Judge denies Novig’s bid to block New York, finding its sports contracts are likely not swaps

A federal judge in Manhattan on Tuesday, Nov. 10, denied Novig’s request for a preliminary injunction that would have kept New York from applying its gambling and sports-wagering laws to the exchange’s sports event contracts.

In a 35-page Opinion and Order, U.S. District Judge McMahon concluded that, at this preliminary stage, Novig’s contracts are not “swaps” under the Commodity Exchange Act. That means, in the court’s view, New York can require Novig “either to obtain a state gambling license or to prohibit the listing and trading of those contracts” on its exchange.

Ludlow Exchange, LLC, which does business as Novig, sued Attorney General Letitia James and New York State Gaming Commission officials (No. 1:26-cv-06676).

How the case got here

The CFTC designated Novig as a contract market on June 16, 2026. On Aug. 4, Novig announced it would offer sports event contracts to New York customers. It filed suit the next day, in anticipation that New York would move against it as the state had against Kalshi, Coinbase and Gemini, and sought a preliminary injunction on Aug. 6. The court denied a temporary restraining order on Aug. 11.

New York opposed the motion on Sept. 10, and the court accepted an amicus brief from 24 federally recognized tribes and tribal organizations backing the state. Novig replied on Sept. 24. On Nov. 5, New York told the court that a Second Circuit motions panel had denied an injunction pending appeal in three consolidated Kalshi and Coinbase cases raising essentially the same issues. The opinion notes that a merits panel will take up the question, with no argument date set. Our New York Kalshi explainer covers the related Kalshi cases.

The swap question

The CEA gives the CFTC “exclusive jurisdiction” over swaps traded on a designated contract market. Novig argued that its contracts meet the statute’s definition, which covers payments dependent on “an event or contingency associated with a potential financial, economic, or commercial consequence.”

On the first half of that test, the court sided with Novig. It agreed with the Third and Sixth Circuits, and disagreed with district courts in Connecticut and Nevada, that a sports outcome such as the Giants winning by 2.5 points or more is itself an “event or contingency.”

The second half is where Novig lost. The court rejected the broad reading of “associated with” in the Third Circuit’s Flaherty decision, instead following the Sixth and Ninth Circuits in requiring events “inherently associated with potential financial consequences.” It gave three reasons: the surrounding statutory text concerns rates, currencies and other financial interests; the CEA exists to manage price risk, while sports contracts “create risk, largely for ordinary consumers,” quoting the Ninth Circuit; and Novig’s reading would sweep in casino games, charity raffles and bets between friends on a “neighborhood ping pong match.”

The court gave no deference to the CFTC. It found the agency’s Oct. 19 interim final rule, which says sportsbook wagers are not swaps, and its same-day proposal to treat sports event contracts as swaps “inherently contradictory.” Judge McMahon wrote that the shift “appears calculated to influence the outcome of the ongoing litigation.” From a customer’s perspective, the opinion says, the only difference between Novig’s product and a FanDuel bet is who takes the other side, which “is simply not a difference that makes a difference.”

The court also quoted Novig’s own statements, including “Our north star is to be the largest sports betting platform in the world,” and concluded that “Novig’s sports event contracts are sports betting.”

Preemption, in the alternative

Because the contracts are not swaps, the court found that the CEA does not preempt New York’s laws on any theory. It added an alternative analysis in case a higher court disagrees. Even if the contracts were swaps, the CFTC’s exclusive jurisdiction, read with the statute’s savings clause, bars states only from regulating the licensing and operation of exchanges, not from incidentally applying gambling laws. The court contrasted Minnesota’s law criminalizing prediction markets outright, which a Minnesota federal court found likely preempted at least in part.

On conflict preemption, the court called the CFTC’s Aug. 11 order directing Kalshi to keep operating an apparent “collusive effort between a regulator and regulatee.” It found that Novig could comply with both regimes by obtaining a New York license, as it once did in Colorado, and by geofencing.

The order is narrow in form. Finding no likelihood of success, the court denied the motion without reaching irreparable harm, the balance of equities or the public interest. It does not itself order Novig to stop anything; it resolves only the injunction motion.

For traders, the ruling denies Novig the court-ordered protection it sought in its home state, where it is headquartered, and, in the court’s view, leaves New York free to apply its licensing laws to the exchange. Novig is also in court in Missouri: a day earlier, Missouri filed counterclaims against Novig seeking to bar it from taking payments from state residents.

Our AI news desk researched and wrote this article, and software checked every factual sentence against the records it links to, following the WriterOps methodology. Report an error.