PredictIt Lawsuit Against Trading Commission Should Be Moved to DC, Federal Judge Recommends.
Posted on: December 12, 2022, 09:26h.
Last updated on: December 13, 2022, 03:49h.
A federal judge in Texas recommends moving a lawsuit filed against the Commodity Futures Trading Commission (CFTC) by PredictIt and other parties to the US District Court in Washington, DC.
Magistrate Mark Lane issued the eight-page ruling Monday. It comes less than two weeks after he held a Dec. 1 hearing on the matter in the Austin federal courthouse.
PredictIt, an online trading site for the political futures market, along with its parent company Aristotle International, several PredictIt traders, and college researchers, filed suit against the CFTC in September. That’s after the federal regulatory agency pulled its “no-action” letter it issued permitting the exchange eight years ago. The suit was filed in Texas, where Kevin Clarke, a trader in the case, and other plaintiffs live.
The CFTC, which is based in Washington, argued the nation’s capital was the more appropriate venue for the case.
When asked why they filed the case here, plaintiffs repeatedly answered they filed here because Mr. Clarke resides here,” Lane wrote. “Plaintiffs repeatedly emphasized Mr. Clarke’s residency, although they conceded that from an economic perspective Mr. Clarke was not the largest investor or faces the greatest potential financial loss of the plaintiffs. Indeed, even though there are numerous other plaintiffs, plaintiffs consistently argue this case is about how the withdrawal of the no-action letter has harmed Mr. Clarke.
“Plaintiffs’ insistence on the importance of Mr. Clarke and reasons for filing the suit here still confound the court, even after the hearing. The two entity plaintiffs—PredictIt, Inc. and Aristotle International, Inc.—are both based in the District of Columbia.”
Lane’s recommendation now heads to US District Judge Lee Yeakel, who will make the formal decision of whether to move the case from Texas to DC.
Plaintiffs ‘Likely’ to Contest Recommendation
A spokesperson for PredictIt told Casino.org the plaintiffs “likely” will submit an objection regarding Lane’s recommendation to Yeakel.
The CFTC’s desire to move this case away from the plaintiffs and onto their home turf is disappointing,” said Lindsey Singer, PredictIt’s public relations director. “The plaintiffs and others impacted by their actions deserve answers today, not delay tactics.”
In its Aug. 4 letter revoking PredictIt’s status, the CFTC said it wanted the exchange to shut down by Feb. 15. Since then, PredictIt has not established any new markets. It filed the lawsuit to block the CFTC from forcing its closure and has sought an injunction to allow its ongoing futures markets, including ones for the 2024 presidential election cycle, to run their natural course.
A hearing on the temporary injunction has not yet been scheduled.
CFTC Also Seeks Dismissal
Besides seeking a venue change, the CFTC also filed to dismiss the case completely.
While Lane heard arguments from both sides regarding the dismissal request during his Dec. 1 hearing, he did not issue a recommendation on that to Yeakel. Still, he seemed to indicate that the plaintiffs’ rationale against the dismissal was not entirely compelling.
“The CFTC argues that issuance of a no-action letter and its withdrawal are not final agency actions and that Plaintiffs lack standing to sue,” Lane stated in a footnote in his recommendation. “Plaintiffs argue the no-action letter constituted a license, and they are beneficiaries of the no-action letter.
“However, at best, Plaintiffs can only strain to analogize to other cases. Plaintiffs’ inability to cite cases directly holding that a no-action letter is the equivalent of a license or other final action or that third parties are beneficiaries to a no-action letter with standing sue leaves the court highly skeptical of their arguments. Nonetheless, as this court is not reaching the motion to dismiss, Plaintiffs will have a second chance to convince a court that their claims should move forward.”
PredictIt Wants Injunction Ruling Soon
Monday’s recommendation was a blow to PredictIt and other plaintiffs. They have been pushing the court to make a decision on their request for an injunction by Christmas.
PredictIt and Aristotle, which is the parent company for PredictIt, have said they must start work soon on a system that would allow them to settle contracts for a value between $1 and zero cents. That’s a platform that would need to be built from the ground up and require nearly all staff to develop it. In addition, should an injunction ruling in their favor come after they’ve started work, PredictIt and Aristotle say they would be out hundreds of thousands of dollars, with no way to recoup the money.
However, the CFTC counters that the revocation of the no-action letter is not a final order. The Aug. 4 letter used the word “should” regarding the Feb. 15 liquidation date. Although, it would appear the agency could take action against PredictIt if it still operated markets after that date.
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