Within two weeks of its near-nationwide launch as a sports prediction market platform, Novig has now instigated court battles with five separate states.
Novig sued Wisconsin in federal court on Friday, Aug. 14, just days after it also filed separate lawsuits against these states:
- Massachusetts
- New Mexico
- New York
- Washington
All five defendant states are engaged in litigation with other prediction market platforms in various courts, most commonly involving Kalshi. Most notably, New York Attorney General Letitia James sued Kalshi on behalf of the state at the end of July, seeking a total of $36bn in relief in response to the operator running what James called an “illegal, unlicensed gambling operation.”
Novig transformation to prediction market
Formerly a betting exchange and subsequently a sweepstakes-style gaming platform for a brief period, Novig gained approval from the Commodity Futures Trading Commission (CFTC) and was registered as a designated contract market (DCM) on June 16. Valued at around $500m after closing a $75m Series B funding round in February, it launched its sports-focused prediction markets platform in 47 states seven weeks later, on Aug. 4.
Co-founder and CEO Jacob Fortinsky told CNBC this week that the platform experienced over $125m in notional volume in its opening week, dominated by parlay contracts and baseball markets.
Since then, it followed the lead of Kalshi and the CFTC itself by suing state attorneys general and gaming regulators to defend its claimed federal rights to offer sports event contracts.
Wisconsin moving ‘aggressively’ poses threat, claims Novig
In the lawsuit filed in the U.S. District Court for the Western District of Wisconsin, Novig seeks injunctive and declaratory relief against Wisconsin Attorney General Josh Kaul and the Wisconsin Department of Administration’s Gaming Division Administrator John Dillett.
Novig stated that, “Wisconsin has moved aggressively against federally regulated event-contract trading within its borders”, pointing to lawsuits the state filed earlier this year against several companies, including:
- Crypto.com
- Kalshi
- Polymarket
- Robinhood
As it did in its previous court filings in New York and other states, Novig said it sued in Wisconsin to prevent the state authorities from similarly seeking to enforce state gaming laws against its own sports contracts, arguing that the matter at hand is “existential” for the company’s new business operations.
“Despite the CFTC’s exclusive jurisdiction over event contracts, Novig expects that Wisconsin will imminently bring an enforcement action against it along the same lines as the other lawsuits that Defendants have already brought against similarly situated parties,” wrote counsel for Novig.
“… Given Wisconsin’s mistaken view and track record, Novig must either risk exposing the company to significant civil and criminal liability or refrain from offering event contracts to Wisconsin residents altogether … Absent this Court’s relief, Novig will also incur irreparable harm in multiple ways.”
Novig says it faces lose-lose without an injunction
The company argued that if it continues to offer event contracts in Wisconsin, it could be exposed to not only an injunction but also criminal liability for a Class I felony on the “false notion that Novig is violating state gambling laws.”
But, it argued, if Novig did not offer event contracts in Wisconsin, it would suffer harms because it would forfeit market share and revenue that it said it would never be able to recoup.
In its 45-page filing, Novig also noted how its business model differs from other prediction market platforms. While Kalshi and others allow users as young as 18 to trade, sports-focused Novig sets a minimum trading age of 21 for its markets, which is the most common age of majority for sports betting in the U.S.
Judge denies CFTC injunction in Wisconsin battleground
Novig’s lawsuit not only engages another individual prediction market platform in litigation against Wisconsin, but continues a broader fight over sports event contracts in that state, which just this year legalized a tribal-run online sports betting model.
The CFTC sued Wisconsin Gov. Tony Evers, Kaul, and the state’s gaming regulator in federal court in late April, days after Wisconsin filed its lawsuits against numerous CFTC-registered prediction markets. The federal agency, led solely by President Trump appointee Michael Selig, argued that Wisconsin overreached its state powers and intruded upon the CFTC’s exclusive federal authority to oversee event contracts.
However, in late July, U.S. District Judge William C. Griesbach denied the CFTC’s motion for a preliminary injunction against the state, determining that the commission did not show that it would suffer irreparable harm or that it was likely to succeed on the merits of its argument. He wrote that the CFTC has not demonstrated that it would succeed in its argument that sports event contracts fall under the Commodity Exchange Act’s definiton of “swaps”.
Griesbach also wrote that, for the purposes of the federal vs. state pre-emption argument around sports specifically, the language of Wisconsin’s commercial gambling statute “seems to cover” sports contracts.
As well as the CFTC and individual prediction market platforms, tribal entities are in court in Wisconsin. The Ho-Chunk Nation was denied a preliminary injunction against Kalshi earlier this year in a lawsuit that centers on the tribe’s allegations that Kalshi is violating the Indian Gaming Regulatory Act (IGRA) by offering a sports betting equivalent on tribal land.
The Ho-Chunk Nation is one of several tribes that stand to gain from the state’s new sports wagering model, which will expand legal betting from on-site wagers at certain tribal casinos to allow online sportsbook partners to offer statewide mobile betting.
