Licenses
Novig Loses Bid to Shield Sports Contracts From New York Gambling Law
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U.S. District Judge Colleen McMahon on November 10, 2026, denied Novig’s request for a preliminary injunction against New York Attorney General Letitia James and state Gaming Commission officials, concluding that its sports event contracts are not swaps under federal commodities law and that New York may require a state gambling license or prohibit their listing and trading on its exchange.
Ludlow Exchange, which does business as Novig, had sought to stop state enforcement while its case proceeded. McMahon found that the company had not established a likelihood of success on the merits, so she did not reach the other injunction requirements: irreparable harm, the balance of equities and the public interest.
The Commodity Futures Trading Commission designated Ludlow Exchange as a federal contract market on June 16, 2026. After announcing sports event contracts for New York customers on August 4, 2026, Novig sued the next day in anticipation of enforcement and moved for a preliminary injunction one day later. McMahon denied its temporary-restraining-order request on August 11, 2026.
The designation made Novig itself the federally regulated exchange, rather than an intermediary routing trades to another venue. Its market matches buyers and sellers at the same price and does not take the opposite side of trades, earning fees from participants rather than keeping losing customers’ stakes. Its sports offerings included game winners, point spreads, totals, parlays and player-specific statistical outcomes, with comparable positions available through conventional sportsbook apps.
Why the Court Rejected Preemption
Novig argued that the Commodity Exchange Act gives the CFTC exclusive jurisdiction over swaps traded on a designated contract market and therefore preempts New York’s gambling laws. Its case invoked all three forms of preemption: express statutory displacement, federal occupation of the field and conflict between state and federal duties.
McMahon concluded that although sporting outcomes qualify as events or contingencies, they are not associated with a potential financial, economic or commercial consequence in the contextual sense required by the swap definition. Neighboring provisions address financial interests and risk management, whereas recreational sports contracts create risk for consumers instead of hedging the price risks that futures markets allow commodity producers to manage.
Federal designation did not decide whether these particular products were swaps, and the exchange model did not change the result. McMahon found that customers were still taking positions on the same sporting outcomes available through conventional sportsbooks, making Novig’s product sports betting in substance despite its derivatives terminology.
McMahon also held in the alternative that, even if the contracts were swaps, federal exclusivity would protect CFTC authority over exchange licensing and operation without displacing state gambling rules that incidentally apply to betting on the exchange. The field and conflict preemption arguments failed as well.
Licensing and Geofencing Remain Options
McMahon rejected Novig’s argument that compliance with both state and federal law was impossible. The company could seek a New York gambling license and geofence its service to customers physically in the state while continuing to operate its designated contract market. Licensure would also resolve the conflict Novig identified between New York’s restriction on gambling records and federal exchange recordkeeping duties, because the state restriction concerns gambling activity not authorized by law.
Novig previously obtained a Colorado internet sports betting operator license in 2023 but returned it as the company shifted to a federally regulated exchange strategy. Under the court’s analysis, an available compliance alternative does not have to be the most practical or cost-effective option to defeat an impossibility argument.
A Second Circuit motions panel has already denied injunctions pending appeal in related Kalshi and Coinbase cases raising essentially the same issues. A merits panel will consider the question, with no oral-argument date yet set. For Novig, state authorization or exclusion of the contested New York contracts remains the practical compliance route while those related appeals test the broader argument for federal protection.
