Prediction market operator Novig continued its bold entry into the industry by submitting another lawsuit, this time targeting Wisconsin officials.
The operator, which launched its prediction markets on Aug. 4, submitted a filing to stop Wisconsin from applying gaming regulations against its platform.
Key Takeaways
- Novig has now sued Massachusetts, New Mexico, New York, Washington and Wisconsin.
- Wisconsin previously sued Kalshi, Polymarket, Crypto.com, Robinhood and Coinbase.
- The lawsuit argues that the state is preempted from applying gaming enforcement.
Novig named Wisconsin Attorney General Josh Kaul and state gaming administrator John Dillett in its 45-page lawsuit, which was filed in the U.S. District Court for the Western District of Wisconsin last Friday.
The lawsuit was a preemptive strike from the operator, which anticipated a lawsuit from the state due to similar actions against other prediction providers.
“Wisconsin has moved aggressively against federally regulated event-contract trading within its borders, suing Kalshi, Polymarket, and Crypto.com, and their affiliates, for offering the type of contracts at issue here,” the lawsuit read. “Novig, having just secured its status as a Designated Contract Market (“DCM”) registered by the CFTC, brings this action to prevent Defendants from doing the same to Novig.”
Novig is starkly different from many of its competitors. Whereas customers at those platforms can find prediction markets in politics, finance, pop culture, and other industries, Novig’s entire marketplace is dedicated to sports.
Novig also requires its users to be at least 21 years old, whereas most prediction operators have a minimum trading age of 18. The 21-year requirement is in line with state gaming regulations nationwide.
“There’s a broader reckoning coming with the younger traders,” Novig CEO and co-founder Jacob Fortinsky told WIRED. “That group is particularly susceptible to irresponsible behavior and financial ruin.”
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The basic argument
The primary basis of Novig’s lawsuit is a familiar one. According to the platform, the Commodity Exchange Act awards regulatory powers over prediction platforms to the Commodity Futures Trading Commission (CFTC), a federal body, which preempts state authority through the U.S. Constitution’s Supremacy Clause.
The CFTC already made Ludlow Exchange LLC, which operates Novig, a licensed DCM on June 16.
Wisconsin already sued Kalshi, Polymarket, Crypto.com, Robinhood and Coinbase in April, claiming that their sports event contracts represented an illegal form of gambling.
The CFTC fired back with a lawsuit against the state, although Judge William Griesbach on July 28 decided not to honor the CFTC’s request for a block on state enforcement.
That decision did not mark an end in the case. Judge Griesbach only found that the CFTC had not shown a likelihood of success in proving its claim of preemption or other aspects needed to secure a preliminary injunction, not that the CFTC didn’t have the final power in the regulation of prediction markets.
Novig already sued five states
Although Novig only joined the prediction industry a couple of weeks ago, it has dominated prediction market news. The operator has now filed lawsuits in five states, including Wisconsin, adding to a list that already included Massachusetts, New Mexico, New York, and Washington.
The operator also requested expedited consideration in Wisconsin due to the “imminent and existential” business risks it would be exposed to if state officials threatened enforcement.
