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A New York federal judge has denied Novig’s bid to block state gambling enforcement. Judge Colleen McMahon ruled at the preliminary-injunction stage that the prediction exchange’s sports event contracts are not federally regulated swaps, according to The Defiant.
The decision says New York can require Novig to obtain a state gambling license. It can also prohibit the listing and trading of those contracts, The Defiant reported.
Why the court rejected Novig’s swap argument
Novig argued that the Commodity Exchange Act placed its contracts under the exclusive authority of the CFTC. That, it said, shielded them from state gambling laws. McMahon found Novig had not established a likelihood of success on the merits.
The judge said the contracts failed the requirement that the event be associated with a potential financial, economic or commercial consequence. She also said Novig marketed the product to recreational bettors rather than for real-world hedging use, per The Defiant.
In her opinion, McMahon wrote: “From the perspective of the customer, there is no qualitative difference between Novig’s product and FanDuel’s traditional sports bet.”
Focus Gaming News reported that the court found significant similarities between the contracts and traditional sports betting. It said McMahon sits on the Southern District of New York.
Focus Gaming News also reported that Ludlow Exchange LLC, the legal entity behind Novig, sued New York Attorney General Letitia James and New York State Gaming Commission officials. It said the CFTC designated Ludlow as a contract market in June 2026. Ludlow began offering sports event contracts to New York customers in August 2026, the outlet reported.
McMahon’s criticism of the CFTC
McMahon also criticized the CFTC’s October actions, The Defiant reported. They included an interim final rule excluding sportsbook bets and casino-style gambling from the swap definition. The rule appeared in the Federal Register on Oct. 19, 2026. The CFTC also proposed a rule that includes sports event contracts.
According to The Defiant, McMahon said the two rules “are inherently contradictory and cannot be reconciled”.
The judge also criticized the CFTC’s Aug. 11 emergency order directing Kalshi to continue operating while New York pursued restrictions. According to The Defiant, McMahon said the order “smacks of a collusive effort between a regulator and regulatee to generate a claim for conflict preemption”.
Appeal to the Second Circuit
The Defiant reported that the Second Circuit denied injunctions pending appeal in related cases on Nov. 3. Novig has filed a notice of appeal to the Second Circuit.
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Sources: As reported by thedefiant.io and Focus Gaming News | Latest Gambling Industry News & Updates.
