A federal judge in New York denied sports prediction exchange Novig’s bid to block state gambling enforcement, ruling at the preliminary-injunction stage that its sports event contracts are not swaps regulated by federal law.
In an opinion dated Nov. 10, U.S. District Judge Colleen McMahon said New York may require Novig to obtain a state gambling license or bar the listing and trading of those contracts. The ruling denies Novig protection from enforcement; it does not itself order the platform to shut down or resolve the lawsuit definitively.
Novig matches customers who take opposing positions on sporting outcomes rather than taking the other side of their bets. The opinion says Novig received federal exchange designation in June and began offering sports contracts to New York customers in August. Novig argued that the Commodity Exchange Act gives the Commodity Futures Trading Commission exclusive authority over those contracts, shielding them from state gambling laws.
McMahon rejected the argument, finding that Novig had not shown a likelihood of success on the merits. Her reasoning challenges the premise that operating a federally designated exchange is sufficient to put its sports contracts beyond the reach of state gambling regulators.
Why the Contracts Are Not Swaps
McMahon agreed that sporting outcomes meet the statute’s definition of an “event or contingency”. But she concluded that Novig’s contracts did not meet the separate requirement that the event be associated with a potential financial, economic or commercial consequence, interpreting that requirement in the context of a law intended to manage price risk.
Novig offered hypothetical examples of businesses using sports contracts to hedge risks, but, McMahon wrote, provided no real-world example. Instead, she found that Novig marketed its product to recreational bettors.
“From the perspective of the customer, there is no qualitative difference between Novig's product and FanDuel's traditional sports bet,” McMahon wrote.
She also gave an alternative reason for denying relief: even if the contracts were swaps, the act would not prevent New York from applying its gambling laws to betting activity on the exchange.
CFTC's Rules Draw Sharp Criticism
The opinion criticized the CFTC’s October actions: an interim final rule excluding sportsbook bets and casino-style gambling from the definition of a swap, alongside a proposed rule that would include sports event contracts.
The CFTC’s interim final rule draws a structural distinction: exchange contracts trade at market-set prices between participants and are centrally cleared, unlike traditional wagers made against a sportsbook.
McMahon found that distinction insufficient under the statutory test. The two rules “are inherently contradictory and cannot be reconciled,” she wrote, declining to defer to the agency. She also said proposed regulations have no legal effect.
The judge separately criticized the CFTC’s emergency order of Aug. 11, which directed Kalshi to continue operating while New York pursued restrictions. She wrote that it “smacks of a collusive effort between a regulator and regulatee to generate a claim for conflict preemption”—the argument that federal requirements override incompatible state law.
The agency had defended its intervention as necessary to preserve orderly national derivatives markets, arguing that state-by-state regulation threatened those markets.
The decision follows the Second Circuit’s Nov. 3 denial of injunctions pending appeal in Kalshi’s cases in New York and Connecticut and Coinbase’s case in Connecticut. That brief order denied interim relief, not the appeals themselves.
Novig has already taken the next step: it filed a notice of appeal to the Second Circuit on Nov. 10.
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