Novig expands legal battle against four states over prediction markets
Clash between federally approved markets and state gambling laws intensifies.
1Novig's legal move
Just three days after launching its sports prediction markets, Novig filed federal lawsuits against New York, Massachusetts, New Mexico, and Washington. The suits follow the Commodity Futures Trading Commission's (CFTC) approval of Novig as a Designated Contract Market (DCM). The company questions whether states can apply gambling laws to federally regulated prediction markets, arguing the Commodity Exchange Act grants exclusive authority to the CFTC.
2Federal-state clash
Novig contends states are misclassifying prediction markets as gambling through temporary restraining orders. Legal analyst Daniel Wallach notes Novig's federal court strategy aims to preempt state interference. This creates a significant test case for federal preemption over state laws. The timing is strategic, as all four states had already sought injunctions against similar federally regulated markets in state courts.
3First hurdle in New York
Novig's August 5 lawsuit against New York seeks to block application of state gambling laws to its sports event contracts. The company maintains its markets are CFTC-regulated derivatives, not sports betting. New York's recent actions against Kalshi and Coinbase Financial Markets present immediate enforcement threats. The case has been assigned to Judge Analisa Torres, who previously denied similar relief to Kalshi.
4Platform safeguards
Novig highlights its platform's multiple safeguards: minimum age of 21, deposit and trading limits, self-exclusion tools, identity verification, and market surveillance to prevent insider trading. These align with the CFTC's proposed rules for prediction markets released in June, which suggested sports event contracts based on aggregate professional/collegiate outcomes may not be contrary to public interest with proper safeguards.
5Massachusetts challenge
In Massachusetts, Novig alleges Attorney General Andrea Campbell and the Gaming Commission wrongly treat its contracts as sports betting. The complaint cites the state's preliminary injunction against Kalshi and its stance that sports gaming companies must follow state rules. Novig counters that federal law preempts these licensing requirements for designated contract markets, creating a direct conflict.
6Arguments in Washington and New Mexico
Washington's lawsuit challenges the state gambling commission's guidance declaring prediction markets unauthorized and its case against Kalshi. Novig argues Washington improperly classifies CFTC-regulated contracts as gambling. In New Mexico, the company contests Attorney General Raúl Torrez's lawsuit accusing Kalshi of unlawful sports betting, asserting the state mischaracterizes federally regulated contracts as gaming devices.
7Congressional authority
Across all four suits, Novig's core argument is that sports event contracts on designated exchanges qualify as 'swaps' under the Commodity Exchange Act, placing them under CFTC's exclusive jurisdiction. The complaints cite legislative history showing Congress intended to prevent state regulation of derivatives markets. They reference recent federal decisions including the Third Circuit's ruling in KalshiEX LLC v. Flaherty supporting preemption.
8Existential business risks
Novig warns that without federal intervention, it faces impossible choices: cease operations in major states or risk severe penalties. Washington could seek restitution, disgorgement, civil fines and criminal sanctions like those against Kalshi. Massachusetts might impose civil fines, criminal penalties and injunctions, while New Mexico's laws expose Novig to nuisance claims and civil/criminal liability. Sovereign immunity could prevent recovery of losses even with eventual victory.
Original article: ReadWrite — Novig, 4 eyalete karşı yasal mücadelesini genişletiyor