PredictIt is seeking an injunction allowing trading in political futures contracts to continue

Posted on: Oct 2nd, 2022 08:01 am.

Last updated on: October 1, 2022, 10:35 am.

Steve Bittebender

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Three weeks after PredictIt and others filed a lawsuit against the US Commodity Futures Trading Commission (CFTC), the political futures market operator and its users filed an injunction on Friday against the federal regulator’s order requiring it to close all of its open markets to be liquidated by February.

President Joe Biden, then candidate for office, speaks at a campaign event in Wilmington, DE, October 2020. On Friday, PredictIt and other plaintiffs in a lawsuit against the CFTC filed an injunction that would allow the political futures trading operator to continue its presidential trading markets of 2024 and other markets that the CFTC has ordered liquidated by February 15, 2023. (Image: JoeBiden.com/YouTube)

The motion filed in the United States District Court for the Western District of Texas seeks to stay the CFTC’s February 15 liquidation date for all of PredictIt’s outstanding markets. This includes markets for political events in 2024, such as the presidential election.

This particular mandate, which requires the early termination of election contracts for 2024 and others, is already causing unnecessary and damaging disruption, distortion and dislocation in these markets.” the states of motion. “Because the economic damage to market investors is caused by a federal government action, state immunity and other principles make it difficult to recover that damage later, making the damage irreparable.”

PredictIt also wants the ability to add contracts to a market that was in effect on August 4th, the date the CFTC notified the Victoria University of Wellington that PredictIt’s “no-action” letter was revoked. An injunction that would allow PredictIt to list contracts for new candidates who have appeared in races currently offered on the site.

PredictIt Says CFTC Action Hurts Traders

PredictIt is joined by two college professors who are using the market for research and two investors who say the CFTC’s decision will hurt them because they own stakes in markets set to close after February 15 involved in the lawsuit.

According to a supporting memo filed with the motion, up to 75 markets would not expire until the CFTC’s Feb. 15, 2023 liquidation deadline, and nearly 14,500 traders have contracts in those markets.

“Traders are attempting to salvage their investments by either withdrawing their assets from the market entirely, or attempting to predict what will be the prevailing view of the outcome of events on the record date, rather than what the actual outcome will be,” the note stated.

Aristotle International, a technology provider and political campaign consultant and the parent company of PredictIt, is also a plaintiff. The memo said Aristotle partnered with Victoria University to build the political futures trading market and invested more than $7 million in its operations. PredictIt also employs 25 full and part-time staff.

One problem that PredictIt and the other plaintiffs don’t want the injunction to solve is the ability to offer new markets.

“The plaintiffs are also contesting the Commission’s decision to shut down the market and stop awarding contracts on brand new issues, but will seek summary judgment to remedy this matter in the normal course,” the motion for an interim hearing reads Disposal.

“Random and moody”

In October 2014, the CFTC issued a no-action letter to Victoria University allowing PredictIt to offer political futures markets, but the federal agency included several provisions, such as: B. Limiting individual investments and the number of traders for each contract.

In its August letter, the commission said PredictIt violated the terms of the letter, but did not specify what specific criteria it believed were violated.

A footnote in the memo indicated that some CFTC officials “orally gave their views” that some PredictIt markets offered, such as passing legislation or who would become a Supreme Court nominee, themselves appealed the cease and desist letter. However, plaintiffs noted that Victoria University’s 2014 proposal was to offer markets for elections “and other important policy issues” unrelated to war, terrorism or assassination, things that federal law specifically prohibits.

“This explanation for the revocation decision is not written down anywhere. But to the extent that that is the basis of the agency’s order to shut down the market, it is arbitrary and capricious,” the plaintiffs said.