Prediction Market Sues New York Officials to Block Enforcement of State Gambling Laws
A prediction market sued New York officials in federal court to block the enforcement of state gambling laws against its federally regulated event contracts.
Ludlow Exchange, LLC, operating as Novig and designated by the CFTC as a contract market, filed the complaint in the U.S. District Court for the Southern District of New York against nine state officials: the Attorney General and the Executive Director, Chair, Vice Chair, and five Commissioners of the New York State Gaming Commission. The company argued that CEA Section 2(a)(1)(A) ("Jurisdiction of Commission") gives the CFTC exclusive jurisdiction over transactions in swaps and futures contracts traded or executed on a designated contract market, preempting state gambling and sports-wagering laws.
The company obtained its federal designation in June 2026 and began offering event contracts to New York customers on the day the complaint was signed. Novig stated that New York has aggressively pursued federally regulated event-contract trading, citing an October 2025 Gaming Commission cease-and-desist demand to KalshiEX LLC and Attorney General proceedings brought against Coinbase Financial Markets, Inc. in April 2026 (see prior coverage). Novig also cited New York Attorney General proceedings brought against Kalshi on July 31, 2026. Novig argued that compliance with New York's mobile sports-wagering regime, which requires operators to restrict access to individuals physically located within the state, would destroy the liquidity necessary for a national exchange and violate federal requirements for impartial access.
The complaint relied on a recent Third Circuit decision, KalshiEX LLC v. Flaherty, and several district court rulings that found the Commodity Exchange Act preempts state gambling laws as applied to CFTC-designated exchanges. Novig sought a declaratory judgment that the state laws are preempted and an injunction barring their enforcement against its business, arguing that it otherwise faces ruinous civil penalties and potential criminal liability.