A federal judge has ruled that Novig's sports event contracts are sports betting, handing New York a significant win in the national fight over prediction markets. On November 10, 2026, U.S. District Judge Colleen McMahon of the Southern District of New York denied Novig's request for a preliminary injunction that would have blocked New York Attorney General Letitia James and state gaming officials from enforcing state gambling laws against the company.
The 35-page opinion is notable not just for the result but for its tone. McMahon wrote that "the Court is not required to disregard common sense," concluding that "Novig's sports event contracts are sports betting." She also sharply criticized the Commodity Futures Trading Commission (CFTC), saying an earlier agency order protecting rival Kalshi "smacks of a collusive effort."
Novig filed a notice of interlocutory appeal to the Second Circuit on November 11, within hours of the ruling.
The Case in Brief
Novig sued New York in August 2026, operating through its company Ludlow Exchange LLC. Its core argument was federal preemption:
- Novig's sports event contracts are swaps under the Commodity Exchange Act (CEA).
- The CFTC designated Novig as a contract market in June 2026.
- Therefore, federal regulators have exclusive jurisdiction, and New York's gambling laws can't apply.
McMahon rejected each step.
What the Judge Decided
Sports Outcomes Aren't Swaps
McMahon agreed that sporting outcomes count as "events" or "contingencies" under the CEA. But she found they lack the financial, economic or commercial consequences needed to make a contract a swap. As she put it, "Congress drafted the CEA to regulate financial activity, like hedging against corn futures."
The Exchange Model Doesn't Change Anything
Novig argued that its peer-to-peer model, which matches opposing positions instead of setting odds and taking bets, makes it different from a sportsbook. McMahon disagreed, writing that from the customer's view, "there is no qualitative difference between Novig's product and FanDuel's traditional sports bet." In her words, "The only difference is who is on the other side of the contract."
She also cited Novig's own public statement that it wants to be "the largest sports betting platform in the world."
States Can Still Enforce Gambling Laws
Even if the contracts were swaps, McMahon said, federal oversight wouldn't automatically stop states from applying their gambling laws. States can't regulate how a designated contract market operates or is licensed, but the CEA doesn't stop them from enforcing gambling rules against betting conducted through one.
She even suggested a practical path: Novig could seek a state sportsbook license, noting it already holds a 2023 Internet Sports Betting Operator license in Colorado, and could use geofencing to comply state by state.
The CFTC Criticism
The most explosive part of the opinion concerns the CFTC. After New York sued Kalshi in August, the CFTC used emergency powers to order Kalshi to keep operating, saying a sudden shutdown posed "an existential threat to the Commission's registrants, marketplaces, and regulatory jurisdiction."
Novig pointed to that order as proof of an irreconcilable federal-state conflict. McMahon wasn't persuaded. She wrote that the order "smacks of a collusive effort between a regulator and regulatee" to manufacture a preemption claim. She said current CFTC rules bar listing gaming-related event contracts, making the claimed conflict "a mirage."
She also called the CFTC's October 19 rulemakings "inherently contradictory." One proposal treated sports, politics, culture and weather contracts as swaps, while an interim final rule said bets with sportsbooks and casinos are not swaps. She wrote that the shift "appears calculated to influence the outcome of the ongoing litigation on this very issue."
Who Is Novig?
Novig launched prediction markets on August 4. It gained attention with ads featuring actress Sydney Sweeney, and its valuation reportedly rose from $500 million in February to $2 billion in September. In July, it became MLB's first team prediction market partner through a deal with the New York Mets. We covered the marketing push in our report on Novig's Sydney Sweeney ads.
How This Fits the Bigger Legal Fight
This ruling adds to a growing body of court decisions going against prediction markets on sports:
- Earlier in November, a three-judge Second Circuit panel denied injunctions pending appeal sought by Kalshi and Coinbase in disputes involving New York and Connecticut.
- Michigan, Nevada and Washington have banned prediction market sports contracts after state court decisions.
- New Jersey has asked the U.S. Supreme Court to take up the issue, backed by a multistate coalition.
- More than 20 federal court cases involve sports event contracts.
The CFTC, meanwhile, has pushed in the opposite direction, including its recent order telling prediction markets to stop geofencing states, which we covered in our report on the CFTC's 30-day geofencing order.
A preliminary injunction denial isn't a final ruling. The underlying lawsuit continues, and the Second Circuit will decide the appeal. But for now, Novig has no protection, and New York can keep enforcing its gambling laws.
Historical Precedent
The case echoes earlier fights over whether new betting products fall under gambling law. Daily fantasy sports operators argued for years that their contests were games of skill rather than gambling, until states including New York forced them into licensing regimes. Online poker went through a similar fight after 2006 over how federal law applied. In each case, courts and lawmakers eventually looked past the product's structure to what customers were actually doing. McMahon's "common sense" framing follows that pattern.
What This Means for Bettors
For sports bettors, the practical message is that prediction market sports contracts are on shaky legal ground, especially in New York. If a state wins enforcement, a platform can be forced to stop offering contracts quickly, which creates risk for open positions and account balances.
Licensed sportsbooks face no such uncertainty in the states where they operate. If you bet on sports, it's worth understanding the differences between regulated books, offshore books and prediction markets. Our sportsbooks guide compares options, and reviews such as BetOnline Sportsbook and SportsBetting.ag explain what established offshore books offer. We've also written a full breakdown of prediction markets vs sports betting.
What Comes Next
Watch three things: the Second Circuit's handling of Novig's appeal, whether the Supreme Court takes up New Jersey's petition, and whether the CFTC responds to McMahon's criticism. With courts increasingly treating sports event contracts as sports betting, the burden is shifting to prediction markets to prove otherwise.