Judge rules Novig sports contracts are not swaps under CEA
The ruling denies Novig’s request for a preliminary injunction and allows New York to require a gambling licence or an end to sports event contracts in the state.
Key takeaways:
- US District Judge Colleen McMahon of the Southern District of New York rejected a preliminary injunction sought by Novig, ruling its sports event contracts do not fall within the definition of swaps under the Commodity Exchange Act (CEA).
- Ludlow Exchange LLC, the legal entity behind Novig, sued New York Attorney General Letitia James and New York State Gaming Commission officials on August 5.
- Novig argued the CFTC has exclusive authority over its products, which would prevent state regulators from applying gambling laws.
- The court found the contracts have significant similarities to traditional sports betting and do not depend on events with a potential financial, economic or commercial consequence.
US.- A federal judge in New York has rejected a preliminary injunction sought by sports prediction market operator Novig. Colleen McMahon of the Southern District of New York ruled that the operator’s sports-related event contracts do not fall within the definition of swaps under the Commodity Exchange Act (CEA). The decision allows state authorities to require the company to obtain a gambling licence or stop offering sports event contracts to New York customers.
The ruling follows a lawsuit filed by Ludlow Exchange LLC, the legal entity behind Novig, against New York Attorney General Letitia James and officials from the New York State Gaming Commission. The company had argued that federal commodities legislation gives the Commodity Futures Trading Commission (CFTC) exclusive authority over its products, preventing state regulators from applying gambling laws to its operations.
Ludlow Exchange received designation as a contract market from the CFTC in June 2026 and began offering sports event contracts to customers in New York in August. It filed a federal lawsuit lawsuit on August 5, challenging the state’s authority to regulate its platform and arguing that its event contracts qualify as swaps under the CEA and therefore under the CFTC’s exclusive jurisdiction.
Judge McMahon rejected that interpretation when assessing the request for preliminary relief. She ruled that Novig’s sports contracts have significant similarities to traditional sports betting and do not meet the statutory requirements to be classified as swaps as they do not depend on events or contingencies associated with a potential financial, economic or commercial consequence, as required by the CEA’s definition.
Frequently asked questions (FAQs)
- Why did the court say Novig’s contracts are not swaps? The judge found the contracts have significant similarities to traditional sports betting. She concluded they do not depend on events or contingencies associated with a potential financial, economic or commercial consequence, as the CEA’s definition requires.
- What does the ruling mean for Novig in New York? It allows state authorities to require Novig to obtain a gambling licence or stop offering sports event contracts to New York customers. Novig, operated by Ludlow Exchange LLC, had been designated a contract market by the CFTC in June 2026 and began offering these contracts in New York in August.
