New Jersey has banned online sweepstakes and dual-currency gaming systems under a new law signed by Governor Phil Murphy. In response, sports prediction platform Novig has ceased its operations in the state. The decision comes shortly after the company raised $18 million in funding, signalling a shift in its strategy.
Novig’s unique business model
Novig’s platform is built around a dual-currency system. Users receive two forms of currency upon signing up: Novig Coins, which are virtual tokens used for free games and hold no monetary value, and Novig Cash, which can be exchanged for US dollars and is used in competitive sports predictions. Novig Cash introduces real-money stakes to the game, while Novig Coins are intended for casual play.
The platform also operates on a peer-to-peer prediction model, allowing users to trade directly with one another by setting their own odds and terms. This approach differs from traditional sportsbooks, where bookmakers determine the odds. More than half of Novig’s activity stems from this user-driven exchange.
New Jersey’s new legislation
A regulation prohibiting online sweepstakes that offer rewards in exchange for digital currency has been introduced in New Jersey. Platforms like Novig, which blended free gameplay with in-app purchases, are affected by this. Dual-currency systems are also targeted by the law, which characterises them as an indirect gambling scheme. Novig’s business strategy, which provided a real-money credit bonus for purchasing virtual coins, was severely impacted by the prohibition.
Novig’s exit from New Jersey
Novig notified its users in New Jersey via email that it would be discontinuing operations in the state, citing new legal restrictions. The shutdown removes Novig from one of the country’s major online gaming markets and shifts its focus to states with more permissive regulations.
The Division of Gaming Enforcement and the Division of Consumer Affairs are responsible for enforcing the new law. Violations can result in fines of up to $25,000 per incident. The restrictions also apply to affiliates and influencers who promote platforms that fall under the ban.
Several states have introduced or considered laws similar to New Jersey’s ban on dual-currency gaming. Connecticut has passed a comparable ban, though Novig continues to operate there. Montana also enacted a ban, but Novig never launched in that market. Legislators in Louisiana passed a similar law, but Governor Jeff Landry vetoed it. Proposals that would impose comparable limitations are currently being reviewed by California and New York, which might restrict the reach of platforms that use dual-currency models.
Novig’s funding and future plans
Novig recently raised $18 million in a Series A round led by Forerunner, with participation from Y Combinator, NFX, Perceptive Ventures, and Gaingels. The company initially operated as a traditional sportsbook but shifted to prediction markets and sweepstakes following its $6.4 million funding round in 2023. While Connecticut remains active, a map on Novig’s website suggests the company may be reconsidering its presence in certain markets.
Competitive landscape
While Novig has chosen to leave states with restrictive legislation rather than pursue legal action, Kalshi is currently battling regulatory obstacles in court. Novig’s exit from New Jersey serves as a reminder of the growing legal scrutiny of dual-currency platforms and online contests. Although its peer-to-peer prediction methodology presents an alternative method of sports gaming, evolving restrictions might result in a more cautious approach to growth.
