New York judge denies Novig injunction, calls sports contracts bets

A federal judge in New York denied prediction market platform Novig's request to block state officials from enforcing gambling laws against its sports event contracts, ruling Tuesday that the products are sports bets rather than financial swaps.

Novig had sought an injunction against New York Attorney General Letitia James and other state officials, arguing that the Commodity Exchange Act prevented the state from using gambling laws to restrict its offerings, Covers reported.

In a 35-page opinion, U.S. District Judge Colleen McMahon rejected Novig's argument that its contracts were swaps subject exclusively to federal commodities regulation. She found that sports outcomes qualify as contingencies under the law but lack the financial or commercial consequences needed to qualify the contracts as swaps.

The Court is not required to disregard common sense - Novig’s sports event contracts are sports betting.

McMahon said states cannot regulate the operation or licensing of designated contract markets, the federally regulated exchanges that list, oversee and clear event contracts. But she found that the Commodity Exchange Act does not prevent states from enforcing gambling regulations.

Novig argued that its peer-to-peer model differed from traditional sportsbooks. McMahon found that the distinction did not substantially change the experience for customers, comparing Novig's product with a traditional FanDuel sports bet.

The judge also rejected Novig's argument that state licensing would conflict with federal requirements. Gambling Insider reported that she noted the company could obtain gambling licenses, as it previously did in Colorado, and use geofencing.

McMahon criticized the Commodity Futures Trading Commission's emergency order directing Kalshi to continue operating in New York even if a state court ruled otherwise. She wrote that it “smacks of a collusive effort between a regulator and regulatee to generate a claim for conflict preemption.”

Sports betting and gaming attorney Daniel Wallach said Novig filed an appeal Wednesday, one day after the decision. Novig launched its markets Aug. 4 and secured a prediction market partnership with the New York Mets in July.