In an opinion yesterday, Judge McMahon denied a preliminary injunction to the online exchange that does business as Novig and that sells “event contracts” tied to sporting events. Novig sued the New York Attorney General and the State Gaming Commission to stop them from enforcing New York’s gambling and mobile sports-wagering laws against it. New York had already moved against other operators of these markets, including Kalshi, Coinbase, and Gemini.

Novig’s theory was preemption. The CFTC has “exclusive jurisdiction” over swaps traded on designated contract markets. It defines swaps to include contracts that depend on an “event or contingency associated with a potential financial, economic, or commercial consequence.” Judge McMahon held that Novig’s contracts likely are not swaps, so New York may require Novig either to get a state gambling license or to stop listing the contracts.

The court’s analysis tracks a split that has opened among the courts of appeals this year: the Third Circuit held that sports event contracts are swaps and that the CEA preempts New Jersey’s gaming laws as applied to them, but the Ninth and Sixth Circuits ruled the other way.

In the Second Circuit, a motions panel on November 3 denied injunctions pending appeal in three appeals heard together: two by Kalshi and one by Coinbase. The panel said only that the appellants “failed to make the required showing” for an injunction.  Two of the appeals are from cases in Connecticut, and the third arises from a ruling from Judge Torres, which aligns with Judge McMahon’s ruling.

Following the Sixth and Ninth Circuits, Judge McMahon found that the key statutory phrase— contracts that are “associated with a potential financial, economic, or commercial consequence”—addresses interest rates, currencies, commodities, and the transfer of financial risk. That is, the phrase covers only events “inherently associated with potential financial consequences.” Any broader reading, the court explained, would make the definition so wide “that it would lose all meaning.” The court also found that the contracts serve none of the CEA’s hedging purposes. A farmer might by corn futures, for example, to hedge against “financial ruin” if the “corn market craters.” But Novig’s sports event contracts are nothing like that:

Bettors are not hedging against the economic fallout from price fluctuations. In fact, instead of hedging against risk, sports event contracts “create risk, largely for ordinary consumers[.]” KalshiEX, LLC v. Assad, 190 F.4th 1098, 1114 (9th Cir. 2026).

Novig protests, proposing examples where sports event contracts could be used to offset risk, such as a hotel’s hedging against their local team’s early playoff exit. These examples are unpersuasive. Notably, Novig offers only hypotheticals, not a single real-world example of a business’ hedging by purchasing a sports event contract. That absence is not surprising, because Novig’s target market is not businesspeople like Hilton Hotels, who want to hedge against risks to their businesses. Novig markets its product to ordinary people who want to bet on sports games for recreational purposes. See Dkt. No. 52-22 (press release announcing partnership between Novig and the New York Mets). Congress drafted the CEA to regulate financial activity, like hedging against corn futures, not consumers betting on Thursday Night Football. The CEA’s text must be read accordingly.

The court also stressed what would follow from Novig’s reading. Under the CEA, it is unlawful to enter into a swap except on a designated contract market. If sports bets were swaps, ordinary sportsbook wagers, casino games, and even bets between friends “on a ‘neighborhood ping pong match’” would become federal crimes.

Judge McMahon was blunt about Novig’s arguments:

And despite Novig’s cloaking its operations in the terminology of a “derivatives market,” there is no real dispute that the product it offers consumers is the ability to bet on the outcome of a sporting event.

The opinion quotes Novig’s own statements, including that “[o]ur north star is to be the largest sports betting platform in the world.”

Anticipating that a higher court might disagree, the court went on to hold that preemption would still be limited. The CEA’s savings clause preserves the jurisdiction of “other regulatory authorities under the laws of the United States or of any State.” The court reasoned that “exclusive jurisdiction” therefore bars states from regulating the licensing and operation of designated contract markets themselves, but not from applying gambling laws that only incidentally affect them.