A federal judge in Manhattan has refused to block New York from enforcing its gambling laws against Novig’s sports-event contracts, finding that the company was unlikely to show that the products are federally regulated swaps.
Judge Colleen McMahon denied the preliminary-injunction request on Nov. 10 in Ludlow Exchange LLC v. James, a 35-page decision that left New York free to require a state gambling licence or prohibit Novig from listing and trading the contracts. She concluded that sporting events do not carry the financial, economic or commercial consequence Congress contemplated in the Commodity Exchange Act’s definition of a swap.
“The Court is not required to disregard common sense,” McMahon wrote. “Novig’s sports event contracts are sports betting.” Because Novig was unlikely to succeed on the merits, she did not consider the remaining factors for preliminary relief.
Novig operates an online exchange where users take opposing positions on how a sporting event will occur or resolve. Trades execute when a buyer and seller meet at the same price, and Novig does not take the other side of the trade, unlike a traditional sportsbook.
Novig received CFTC designation as a contract market on June 16 and announced on Aug. 4 that its sports contracts would be offered to New York customers. New York considers that activity sports wagering, for which state law generally bars unlicensed mobile platforms serving residents.
Novig sued in August on the argument that the Commodity Exchange Act grants the Commodity Futures Trading Commission exclusive jurisdiction over swaps traded on a designated contract market. McMahon rejected that central argument. She also held alternatively that, even if the contracts were swaps, the federal statute’s protection of exchanges’ licensing and operation would not prevent New York from applying its gambling laws to the contracts themselves.
The judge called Novig’s contention that it could not comply with both state and federal law “ridiculous,” noting that the company could pursue a New York licence. Novig had previously obtained a Colorado Internet Sports Betting Operator licence in 2023 before returning it and shifting to a federally regulated exchange model.
The ruling also delivered a sharp rebuke to the CFTC’s recent approach to sports contracts. McMahon said the agency had failed to identify a meaningful difference between exchange-traded sports contracts and sportsbook wagers, since both are outcome-dependent bets with financial consequences.
She described the CFTC’s two Oct. 19 rulemakings as “inherently contradictory”: one proposed treating sports, political, cultural and weather contracts as swaps, while the other said casino-style gambling products, including sportsbook sports wagers, were not swaps. The judge also said the CFTC’s August emergency order allowing Kalshi to continue operating in New York “smacks of a collusive effort” between regulator and regulated company, while stopping short of finding collusion occurred.
As we reported in August, the Ninth Circuit reached a similar conclusion in Kalshi’s Nevada case, holding that sports contracts were sports bets rather than swaps and that federal law did not displace state enforcement.
The decisions have deepened a federal appellate divide. The Third Circuit sided with Kalshi in April on CFTC jurisdiction, while the Ninth Circuit ruled the opposite way in August and the Sixth Circuit followed that approach in September.
Ludlow Exchange filed its notice of interlocutory appeal on Nov. 10, shortly after McMahon issued her opinion. The case, No. 1:26-cv-06676, now proceeds to the U.S. Court of Appeals for the Second Circuit, which hears appeals from the Southern District of New York.
