Judge Rejects Novig’s Bid to Bypass State Gambling Laws
Federal court labels CFTC intervention as collusive while classifying prediction markets as sports betting.
1Court Rejects Novig Injunction
U.S. District Judge Colleen McMahon denied Novig’s motion for a preliminary injunction against New York officials on November 10. The ruling allows the state to apply its gambling laws to the platform. Novig had argued that the Commodity Exchange Act granted the CFTC exclusive jurisdiction over its sports-based contracts.
2Contracts Classified as Gambling
Judge McMahon determined that Novig’s contracts are likely not swaps under federal law, as sporting events lack the required commercial consequences. She emphasized that the court must use common sense, explicitly classifying the platform’s offerings as sports betting. The judge noted Novig’s own marketing goals as a global betting platform.
3Allegations of Regulatory Collusion
The court sharply criticized the CFTC for its emergency order shielding Kalshi from state lawsuits. Judge McMahon described the agency’s intervention as a collusive effort between a regulator and a regulatee to manufacture a conflict. She suggested this maneuver was designed to create a false legal basis for federal preemption.
4Contradictory CFTC Rulemakings
McMahon scrutinized two October CFTC rulemakings that attempted to define event contracts as swaps while excluding traditional sportsbooks. She labeled these rules as inherently contradictory, arguing that the underlying financial outcome remains the same regardless of the platform structure. The judge suggested these shifts were calculated to influence ongoing litigation.
5Deepening Federal Court Split
This ruling widens a significant divide among U.S. appellate courts regarding the legal status of sports event contracts. While the Third Circuit previously sided with Kalshi, the Ninth and Sixth Circuits have reached conclusions aligning with Judge McMahon’s view. These courts increasingly prioritize the substance of gambling over technical definitions.
6Supreme Court Review Pending
The legal battle is heading toward the Supreme Court, with New Jersey seeking a review of the Third Circuit’s decision. A broad coalition, including 38 states, the NFL, and the American Gaming Association, has filed amicus briefs against the exchanges. Kalshi’s formal response to the high court is due December 7.
7Novig’s Immediate Legal Response
Following the adverse ruling, Novig filed a notice of interlocutory appeal to the Second Circuit within hours. The appellate court is already reviewing similar questions in consolidated cases involving Kalshi and Coinbase. A merits panel has not yet heard arguments, leaving the regulatory status of these prediction markets currently in flux.
8Broader Industry Legal Pressures
Novig faces mounting legal challenges beyond the New York case, including a counterclaim from Missouri’s attorney general under federal anti-gambling statutes. These developments highlight the precarious position of prediction markets operating across state lines. The industry remains embroiled in complex jurisdictional disputes that could redefine federal oversight of digital betting.
Original article: Bitcoin News — Judge Rejects Novig’s Bid to Bypass State Gambling Laws