A federal judge on Nov. 10 denied Novig, a sports event-contract exchange, preliminary protection from New York gambling laws for its sports contracts, according to CryptoSlate, which cited the court opinion. Novig filed a notice of appeal to the US Court of Appeals for the Second Circuit the same day, challenging the denial of its preliminary-injunction request, the outlet reported.
The account rests on a single source, and the case name and docket number were not provided.
Federal designation versus state law
According to the opinion as described by CryptoSlate, the Commodity Futures Trading Commission (CFTC) designated Novig as a contract market on June 16, and Novig announced the availability of New York sports contracts on Aug. 4. The dispute turns on whether permission to run a federally designated exchange also shields the platform from state sports-betting requirements.
Two grounds for the denial
US District Judge McMahon first concluded that Novig’s sports contracts fall outside the Commodity Exchange Act’s definition of swaps, CryptoSlate reported. In the judge’s reading, the contracts lack the required inherent financial, economic or commercial connection.
The judge then reasoned in the alternative. Even if the contracts were swaps, the CFTC’s exclusive jurisdiction would leave room for New York gambling laws to apply incidentally to betting on designated contract markets, according to the report on the opinion.
The judge also rejected Novig’s argument that complying with both federal and state law was impossible. According to the account of the ruling, she pointed to state licensing and geographic controls as possible routes to compliance.
What the order does and does not do
CryptoSlate stressed that the order concerns only interim relief. It leaves Novig’s federal exchange designation in place and is not a final judgment on the merits, a nationwide ban or a shutdown directive.
What remains unknown
The timetable and outcome of the Second Circuit appeal are unknown. It is also unclear whether Novig will change its New York operations after the ruling, and whether New York officials have taken or plan enforcement action against the company.
Sources
- cryptoslate.com CryptoSlate — Novig loses court shield, and New York gambling laws strike back Accessed
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