A federally regulated prediction market operator is asking a federal judge to block New York from enforcing state gambling laws against its sports event contracts, arguing that Congress placed those markets under the exclusive authority of the Commodity Futures Trading Commission.
Ludlow Exchange LLC, which operates as Novig, filed the lawsuit Wednesday (August 5) in the U.S. District Court for the Southern District of New York. The defendants include Attorney General Letitia James, New York State Gaming Commission Executive Director Robert Williams, Gaming Commission Chair Brian O’Dwyer and other commission members in their official capacities.
Novig says federal oversight overrides New York gambling laws
The case arrived only a day after the CFTC approved Novig as a Designated Contract Market, allowing the company to launch a nationwide sports prediction market under a federal regulatory framework instead of pursuing state-by-state sportsbook licenses. Novig says that the structure gives users access across the US, greater liquidity, live trading, more payment options and additional compliance safeguards, while requiring participants to be at least 21 years old.
The complaint says New York has already targeted similar products through lawsuits involving Kalshi and Coinbase Financial Markets Inc.
“New York has moved aggressively against federally regulated event-contract trading within its borders,” the complaint states.
Novig officially received its CFTC designation on June 16 and says it began offering sports event contracts to New York customers the same day it filed suit. The company argues those products are federally regulated derivatives rather than wagers governed by state gambling laws.
“The event contracts Novig lists are a type of derivative instrument that is extensively regulated under federal law and that can be listed, traded, and settled only on federally registered exchanges,” the complaint says.
According to the filing, Congress granted the CFTC “exclusive jurisdiction” over those markets, preventing New York from applying its gambling and sports wagering laws to contracts traded on a designated exchange.
The lawsuit points to the state’s cease-and-desist action against Kalshi and later enforcement cases against Kalshi and Coinbase Financial Markets as evidence that Novig faces an immediate threat.
“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,” the complaint states.
That dispute is already unfolding in another courtroom. Earlier this week, Kalshi shifted New York’s enforcement case into federal court, prompting a state judge to deny the attorney general’s request for emergency relief as moot while jurisdiction is decided.
Novig says its exchange includes deposit and trading limits, self-exclusion tools, market surveillance, employee integrity training and screening for prohibited traders. The company also says cumulative trading volume has exceeded $6 billion and stresses its exchange model, where users trade directly with one another instead of betting against a bookmaker.
According to the filing, “Congress recognized the obvious point that a national market cannot function under fifty regulators,” and intended the CFTC to provide a single regulatory framework for federally designated exchanges.
“Novig must either risk exposing the company to significant civil (and potentially even criminal) liability or refrain from offering event contracts to New Yorkers altogether,” the complaint states.
The company wants the court to declare that federal law preempts New York’s gambling laws and quickly issue an injunction, arguing that “the specter of New York enforcement is imminent and existential to Novig’s business operations.”
Featured image: Novig / Canva
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