. The two “are inherently contradictory and cannot be reconciled,” McMahon wrote, declining to defer to the agency and noting proposed regulations have no legal effect. She also criticized the CFTC's Aug. 11 emergency order directing Kalshi to keep operating while New York pursued restrictions, writing it “smacks of a collusive effort between a regulator and regulatee to generate a claim for conflict preemption.” The agency had defended its intervention as necessary to preserve orderly national derivatives markets.

The decision lands after the Second Circuit's Nov. 3 denial of injunctions pending appeal in Kalshi's New York and Connecticut cases and Coinbase's Connecticut case — a short order that denied interim relief, not the appeals themselves. Novig didn't wait around: it filed a notice of appeal to the Second Circuit on Nov. 10.