Novig Loses Injunction Bid as Judge Rules Sports Contracts Not Swaps

A federal judge in New York has denied Novig's request for a preliminary injunction, ruling that the platform's sports event contracts are not swaps under the Commodity Exchange Act (CEA) and that New York may apply its gambling laws to the company.

U.S. District Judge Colleen McMahon of the Southern District of New York issued the decision in a Tuesday court filing. It allows the state to require Novig either to obtain a gambling license or to prohibit the listing and trading of sports event contracts on its platform.

What does the ruling change for Novig's operation?

Novig can no longer claim federal preemption in New York while the case proceeds. McMahon rejected the platform's core legal theory that the CFTC (Commodity Futures Trading Commission) holds "exclusive jurisdiction" over event contracts as swaps under the act.

She quoted the platform's product directly in her assessment, writing that Novig's sports event contracts "bear more than a passing resemblance to sports betting."

The court's reasoning turned on statutory text. "The Court concludes that Novig's contracts do not depend on events or contingencies that are 'associated with a potential financial, economic, or commercial consequence' within the meaning of § 1a(47)(A)(ii). Accordingly, they are not 'swaps' under the CEA," the filing said.

Timeline of the dispute

• June 2026: Ludlow Exchange, LLC, the legal entity behind Novig, receives CFTC designation as a contract market.
• August 2026: The platform begins offering sports event contracts to New York customers.
• Aug. 5, 2026: The company sues New York Attorney General Letitia James and officials at the New York State Gaming Commission, arguing federal commodities law preempts state regulation of its products.
• This week: Judge McMahon denies the preliminary injunction at the current stage of the case.

The designation timeline matters for execution desks tracking the sector. Novig held a federal contract-market status when it launched the contested products, yet the ruling treats that status as insufficient to shield sports contracts from state gambling statutes.

A pattern across courts

The decision follows a similar ruling earlier this year by another New York federal judge, who denied Kalshi's request to block state authorities from enforcing gambling laws on its prediction market platform.

Novig is litigating the same preemption question in multiple other states. Kalshi, Polymarket, and other prediction market platforms face parallel proceedings of their own.

Sports betting and gaming lawyer Daniel Wallach wrote on X: "NY Attorney General Letitia James could literally cross the street and file a state-court civil enforcement action against Novig as soon as today."

Wallach added that state regulators may shift from defending their enforcement authority to exercising it proactively in state court. He noted that federal courts within the Second Circuit have now issued 10 rulings in sports prediction-market litigation — all favoring the states.

Mandate versus assertion

Two categories of fact should be kept separate here. What is mandated: New York may apply its gambling and sports-wagering laws to Novig's activity, pending further proceedings, and may demand a license or a trading halt. What is asserted: Wallach's characterization of a broader regulatory shift remains his analysis, not a court holding.

The Block has reached out to Novig for comment, and the company's response, if any, is not yet public.

The preliminary-injunction stage leaves the underlying merits unresolved, but the 10-0 record of state victories in the Second Circuit signals that prediction market operators offering sports contracts face a rising compliance burden in state after state.