New York Judge Denies Novig Injunction, Scolds CFTC for ‘Contradictory’ Actions

NEW YORK – A federal judge in New York on November 10 denied Novig’s request for a preliminary injunction against state authorities, asserting that the company’s sports contracts are functionally equivalent to unlicensed sports betting, while also delivering sharp criticism of the Commodity Futures Trading Commission (CFTC).

What Happened

U.S. District Court Southern District of New York Judge Colleen McMahon denied Novig’s motion for temporary relief against New York Attorney General Letitia James and members of the New York State Gaming Commission (NYSGC). Novig had sued James and the NYSGC in August after launching its sports prediction market platform in New York, seeking to block potential state enforcement efforts. Immediately following the denial, Novig appealed the ruling to the U.S. Court of Appeals for the Second Circuit.

Key Details

• Judge McMahon agreed with New York authorities that Novig’s sports contracts are not “swaps” as defined by the Commodity Exchange Act (CEA) but rather are equivalent to sports betting without a state license.
• The judge stated that New York can apply its gambling laws, requiring Novig to obtain a state gambling license or cease its sports contracts in the state.
• McMahon cited Novig’s own statements, including its CEO’s proclaimed goal to be the “largest sports betting platform in the world,” in her rationale, adding that “The Court is not required to disregard common sense, Novig’s sports event contracts are sports betting.”
• She further opined that when Congress drafted the CEA, it was to regulate financial activities like hedging, “not consumers betting on Thursday Night Football.”
• Even if sports contracts were considered swaps, federal law would not necessarily override New York gambling law, according to the judge.
• The judge also criticized the CFTC in her 35-page opinion, labeling its actions in rulemaking and emergency order interventions as “contradictory,” “collusive,” and “calculated.”
• Novig’s argument that its peer-to-peer trading model, without a ‘house,’ inherently differs from sports wagers was dismissed by McMahon, who stated these nuances do not functionally distinguish the user experience from betting on an against-the-house sportsbook.

Why It Matters

This ruling reinforces state authority over gambling regulation, potentially setting a precedent for how similar sports prediction platforms are treated in other states. The judge’s strong rebuke of the CFTC also raises questions about the agency’s regulatory consistency and its interventions in the nascent prediction market industry, coming shortly after the Second Circuit ruled against Kalshi in New York. The decision highlights the ongoing tension between federal and state oversight, particularly where innovative financial products intersect with traditional gambling laws, and could impact the regulatory landscape for other similar platforms seeking to operate nationwide.