Novig sues Missouri to block enforcement over sports event contracts

Ludlow Exchange, a wholly owned subsidiary of Novig, Inc., has sued Missouri’s attorney general and gaming regulators in federal court, seeking to prevent the state from applying its gambling and sports-wagering laws to the platform’s sports event contracts.

The complaint, filed Oct. 16 in the U.S. District Court for the Eastern District of Missouri, came a day before a state deadline for Novig to stop serving Missouri customers or obtain a gaming licence and pay state taxes and fees. The defendants are Attorney General Catherine L. Hanaway, Missouri Gaming Commission Executive Director Michael A. Lear and Commission Chair Jan M. Zimmerman, all in their official capacities.

The company is asking for preliminary and permanent injunctions, as well as a declaration that Missouri’s laws are pre-empted when applied to its contracts. It argues that the contracts are swaps under the Commodity Exchange Act, putting transactions on its exchange within the Commodity Futures Trading Commission’s exclusive jurisdiction.

Novig does not challenge Missouri’s general authority to regulate gambling. Instead, it says the state cannot treat contracts traded on its federally regulated designated contract market as unlawful sports wagers. The complaint says continued operations could expose the company to criminal liability, civil monetary penalties under the Missouri Merchandising Practices Act and public-nuisance remedies.

Novig, Inc. formed Ludlow Exchange as a wholly owned subsidiary in October 2025, and the CFTC designated it as a contract market on June 16 after reviewing its application. The company says it is subject to the agency’s 23 core principles and broader regulatory framework.

Its contracts trade through an anonymous electronic central limit order book and are fully collateralized through a derivatives clearing organization, according to the complaint. Novig says customers trade with one another rather than against the company, which neither takes the other side of a trade nor builds a betting margin into prices.

The company also argues that a Missouri-only licensing regime would impair that peer-to-peer model by limiting trading to in-state users and shrinking the available pool of buyers and sellers. Its responsible-trading rules restrict participation to people aged 21 or older, allow trading and deposit limits, and permit account freezes ranging from one day to a year.

The lawsuit follows Missouri’s Sept. 17 cease-and-desist action against six prediction-market operators, including Novig, as we reported in September. Missouri’s letter required Novig to cease activity or obtain a Gaming Commission licence within 30 days, pay associated taxes and fees, and warned that the state would pursue available enforcement if violations continued.

The state maintains that facilitating sports event contracts constitutes unlicensed sports wagering. Its voter-approved framework requires operators to hold a Missouri licence, imposes a 10% tax on sports-betting gross receipts and bars people under 21 from placing bets. An initial online sports-wagering licence and its five-year renewal can each cost as much as $500,000.

Missouri rejects Novig’s legal premise, saying sports-betting event contracts do not qualify as swaps and therefore are not insulated from state gambling law. Hanaway said companies could not “repackage sports bets as ‘event contracts’ to avoid Missouri law.”

The case adds to a wider dispute over federal and state authority over prediction markets. Novig cites Third and Ninth Circuit decisions that it says support pre-emption for certain sports contracts on CFTC-regulated exchanges, while a Sixth Circuit decision involving Kalshi found that the contracts at issue were not swaps and that federal law did not pre-empt the relevant state gambling rules.

The CFTC has separately taken an assertive position. In June, it sued Kentucky over that state’s efforts to apply state laws to CFTC-registered contract markets, and Chairman Michael S. Selig said the agency was committed to maintaining exclusive jurisdiction over prediction markets. The regulator has also proposed rules addressing when event contracts could be treated as contrary to the public interest and barred from listing or clearing.

No ruling on Novig’s request for an injunction or its pre-emption argument had been issued as of the report.