Novig Loses Bid to Block New York Gambling Laws in Federal Court

U.S. District Judge Colleen McMahon of the Southern District of New York denied Novig’s motion for a preliminary injunction against the state.

Her 35-page opinion lets New York require Novig to obtain a state gambling license or stop offering sports event contracts to New Yorkers. Novig filed an appeal the same day.

What the Novig Preliminary Injunction Ruling Decided

A preliminary injunction is a temporary court order issued before a case is decided. Novig operates through the legal entity Ludlow Exchange LLC. It wanted a preliminary injuction to keep New York from enforcing its gambling rules while the situation plays out in court.

The defendants are New York Attorney General Letitia James and officials from the New York State Gaming Commission. McMahon’s decision is not a final ruling on the merits. It reflects her view of which side is likely to win.

Why the Judge Says Novig’s Contracts Aren’t Swaps

The case turns on the Commodity Exchange Act (CEA). Under the CEA, swaps listed on a federally designated exchange fall under the exclusive oversight of the Commodity Futures Trading Commission (CFTC). A swap is a financial contract, and if Novig’s products counted as swaps, the CFTC would regulate them instead of New York.

The CEA covers contracts tied to an “event or contingency associated with a potential financial, economic, or commercial consequence.” McMahon accepted that a game result is an event. She said the statute is aimed at hedging price risk, not recreational betting.

She also looked at the product from the bettor’s side of the screen. “From the perspective of the customer, there is no qualitative difference between Novig’s product and FanDuel’s traditional sports bet,” she wrote, according to Unchained.

Her bottom line was blunt: “The Court is not required to disregard common sense: Novig’s sports event contracts are sports betting.” She also cited Novig’s own pitch: “Our north star is to be the largest sports betting platform in the world.”

Judge Calls the CFTC’s October Rules Contradictory

The CFTC released two rules in October 2026, on October 9, with an update on October 19, according to the opinion. An interim final rule kept sportsbook bets and casino-style gambling outside the swap definition. A separate proposed rule would define sports event contracts as swaps.

McMahon said the two rules “are inherently contradictory and cannot be reconciled.” She gave the CFTC no deference, meaning she did not defer to the agency’s reading of the law.

She went further and questioned the timing. McMahon said the CFTC’s shift away from treating sports wagering as a state matter “appears calculated to influence the outcome of the ongoing litigation.”

Even if she had deferred to the agency, Novig would still lose on this point. The judge said its listings would break the CFTC’s own rule, 17 C.F.R. § 40.11, which bars event contracts relating to gaming.

The Kalshi Order and Novig’s Conflict Preemption Argument

Conflict preemption means federal law overrides state law when a company can’t obey both. Novig argued it was stuck in that position. McMahon called the argument “ridiculous.”

She said Novig could apply for a New York permit and use geofencing, location technology that limits service to customers physically inside the state. In her view, that option undercuts the claim that Novig can’t comply with both.

The judge also criticized an August 11 CFTC order directing Kalshi to keep operating while New York pursued it. She said that order “smacks of a collusive effort between a regulator and regulatee to generate a claim for conflict preemption.”

How Novig Reached This Point

Here’s how the case developed, based on the court record and recent reporting:

A DCM is a federally designated exchange overseen by the CFTC. Novig’s appeal is interlocutory, meaning it challenges a ruling before the case ends.

New York’s Wider Fight Over Prediction Markets

Novig isn’t the only target. New York’s attorney general sued Coinbase and Gemini over prediction markets in April 2026.

Earlier in November 2026, the Second Circuit declined to pause New York and Connecticut actions against Kalshi and Coinbase. A merits panel will take up the same swap question, so Novig’s appeal lands in a court already weighing the issue.

Novig faces pressure elsewhere too. Connecticut regulators issued cease-and-desist letters in September 2026 that included Novig. On Nov. 9, Missouri filed a federal counterclaim against Novig under the 2006 Unlawful Internet Gambling Enforcement Act.

Nationally, the picture is unsettled. McMahon’s reasoning matches the Sixth Circuit’s, while federal courts remain split on whether sports event contracts are swaps.

What the Novig Ruling Means for New York Bettors

The ruling draws a clear line for now: in New York, a sports event contract can be regulated like a bet.

Prediction market access can change fast, though. Novig’s appeal and the Second Circuit’s Kalshi and Coinbase cases could reshape the rules, and the courts remain divided. Treat any platform’s regulatory status as subject to change, and check before you fund an account.