Washington Moves to Dismiss Novig’s Prediction-Market Preemption Suit

Washington Attorney General Nicholas W. Brown and five Washington State Gambling Commission officials moved on October 19, 2026, to dismiss prediction-market operator Novig’s federal lawsuit, arguing that the Commodity Exchange Act does not preempt state gambling law as applied to sports event contracts and that the Ninth Circuit has already resolved the question.

All defendants in the case, Ludlow Exchange LLC v. Brown, filed the Defendants’ Motion to Dismiss in the U.S. District Court for the Western District of Washington under Rule 12(b)(6), which permits dismissal of a complaint for the lack of a cognizable legal theory or the absence of sufficient facts to support one. The defendants asked the court to dismiss the complaint without leave to amend, contending that any amendment would be futile.

The Lawsuit the Motion Answers

Ludlow Exchange LLC, which does business as Novig, filed its complaint for declaratory and injunctive relief against all defendants on August 6, 2026, according to the case docket. Summonses were issued to the six defendants on August 10, 2026, the same day Judge Michelle L. Peterson was assigned to the case.

The motion states that the complaint pleads a single claim, preemption by the Commodity Exchange Act, seeking a declaration that the federal statute overrides Washington gambling law as to Novig’s sports event contracts and an injunction barring the defendants from enforcing state gambling laws against it. As recited in the filing, Novig offers only sports-based event contracts, made available to customers across the United States, including in Washington, on a contract market designated by the Commodity Futures Trading Commission. The complaint’s example, the filing notes, is a contract on whether the Seattle Seahawks will win the Super Bowl.

The filing also states that Novig brought the suit with the express intent of forestalling an enforcement action of the kind Brown previously filed against another prediction market, KalshiEX LLC.

Washington Gambling Law and the Kalshi Enforcement Action

The motion describes Washington’s Gambling Act of 1973 as prohibiting all gambling unless specifically exempted, with illegal gambling, professional gambling, bookmaking, online gambling, and sports wagering specifically defined and prohibited. A 2006 amendment explicitly extended the act to internet gambling, and the filing cites the state appellate decision Rousso v. State, which described internet gambling in Washington as effectively banned.

The defendants recount that, after the attorney general sued KalshiEX in state court, Kalshi removed the case to federal court, and the Western District of Washington remanded it on May 5, 2026, for lack of subject-matter jurisdiction. The Ninth Circuit denied Kalshi’s emergency request to stay the remand on May 21, 2026. On July 20, 2026, the Washington Superior Court granted the attorney general’s motion for a preliminary injunction barring Kalshi from offering event contracts in certain categories, including sports, in the state, according to the filing.

The Preemption Arguments

The defendants assert that two of three federal courts of appeal, a clear majority of the district courts to consider the issue, and several state courts, including Washington’s, have held that states may enforce their gambling laws against prediction markets without preemption by the Commodity Exchange Act. Central to their argument is the Ninth Circuit’s August 28, 2026, decision in KalshiEX v. Assad, which, as characterized in the filing, held that the statute neither expressly nor impliedly preempts state gambling law as to sports-related betting offered by prediction markets and is binding in the circuit.

“The substance of the sports event contracts offered on Kalshi’s DCM is sports gambling, regardless of whether Kalshi calls them swaps,” the motion quotes from the Assad opinion. Because Novig offers only sports betting, the defendants contend, there is no distinction between its contracts and those at issue in Assad.

The filing notes that a different Ninth Circuit panel cited Assad in Blue Lake Rancheria v. Kalshi on September 16, 2026, and that the Sixth Circuit held in KalshiEX LLC v. Schuler on September 25, 2026, that sports-event contracts are not swaps and that federal law does not preempt state gambling laws. The motion describes the Third Circuit’s decision in KalshiEX, LLC v. Flaherty as the lone appellate decision on the other side, one that drew a dissent and whose reasoning the Ninth and Sixth Circuits both rejected.

According to the motion, the district-court decisions reaching the same conclusion include KalshiEX LLC v. Cafferelli in Connecticut on August 10, 2026, Coinbase Financial Markets, Inc. v. Nessel in the Eastern District of Michigan on August 7, 2026, CFTC v. Wisconsin in the Eastern District of Wisconsin on July 29, 2026, QCX LLC v. Nessel in the Western District of Michigan on June 17, 2026, and a 2025 ruling in the District of Nevada. The filing acknowledges contrary decisions in Coinbase Financial Markets, Inc. v. Raoul in the Northern District of Illinois on October 2, 2026, and United States v. Minnesota in the District of Minnesota on July 27, 2026.

The defendants also invoke the Commodity Futures Trading Commission’s own words, quoting the agency’s 2024 statement: “The Commission is not a gaming regulator.” The motion argues that the agency’s more recent about-face does not change the analysis under the Supreme Court’s Loper Bright decision, and that the statutory provision allowing the agency to prohibit contracts involving gaming and certain other activities did not enlarge its preemptive authority over gambling. Field- and conflict-preemption theories fail under Assad and Schuler as well, the defendants maintain, and dismissal should be without leave to amend because the preemption theory cannot be cured by amendment.

Seven assistant attorneys general from the attorney general’s Consumer Protection Division, Andrea Alegrett, Julia K. Doyle, Ben Brysacz, Matt Geyman, Seann Colgan, Terrence Mangan, and Claire McNamara, signed the motion for Brown, whose office entered its appearances in the case on October 12, 2026. Suzanne Becker and Matthew Kernutt signed for the commission defendants, Tina Griffin, Sarah Lawson, Alicia Levy, Noah Skartvedt, and Michael Charles, all sued in their official capacities.

Novig is represented by Heidi Bradley of Bradley Bernstein Sands and by Sullivan & Cromwell attorneys admitted to appear pro hac vice on August 17, 2026, the docket shows. The defendants’ motion is noted on the court’s calendar for consideration on November 16, 2026.