Novig has filed three new lawsuits against state regulators, bringing its total to four in its first week as a prediction market operator.
Key Takeaways
- Novig only launched its prediction markets Aug. 4.
- The four states have all recently taken steps to limit prediction market operators.
- After finding lots of initial success in court, a series of recent legal results have added even more uncertainty to the future of prediction markets.
Sports betting and gaming lawyer Daniel Wallach confirmed that Novig filed litigation in all of the aforementioned states. All four took varying enforcement actions against prediction market companies this year and tried to restrict their operations.
3 days into its launch of sports prediction markets, Novig has sued 4 states--New York, Massachusetts, New Mexico, and Washington. What do these states have in common? They pursued TROs & PIs vs. DCMs in state court. Goal may be to tie up likely enforcing states in federal court. pic.twitter.com/McCTQZBfDr
— Daniel Wallach (@WALLACHLEGAL) August 9, 2026
The lawsuits hinge on a common argument made by prediction market platforms: The Commodity Futures Trading Commission (CFTC) has exclusive regulatory authority over their federally approved event contracts. The operators argue that federal law preempts state regulation of those contracts under the Commodity Exchange Act and the U.S. Constitution’s Supremacy Clause.
The first lawsuit was filed in New York just one day after the sports-only platform’s prediction markets went live. That came less than one week after New York Attorney General Letitia James and Gov. Kathy Hochul (D) announced their own lawsuit against Kalshi, accusing the platform of operating an illegal gambling platform. Kalshi had also recently seen its request for a preliminary injunction denied by a federal judge.
“Despite the CFTC’s exclusive jurisdiction over event contracts, Novig expects that New York 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,” Novig’s attorneys wrote in their lawsuit. “New York’s threatened enforcement of its laws is preempted several times over.”
Wallach noted that Novig faces a tough road in Massachusetts, New York, and Washington, which recently found success in court while fighting prediction markets. However, Wallach said preemptive federal lawsuits can provide at least 90 uninterrupted days of operation while leaving enough time for an appellate court to reverse previous decisions.
Prospects for success are dim in MA, NY & WA in light of recent PM court rulings favoring states, but that may be besides the point. Preemptive federal suits ensure 90+ day uninterrupted launch while allowing enough time for possible appellate reversals (CA1, 2 & 9 & MSJC). https://t.co/SeHEzRW0Fu
— Daniel Wallach (@WALLACHLEGAL) August 9, 2026
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More legal battles brewing
Prediction markets initially enjoyed several legal victories during their national expansion. However, a recent series of court decisions favoring states has created even more controversy and confusion within the industry, as both sides remain split over the legality of federally approved markets.
State of Washington King County Superior Court Judge John McHale said state officials presented a “likelihood of success on the merits” of claims that Kalshi violated the state’s Gambling Act. New Mexico Attorney General Raul Torrez said the only approved forms of gambling are through “tribal-state gaming compacts, or under strict state regulations,” without mentioning prediction markets.
“Kalshi has ignored that framework entirely while offering online sports betting within the state,” he said. “We are filing this lawsuit to protect the integrity of our laws, our regulatory system, and most importantly, consumers.”
Massachusetts officials filed a lawsuit last September accusing Kalshi of accepting unapproved online sports bets without the proper licensing. New York’s lawsuit effectively made the same claims while seeking $36 billion in damages, restitution, and disgorgement.
The CFTC has largely gone to bat for prediction market sites amid piling state-level pressure. It filed a lawsuit of its own in New Mexico following the state’s attack on Kalshi and filed an amicus brief in the Massachusetts Supreme Judicial Court to support its right to exclusively regulate approved prediction markets.
Prediction market growth and debates
While recent prediction market news has largely involved legal disputes, operators have enjoyed a period of extraordinary growth. The industry’s top platforms - Kalshi, Polymarket, and Polymarket US - generated $50.6 billion in notional trading volume in July.
Operators have also spread their reach. Polymarket recently provided another example, agreeing to a partnership with the New York Yankees.
All of this comes before the upcoming NFL season and midterm elections, which are expected to be extremely popular with traders.
