Day After Launching Regulated Prediction Market, Novig Sues New York in Federal Court

• One day after launching its regulated prediction market, Novig has filed a lawsuit against New York in federal court
• Novig is requesting a preliminary injunction to prohibit New York from enforcing its gambling laws
• Lawsuit claims Novig’s sports event contracts are exclusively regulated by Commodity Futures Trading Commission

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Just one day after launching its regulated prediction markets, Novig has filed a lawsuit in federal court to potentially prohibit New York from enforcing its gambling laws against its markets.

Counsel for Novig today sued New York Attorney General Letitia James and members of the New York State Gaming Commission, making a motion for a preliminary injunction to prohibit the state from taking action against its sports event contract markets.

“New York has moved aggressively against federally regulated event-contract trading within its borders, suing both KalshiEX LLC and Coinbase Financial Markets, Inc. under Executive Law § 63(12) for offering the type of contracts at issue here. Novig, having just secured its status as a Designated Contract Market (“DCM”) registered by the CFTC, brings this action to prevent Defendants from doing the same to Novig,” counsel wrote in the lawsuit.

Similar Issues at Play

Novig’s lawsuit is similar to other prediction market lawsuits in New York, as the now prediction market operator believes its sports event contracts can only be regulated by the federal government and the Commodity Futures Trading Commission (CFTC).

Novig noted that unlike other prediction market operators, it only allows those who are of the age of 21 to trade on its platforms.

The motion for a preliminary injunction, if granted, would prohibit New York from enforcing its gambling and sports betting rules to halt Novig from offering its sports event contract markets in the Empire State.

“Despite the CFTC’s exclusive jurisdiction over event contracts, Novig expects that New York will imminently bring an enforcement action against it along the same lines as the other lawsuits that Defendants have already brought against similarly situated parties. New York’s threatened enforcement of its laws is preempted several times over,” counsel wrote.

The lawsuit, which was filed in U.S. District Court for the Southern District of New York, was filed one day after Novig launched its federally regulated sports event contracts in 47 states. Novig received Designated Contract Market certification from the Commodity Futures Trading Commission on June 16.

New York is proving to be an important battleground for the regulation of prediction markets, as several legal fronts are currently being decided in its courtrooms.

Another Lawsuit to the Mix

Novig’s New York lawsuit is the latest in the state, with New York itself recently taking legal action against Kalshi, the largest prediction market operator in the U.S.

New York filed a lawsuit against Kalshi at 12:01 a.m. on Friday, July 31, seeking $36 billion from the company for alleged illegal gambling in the state.

After courts denied Kalshi emergency relief last week, New York Gov. Kathy Hochul (D) and Attorney General Letitia James announced a lawsuit against the company, alleging the platform runs an illegal gambling operation in the Empire State.

“Kalshi has chosen to ignore New York’s gaming laws, which exist to protect consumers, prevent problematic gambling, deliver funding for critical public services, and ensure that every company plays by the same rules,” Hochul said in a released statement. “This choice has consequences, and working closely with Attorney General James, New York is taking action to stop this illegal behavior and bring Kalshi into compliance, because no company is above the law.”

The state filed its initial lawsuit against Kalshi in New York County Supreme Court. However, the lawsuit was removed to New York federal court after a Kalshi request and has been assigned to U.S. District Court for the Southern District of New York Judge Analisa Torres. Torres denied Kalshi’s initial request for a preliminary injunction in early July.