New York federal judge denies Novig’s injunction bid, rules its sports event contracts are not swaps
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A federal judge in New York rejected Novig’s bid for a preliminary injunction and said, at this early stage, that its sports prediction contracts are not swaps under the Commodity Exchange Act. The ruling leaves New York able to enforce its gambling laws against Novig while the case continues, and one report says the judge also criticized the CFTC’s approach to prediction markets.
Key claims & sources
What it means
Novig is one of several prediction-market operators, alongside Kalshi, that have leaned on the Commodity Exchange Act's federal swap definition to argue state gambling law cannot touch them. Kalshi used the same argument to beat back regulators in Nevada and New Jersey earlier this year. New York's attorney general and gaming regulators pushed back here, arguing Novig's sports contracts are simple bets dressed up as derivatives.
With the injunction denied, New York's attorney general and gaming regulators can now proceed against Novig under existing gambling statutes while the underlying case continues. Novig cannot rely on federal preemption to shield its sports contracts from state enforcement, at least for now, and other prediction-market operators eyeing New York face the same exposure. The CFTC's swap classification offers no immediate cover here.
Judge McMahon's reported criticism of the CFTC's reasoning cuts at something larger than one company's license to operate in New York: whether a federal regulator can wave a swap label over contracts that look, feel and settle like sports bets, and have that label override decades of state gambling law. If courts keep treating these products as bets rather than swaps, the entire premise that federal commodities law preempts state gaming oversight weakens nationwide.
The case now moves past the preliminary-injunction stage toward a fuller merits fight in the same New York federal court, where McMahon's early-stage swap finding could be tested further or revisited. Parallel battles over Kalshi's sports contracts in other states remain unresolved, and any appellate ruling on the swap question would carry weight well beyond Novig, shaping whether prediction markets can keep citing federal law against state gambling regulators. (per thedefiant.io)
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