Novig has launched into a legal battle two weeks after its significant launch as a sports prediction market platform, engaging in lawsuits with five states.
On Friday, August 14, Novig filed a lawsuit against Wisconsin in federal court, following similar actions taken against Massachusetts, New Mexico, New York, and Washington. Each of these states is presently involved in its own legal disputes with various prediction market platforms, particularly Kalshi. Notably, New York’s Attorney General, Letitia James, initiated a lawsuit against Kalshi at the end of July, seeking $36 billion in damages, alleging the operation of an illicit and unlicensed gambling service.
Novig underwent a transformation from a betting exchange to a brief foray as a sweepstakes gaming platform, receiving approval from the Commodity Futures Trading Commission (CFTC) as a designated contract market on June 16. Following a successful $75 million Series B funding round in February, which brought its valuation to approximately $500 million, it commenced its sports prediction market operations in most of the U.S. on August 4.
Co-founder and CEO Jacob Fortinsky reported that the platform recorded over $125 million in notional trading volume during its first week, with heavy focus on parlay contracts and baseball betting.
In pursuing legal action, Novig has followed the precedent set by Kalshi and the CFTC, taking on state attorneys general and gaming regulators to assert its rights to offer sports event contracts under federal jurisdiction.
In its recent lawsuit in the U.S. District Court for the Western District of Wisconsin, Novig seeks to obtain injunctive and declaratory relief against Attorney General Josh Kaul and John Dillett, the Administrator of the Gaming Division of the Wisconsin Department of Administration. Novig claims that Wisconsin has taken an aggressive stance against federally regulated event-contract trading, highlighting litigation initiated against several companies in 2023, including Crypto.com, Polymarket, Robinhood, and Kalshi.
As in prior lawsuits, Novig is advocating against state enforcement of gaming laws on its sports contracts. They characterized the proceedings as existential for their new business model, arguing that Wisconsin is poised to initiate enforcement actions in a manner akin to previous cases against similar entities. Novig's counsel stated, "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 other lawsuits that Defendants have already brought against similarly situated parties."
The potential consequences of continuing to offer event contracts in Wisconsin are severe, Novig argues. The company risks exposure to civil and criminal liabilities under state gambling laws, potentially classified as a Class I felony. Conversely, if it refrains from offering these contracts, Novig claims to stand to lose significant market share and revenue it would be unable to recover.
In a detailed 45-page filing, Novig underscored its distinction from other platforms, noting that while competitors such as Kalshi allow users from age 18, it has instituted a minimum trading age of 21, aligning with the age requirement for sports betting across the U.S.
In its legal efforts, Novig joins Kalshi in confronting Wisconsin’s restrictions on prediction markets, another instance in a broader struggle over sports event contracts within the state. Earlier this year, Wisconsin affirmed its legalization of a tribal-run online sports betting system. The CFTC had previously initiated legal proceedings against Governor Tony Evers and the state’s gaming regulators in late April, countering Wisconsin’s lawsuits aimed at numerous CFTC-registered prediction market platforms.
However, a recent ruling saw U.S. District Judge William C. Griesbach deny the CFTC's request for a preliminary injunction against Wisconsin, stating that the CFTC failed to demonstrate irreparable harm or a probable win on its arguments regarding whether sports event contracts fell under the Commodity Exchange Act definition of swaps. The judge noted that Wisconsin’s commercial gambling laws appear to encompass sports contracts.
Tribal entities are also engaged in litigation within Wisconsin. The Ho-Chunk Nation was previously denied a preliminary injunction against Kalshi amidst claims that the platform violates the Indian Gaming Regulatory Act (IGRA) by offering equivalent sports betting services on tribal land. The Ho-Chunk Nation is among several tribes that could benefit from Wisconsin’s newly adopted sports wagering model, which expands legal betting to include online sportsbooks across the state beyond limited onsite wagering at designated casinos.
