A federal judge in New York has denied Novig’s bid to stop the state applying its gambling laws to the company’s sports-event contracts, finding that the products are not swaps protected by the Commodity Exchange Act. The decision allows New York to pursue enforcement against Novig, although it does not itself order the platform to stop operating.
U.S. District Judge Colleen McMahon issued the 35-page decision on Nov. 10 in Ludlow Exchange LLC v. James. Ludlow, Novig’s operating company, had sought a preliminary injunction against Attorney General Letitia James and New York State Gaming Commission officials after suing on Aug. 5.
The company argued that federal commodities law gives the Commodity Futures Trading Commission exclusive authority over its contracts. Ludlow received designation as a CFTC contract market in June and began offering sports-event contracts to New York customers in August.
McMahon held that Novig had not shown a likelihood of succeeding on that argument, so she did not consider the other preliminary-injunction tests. She concluded that, although sporting outcomes can be an event or contingency under the statute, Novig’s contracts lacked the potential financial, economic or commercial consequence needed to qualify as swaps.
“The Court is not required to disregard common sense,” McMahon wrote. “Novig’s sports event contracts are sports betting.” She said the Commodity Exchange Act was designed to regulate financial activity such as hedging, “not consumers betting on Thursday Night Football.”
Novig operates an exchange where customers trade with one another on sports outcomes rather than wager against a conventional sportsbook. But the court found its point spreads, player propositions and parlays indistinguishable from betting products offered by FanDuel and BetMGM. One four-game NFL parlay cited in the case offered a payout of more than 111 times the amount staked.
The ruling means New York may require Novig to obtain a state gambling licence or prohibit it from listing and trading sports-event contracts in the state. McMahon said Novig could seek a New York licence and use geofencing, as licensed operators do. Novig previously held a Colorado Internet Sports Betting Operator licence, which it later returned as it shifted to its exchange model.
McMahon also rejected the company’s pre-emption position on an alternative ground, saying that even if the contracts were swaps, federal law would not automatically displace New York’s longstanding authority over gambling. Her opinion criticised a CFTC order involving Kalshi that directed the exchange to continue operating, describing it as appearing to be a collusive attempt by regulator and regulated company to create a conflict-pre-emption claim.
The decision adds to diverging court outcomes over sports-event contracts. In April, the Third Circuit held that Kalshi’s sports contracts were swaps traded on a CFTC-designated market and that federal law pre-empted the New Jersey laws at issue. In New York, however, another federal judge had already refused Kalshi’s request to block state gambling enforcement. The Block reported that federal courts in the Second Circuit have issued 10 rulings in sports-prediction-market cases, all favouring states.
Separately, the CFTC filed suit in New York on April 24 seeking a declaration that it has exclusive authority over event contracts and a permanent injunction against enforcement of state laws it considers pre-empted. The New York Gaming Commission says prediction-market and event-contract platforms are not licensed to offer wagering in the state and are operating unlawfully.
Novig is also litigating the same regulatory question in Missouri and Washington, while Kalshi, Polymarket and other platforms pursue related cases in multiple jurisdictions.
