Quiet Departure of Novig from New Jersey Amidst $18 Million Funding Scrutiny

Novig, a prediction market app that allows users to place bets on various events, has been making headlines recently due to its regulatory battles across several states.

The company, which debuted as a registered sports gambling entity in Colorado in January 2024 before pivoting to the sweepstakes model to gain national reach later last year, operates on a dual currency system, consisting of Novig Coins and Novig Cash. However, under New Jersey law, this system is considered an illegal exchange for "something of value." Despite this, Novig announced an $18 million raise on Aug. 11, despite a cease-and-desist order from the Arizona Department of Gaming.

In response to the potential collapse of the sweepstakes framework, Novig may look to bolster legal protections. This comes as New York and California, among other states, are currently considering anti-sweepstakes laws. Montana and Connecticut passed similar anti-sweepstakes legislation targeting this kind of behavior in May and June, respectively.

Interestingly, Novig's approach differs from that of Kalshi, another prediction market app. Kalshi claims federal Commodity Futures Trading Commission (CFTC) preemption, insisting it should be regulated nationally by the agency like a financial asset.

Novig, however, believes its free-or-not sweepstakes setup means it doesn't need to secure gaming licenses in the states it operates. Users can get small sums of "Novig Cash" for free by interacting with the platform regularly. Users can also choose to only enter bets on the prediction market exchange using the "Novig Coins" that cannot become real money.

The company has faced challenges in several states, leading to its withdrawal from New Jersey, the second-ranked state in the U.S. for sports betting handle. Novig no longer operates in Colorado either.

Despite the regulatory hurdles, Novig's promotional materials feature a defiant slogan: "We play by a different set of rules." The Social and Promotional Games Association, which advocates on behalf of sweepstakes platforms, opposes legislation targeting sweepstakes companies.

It's a complex legal landscape that Novig is navigating, but the company seems determined to continue its operations, albeit with a focus on states where it can operate legally.