New York judge rejects Novig injunction as Kalshi faces possible CFTC charges
Regulation2 min read
A New York federal judge denied Novig’s request to block state gambling enforcement, ruling on 10 November that its sports event contracts are not swaps under federal law. Separately, the CFTC has privately warned Kalshi of possible enforcement over contract filings, while the company said the issue concerned submissions for a handful of contracts and that it was addressing it.
Novig failed to secure a preliminary injunction against New York gambling enforcement, as U.S. District Judge Colleen McMahon denied its request. Separately, Kalshi has received a private warning from the CFTC about potential imminent charges relating to notification of new contracts, according to reports from Politico and Reuters.
Novig’s sports event contracts do not qualify as swaps under the Commodity Exchange Act, McMahon concluded in her November 10 ruling. She also dismissed the company’s contention that federal law preempts New York gambling regulations. The judge was similarly unconvinced that Novig’s peer-to-peer approach sets it apart from conventional sportsbooks. She dismissed Novig’s claim that state licensing would clash with federal requirements, noting that it could seek gambling licences, as it had in Colorado, and use geofencing.
McMahon questioned the CFTC’s changing position on sports contracts, saying its October rules did not explain how sports event contracts differed from traditional sportsbook wagers. She criticised the CFTC’s emergency order directing Kalshi to keep operating in New York even if a state court ruled otherwise.
The investigation into whether Kalshi met federal notification rules for dozens of contracts has lasted months, a person with direct knowledge told Politico. No charges have been announced publicly, though a settlement remains possible. The CFTC’s self-certification system lets regulated exchanges introduce products without advance approval if they certify the contracts comply with applicable rules and laws. The warning related to a procedural submission error affecting a handful of contracts, many not live, Kalshi spokesperson Elisabeth Diana told Politico. She said the company was already dealing with the issue.
Congress should prohibit sports event contracts, Democratic Rep. Ro Khanna said. He said the markets evade state consumer protections and state and tribal gambling laws, drain state tax revenue, fuel addiction and pose public health risks to young Americans.