Is Sports Betting Gambling or Finance: Novig's DCM Transition and Regulatory Innovation in Prediction Markets

On May 9, 2026, Novig CEO Jacob Fortinsky signaled a fundamental paradigm shift in the sports betting industry. He drew significant attention by announcing plans to treat the company's services not as mere gambling, but as 'contracts' within the federal financial regulatory framework.

This move is a strategic choice to counter the practice of existing sportsbooks systematically blocking highly profitable 'sharp' bettors. Novig aims to leverage the Commodity Exchange Act (CEA) to unify markets fragmented by local gaming commissions and provide services across all 50 U.S. states.

Novig plans to officially launch its services in all 50 states across the U.S. by the summer of 2026. CEO Fortinsky criticized the operating methods of existing sportsbooks as having a 'predatory' structure disadvantageous to users, emphasizing that the transition to a financial model will provide a transparent and fair trading environment.

I was suspended from two major sportsbooks in just two months for being 'sharp.' — Adam Mastrelli of 57 Maiden

As in Mastrelli's case, professional bettors face the issue of being excluded from traditional house-style platforms simply for being profitable. Rather than a structure that pits them against the house, they hope to trade at fair prices based on market principles through platforms operated like financial exchanges.

Understanding the Federal Designated Contract Market (DCM) Framework

For a prediction market to be recognized as a federal derivatives exchange, it must obtain Designated Contract Market (DCM) status. This is a highly demanding compliance process that requires adhering to 23 core principles set by the Commodity Futures Trading Commission (CFTC), appointing a resident Chief Compliance Officer (CCO), and meeting strict financial reporting requirements.

• Concerns over potential market manipulation and wash trading resulting from the financialization of sports outcomes
• Legal and political conflicts regarding the infringement on the unique gambling regulatory authority of state governments
• Inherent criticism that sports events do not cause systemic financial risk and their unsuitability as hedging tools

According to data as of February 2026, approximately 87% of Kalshi's $39.7 billion trading volume over the past year consisted of sports-related contracts. Polymarket also proved that prediction markets under financial regulation are essentially functioning as massive sports trading hubs, with sports accounting for 38% of its $36.2 billion trading volume.

On April 6, 2026, the U.S. Court of Appeals for the Third Circuit issued a preliminary ruling in a lawsuit between Kalshi and the state of New Jersey, stating that the Commodity Exchange Act (CEA) is likely to take precedence over state gambling laws. This judicial decision provided a strong legal foundation for companies like Novig to bypass complex state-level regulations using federal regulation as a shield.

Resistance from state governments remains strong, as seen in a letter sent by the Maryland Attorney General on April 30, 2026, warning against the CFTC's abuse of power. However, the favorable federal court ruling and Novig's 50-state expansion plan suggest that the trend toward the financialization of sports betting is becoming an unstoppable force.

As Novig's service fully launches in the coming summer of 2026, the CFTC is expected to further strengthen its oversight of market manipulation and wash trading. Whether sports betting can fully establish itself as a financial product depends on the enforcement will of federal regulators and the market's ability to ensure transparency over the coming months.