Novig sues four states to secure its launch

Novig has recently launched its independent prediction market platform. Just three days after its launch, the company had already filed lawsuits against four states. Right after announcing the national launch of its CFTC-regulated platform, Novig sued New York. Subsequently, it filed lawsuits against Massachusetts, Washington, and New Mexico. Gambling attorney Daniel Wallach argues that these preemptive lawsuits are a strategy to ensure an uninterrupted launch. These four states have acted against prediction markets, including New York, which sued Kalshi for $36 billion last week.

Legal Strategy and Possible Impact

Daniel Wallach noted on LinkedIn that the chances of success are slim in Massachusetts, New York, and Washington due to recent rulings favoring the states. However, he suggests that the key is to preserve an uninterrupted launch of over 90 days, allowing enough time for possible appeals.

The CFTC supports Novig in its legal disputes and has also appealed a ruling in Wisconsin to the Seventh Circuit. A judge denied the CFTC's motion to block the state from enforcing gaming laws against prediction markets.

Lawsuits in Federal Courts

Novig has filed four lawsuits in federal courts, seeking to gain advantage over state authorities. States typically sue in state courts, where judges have been more receptive to their arguments. Federal courts may be inclined to support Novig and Kalshi's claims that their platforms are governed by federal laws.

Wallach explained that these states attempted to obtain restraining orders and preliminary injunctions against designated contract markets (DCMs) in state courts. However, Novig seeks to complicate the litigation in federal courts.

New York Case

The most relevant case for Novig is that of the Southern District of New York (SDNY) against the state. It is the only case where it has sought a preliminary injunction against the enforcement of state law. The case is assigned to Judge Analisa Torres, who recently rejected a similar request from Kalshi.

New York Attorney General Letitia James claimed that Novig did not provide advance notice of its legal action, arguing that the company does not meet the standards to obtain a temporary restraining order.

Judge Torres has already denied Kalshi's position that its markets should be considered swaps under the Commodity Exchange Act. This precedent suggests that she may rule against Novig again, which seems to be using these lawsuits to delay any state enforcement actions.