Judge Rules Novig Contracts Are Sports Betting

A Major Ruling on Sports Event Contracts

Imagine telling someone you run a sports betting platform, but when state regulators show up, you insist it is actually a complex financial market. That is essentially what happened in a high-stakes legal battle over prediction market platform Novig.

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. Novig was trying to stop New York Attorney General Letitia James and the state Gaming Commission from applying local gambling laws to its sports contracts.

Novig sued New York in August, arguing that the federal Commodity Exchange Act gives the Commodity Futures Trading Commission (CFTC) exclusive jurisdiction over its markets. However, Judge McMahon rejected that argument completely.

Why the Judge Found Novig’s Arguments Unconvincing

In her 35-page opinion, Judge McMahon explained why Novig is unlikely to win its lawsuit. She stated that sports event contracts are not swaps under federal law because sporting events do not carry the financial or commercial consequences that Congress intended to regulate under the act.

Even if these contracts were classified as swaps, the judge pointed out that federal law only stops states from regulating exchange licensing and operations. It does not prevent states from enforcing their own gambling laws against them.

The Court is not required to disregard common sense—Novig’s sports event contracts are sports betting.

The judge highlighted Novig's own public statements to make her point. For example, Novig previously declared that its north star is to be the largest sports betting platform in the world.

In a sharp footnote, Judge McMahon added that Novig makes its money by charging two suckers a fee for the privilege of betting against each other on its platform. She called Novig's claim that it could not obey both state and federal law ridiculous, noting that Novig could simply apply for a New York gambling license, just as it did in Colorado in 2023.

Scathing Criticism of the CFTC and Kalshi

The ruling went beyond Novig itself and delivered strong criticism of federal regulators. Judge McMahon specifically targetted an emergency order issued by the CFTC in August to keep rival exchange Kalshi operating after New York took legal action against it.

After Kalshi warned of a market emergency on August 1 if New York obtained a restraining order, the CFTC stepped in. The regulator claimed that a sudden shutdown posed an existential threat to the Commission's registrants, marketplaces, and regulatory jurisdiction.

Novig pointed to that emergency order as proof of a direct conflict between federal and state law. However, Judge McMahon strongly rejected that interpretation.

The Kalshi Order smacks of a collusive effort between a regulator and regulatee to generate a claim for conflict preemption.

She added that the CFTC's own existing rules actually prohibit listing gaming-related event contracts, calling the alleged legal conflict a mirage.

Contradictory Rules from Federal Regulators

Judge McMahon also criticized two rulemaking actions published by the CFTC on October 19. In one proposed rule, the agency suggested defining event contracts tied to sports, politics, culture, and weather as swaps. In another interim rule, it stated that bets placed with traditional sportsbooks and casinos are not swaps.

The CFTC tried to justify this difference based on platform structure. It argued that sportsbooks set their own prices, whereas exchanges match buyers and sellers on an order book.

Judge McMahon called these two rules inherently contradictory. She noted that both types of wagers are outcome-dependent bets with financial consequences, saying the identity of the opposing party is simply not a difference that makes a difference.

She suggested that the CFTC's sudden policy shifts appeared calculated to influence the outcome of the ongoing litigation on this very issue.

A Fractured Legal Landscape Across Federal Courts

Novig filed a notice of appeal to the Second Circuit Court of Appeals just hours after the ruling. This decision deepens a growing divide among federal courts over how to handle sports event contracts:

• The Third Circuit Court of Appeals ruled in favor of Kalshi in April, deciding that sports contracts fall under CFTC jurisdiction in a case against New Jersey.
• The Ninth Circuit Court of Appeals took the opposite stance in August, ruling that the true substance of these contracts is sports gambling.
• The Sixth Circuit Court of Appeals followed the Ninth Circuit's logic in September.

Judge McMahon's ruling aligns with the Ninth and Sixth Circuits, but her explicit criticism of the CFTC goes much further than previous court statements.

Meanwhile, New Jersey has asked the U.S. Supreme Court to review the Third Circuit decision. That appeal is supported by legal briefs from Ohio, 38 other states, the District of Columbia, the NFL, the American Gaming Association, and 145 Native American tribes. Kalshi's formal response to the Supreme Court is due on December 7, after receiving two extensions.

Ongoing Legal Battles and High-Profile Marketing

The Second Circuit is already considering these questions in consolidated appeals involving Kalshi and Coinbase. Although a motions panel previously denied emergency injunctions while the appeal moves forward, a full merits panel has not yet heard oral arguments.

Novig is also facing legal troubles in other states. On November 9, the Attorney General of Missouri filed a counterclaim against Novig in St. Louis under federal anti-gambling laws.

Despite these expanding regulatory and courtroom struggles, Novig continues to push its brand into the mainstream. Actress Sydney Sweeney recently took an equity stake in Novig as part of a viral advertising campaign that drew significant media attention.