Novig launched its CFTC-regulated prediction market platform last week. Three days later the company filed lawsuits against four states: New York, Massachusetts, Washington and New Mexico.
The New York suit came one day after the nationwide launch announcement. Gaming lawyer Daniel Wallach calls it a pre-emptive tactic to secure an uninterrupted start. All four states have previously taken action against prediction markets — New York filed a $36bn lawsuit against Kalshi the same week.
Federal courts over state courts
Novig filed in federal courts, an attempt to gain an advantage over state authorities. States typically turn to their own courts, where judges tend to side with them. Federal courts may be more receptive to the argument from Novig and Kalshi that sports prediction markets fall under federal law, which pre-empts state gambling statutes.
Wallach notes that pre-emptive suits buy 90-plus days to operate without interference and time for any appellate rulings. The odds of success in Massachusetts, New York and Washington are slim after recent court decisions favouring the states, but that is not the point.
The Southern District of New York case is the most telling. It was assigned to Judge Analisa Torres, who recently denied a similar request from Kalshi for a temporary restraining order against state action. Torres already rejected Kalshi's position that its markets should be treated as swaps under the Commodity Exchange Act. New York Attorney General Letitia James said Novig 'has not come close to meeting the standard' for a temporary restraining order.
Still, as Wallach notes, the company likely knows this. The goal is to delay any state enforcement through the legal process.
