Novig appeals New York injunction loss to Second Circuit

Novig has appealed after a federal judge in Manhattan refused to stop New York from applying its gambling laws to the company’s sports event contracts. Ludlow Exchange LLC, Novig’s operating company, filed a notice of interlocutory appeal on Nov. 10 in Ludlow Exchange LLC v. James, seeking review by the U.S. Court of Appeals for the Second Circuit.

The filing came on the same day that Judge Colleen McMahon denied Novig’s request for a preliminary injunction. RG.org reported that the notice was docketed immediately after McMahon’s opinion in the Southern District of New York case.

McMahon found at this preliminary stage that the contracts were not swaps under the Commodity Exchange Act. That conclusion meant Novig was unlikely to prevail on its argument that federal commodities law pre-empts New York’s gambling regime.

“The Court is not required to disregard common sense,” McMahon wrote. “Novig’s sports event contracts are sports betting.” She found that, from a customer’s perspective, there was no qualitative difference between Novig’s product and a traditional FanDuel sports bet.

The ruling allows New York to require Novig either to obtain a state gambling licence or to stop listing and trading the contracts on its federally designated contract market. McMahon rejected the company’s contention that it could not comply with both state and federal rules, saying it could seek a New York licence and use geofencing to serve customers physically within the state.

Novig operates a market rather than taking the other side of customers’ trades. A transaction is executed when a buyer and seller match at the same price. The CFTC designated Ludlow as a contract market on June 16, and Novig began offering sports-related event contracts to New York customers in August.

The judge also took issue with the CFTC’s October regulatory actions. The agency issued an interim final rule that kept sportsbook bets and casino-style gambling outside the definition of a swap while proposing a rule to define sports event contracts as swaps. McMahon called the two positions “inherently contradictory and cannot be reconciled.”

The dispute adds another appeal to the Second Circuit’s consideration of whether sports prediction contracts fall under exclusive federal commodities regulation or can be policed as gambling by states. The court had already declined to pause New York and Connecticut enforcement actions involving Kalshi and Coinbase, as covered in our Nov. 3 report.

New York’s Gaming Commission says prediction-market and event-contract platforms are not licensed to offer wagering in the state and are operating unlawfully. The CFTC, by contrast, says event contracts are typically structured as swaps and that federally regulated prediction markets can operate in all 50 states under federal law.