PredictIt, Traders Seek Expedited Injunction Hearing to Block CFTC Ruling
Posted on: November 21, 2022, 07:01h.
Last updated on: November 20, 2022, 07:38h.
Plaintiffs in PredictIt’s lawsuit against the Commodity Futures Trading Commission (CFTC) say a decision must be made soon on an injunction that would allow the political futures exchange to keep operating after Feb. 15.
On Friday, the plaintiffs filed another motion in the US District Court for the Western District of Texas. In it, they asked US District Judge Lee Yeakel to schedule a hearing for their preliminary injunction request so a ruling could be issued by Christmas.
The 20-page document lists several reasons why they say the ruling needs to be made soon.
PredictIt and Aristotle International, a technology company for political campaigns that also is the parent company for PredictIt, say they must invest hundreds of thousands of dollars to build a system that would allow contracts to be settled for a value between $1 and zero dollars. That work will require allocating nearly every PredictIt employee, the filing stated.
This trading and settlement infrastructure must be built from scratch and will require extensive planning, design, coding, and testing,” the motion stated. “And the fairest way to do so has not even been determined yet—if in fact there is a way to do so that is fair to all traders.”
Further, PredictIt said it can’t recoup those costs if a ruling in its favor comes later.
Trading Also Affected, Plaintiffs Say
Besides PredictIt and Aristotle, other plaintiffs in the case include eight traders on the exchange who have contracts on markets that were set to expire after the Feb. 15 deadline the CFTC imposed on PredictIt when it formally revoked the no-action letter in an Aug. 4 letter the agency sent Victoria University of Wellington. The New Zealand school founded PredictIt for research purposes and received that letter from the federal agency eight years ago.
The traders, including Austin, Texas resident Kevin Clarke, say the CFTC deadline has affected trading on markets for the 2024 presidential election.
“That is not just a problem on Feb. 15— the Commission’s mandate is severely distorting trading in those contracts today,” the motion stated. “Mr. Clarke, for example, bought contracts before the Commission’s decision on Republican nominees for President that, under normal conditions, would have traded up significantly after the midterm elections.”
CFTC Wants Suit Moved to DC
The CFTC wants the case dismissed. It, too, has also filed a motion to move the suit to the DC federal district court. According to the plaintiffs’ filing on Friday, the federal court plans to rule on that first.
The CFTC filed its motion to transfer the case on Sept. 20, and the motion for the preliminary injunction came 10 days later. A federal magistrate judge will hear oral arguments for the relocation on Dec. 1.
Since the CFTC revoked the no-action letter, PredictIt has not opened any new markets on US elections. In filing the suit, the plaintiffs want the CFTC’s letter invalidated so it can continue operations and offer new markets. However, the preliminary injunction focuses only on allowing existing markets to continue after Feb. 15.