Less than one week after launching its CFTC-regulated prediction market exchange for sports contracts, Novig has sued four states to protect its products from state enforcement. Over the weekend, gaming attorney and OSINT specialist Daniel Wallach revealed that Novig’s subsidiary, Ludlow Exchange, had filed lawsuits against four states: Massachusetts, New Mexico, Washington, and New York.
The contents of Novig’s lawsuit against the state of Washington were subsequently posted by Fintech attorney Ariel Givner. According to Givner, Novig “sued the state to block enforcement of Washington’s gambling laws, Consumer Protection Act, and Recovery of Money Lost at Gambling Act.”
Much of what is publicly known about Novig’s claims has been directly posted by Givner, a Villanova Law graduate who, as an IP and corporate attorney, has expansive access to the full text of recent lawsuits. Text within Novig’s suit against the state of Washington refers to the company recently launching as a prediction market exchange offering sports event contracts that are federally regulated by the CFTC.
“The event contracts Novig lists are a type of derivative instrument that is extensively regulated under federal law,” according to Givner’s highlighted text of the exchange’s lawsuit against Washington. “Congress granted the CFTC ‘exclusive jurisdiction’ over precisely such transactions… and Washington is thus squarely preempted as applied to the event contracts Novig has launched this week on its platform.”
Noticeably, all four of Novig’s lawsuits last week were filed in federal courts. According to Miami Law School Professor Daniel Wallach, NM, MA, WA, and NY have all filed temporary restraining orders and sought preliminary injunctions in state courts against prediction market exchanges. The “goal may be to tie up likely enforcing states in federal court,” said the Forbes contributor.
For its part, Novig is seeking declaratory and injunctive relief against Washington and other states that have already filed legal complaints in their respective state courts. Novig cites its ongoing policy of enforcing a 21-year-old minimum age requirement for all account holders, a threshold that likewise existed before the company transitioned from its previous sweepstakes model. By doing so, Novig is apparently seeking to shield its products from any potential state-sponsored enforcement measures that are based on “underage gambling” claims.
Aside from its minimum age restrictions, Novig distinguishes itself from other prediction markets by offering sports event contracts exclusively. Account holders on the Novig app are unable to trade on events that are related to politics, elections, entertainment, or global affairs. Instead, all event contracts on Novig are related to sports outcomes.
Novig officially launched as a CFTC-regulated prediction exchange on Tuesday, August 4th, just in time for the NFL Pro Football Hall of Fame Game between the Carolina Panthers and Arizona Cardinals. Its sports event contracts are currently accessible in 47 states (individuals in Nevada, Michigan, and Arizona are geoblocked). Although its legal stance firmly aligns with other federally regulated prediction markets like Kalshi, the newly licensed exchange is expected to compete against Kalshi for market share through its sports-focused products and user interface design.
Loading …
