Judge Rejects Federal Shield for Novig
On November 10, a New York federal judge denied sports prediction exchange Novig's request to block state gambling enforcement, ruling that its sports event contracts do not qualify as federally regulated swaps.
U.S. District Judge Colleen McMahon concluded that Novig's contracts failed the statutory requirement of being associated with a potential financial, economic, or commercial consequence. Instead, she found the products were marketed to recreational bettors, noting no qualitative difference between Novig's offerings and traditional sports bets. As The Defiant Team at The Defiant reported, the judge also sharply criticized the Commodity Futures Trading Commission (CFTC) for its efforts to shield prediction markets from state oversight. McMahon called the CFTC's recent rules "inherently contradictory" and described the agency's August emergency order directing Kalshi to continue operating as smacking of a "collusive effort" to generate a conflict preemption claim.
Novig, which received federal exchange designation in June and began offering contracts to New York customers in August, has already filed a notice of appeal to the Second Circuit. The decision does not immediately shut down the platform but denies it protection from state enforcement while the lawsuit proceeds.
State Regulators Clash With Prediction Markets
The New York ruling arrives amid a nationwide surge in litigation between prediction market operators and state officials. As Dustin Gouker at The Event Horizon reported, operators are aggressively pushing back against state-level crackdowns. In Missouri, Polymarket US, Robinhood, and Underdog all filed federal lawsuits in early November to fend off enforcement actions from Attorney General Catherine Hanaway. These companies argue that federal commodities laws preempt state gambling regulations.
The legal uncertainty continues to reshape the landscape for traders evaluating Kalshi vs Polymarket and other platforms. While operators argue they are federally regulated exchanges, states that have invested heavily in legalizing and taxing traditional sports betting are increasingly treating event contracts as unlicensed gambling. Traders utilizing the best Polymarket tools and other market analytics must now navigate a fragmented regulatory environment as these jurisdictional battles advance through federal appellate courts.