Published on: October 2, 2022, 08:01 am.
Last update: October 1, 2022, 10:35 am.
Three weeks after PredictIt and others filed a lawsuit against the U.S. Commodity Futures Trading Commission (CFTC), the political futures market operator and those who use it filed a preliminary injunction on Friday against the federal regulator’s order that asks to liquidate all its open markets. until February.
The motion, filed in the U.S. District Court for the Western District of Texas, seeks to stay the CFTC’s Feb. 15 wind-up date for all of PredictIt’s outstanding markets. This includes markets for political events in 2024, such as the presidential election.
This special mandate, which requires the premature liquidation of the 2024 election contracts and others, is already causing unnecessary and harmful disruption, distortion and dislocation in those markets.” movement provides. “Because economic damages to market investors are caused by an action by the federal government, sovereign immunity and other principles will make it difficult to recover those damages later, making the harm irreparable.”
PredictIt also wants the ability to add contracts to a market that was in effect on August 4, the date the CFTC notified Victoria University of Wellington that PredictIt’s “No Action” letter had been revoked. An ordinance coverage that would allow PredictIt to list contracts for new candidates who appeared in races currently offered on the site.
PredictIt Says CFTC Action Hurts Traders
PredictIt is joined in the lawsuit by two professors who use the market for research purposes and two investors who say the CFTC’s decision will harm them because they own stocks in markets that will close after February 15.
According to a supporting memo filed with the proposal, up to 75 markets would not expire by the CFTC’s February 15, 2023 wind-up deadline, and nearly 14,500 traders have contracts in those markets.
“Traders try to save their investments, either by pulling their assets out of the market entirely, or by trying to predict what the prevailing belief will be about the outcome of events at the cut-off date, rather than what the outcome will actually be.” the note said.
Aristotle International, a technology provider and political campaign consultant and the parent company of PredictIt, is also a plaintiff. The memo notes that Aristotle partnered with Victoria University to establish the political futures trading market and invested more than $7 million in its operation. PredictIt also has 25 full-time and part-time workers.
One issue that PredictIt and the other plaintiffs do not seek to address in the injunction is the ability to offer new markets.
“Plaintiffs also challenge the Commission’s decision to close the Marketplace and prohibit the issuance of contracts on new subjects, but will seek resolution of this matter in the normal course through summary judgment proceedings,” the injunction request states.
‘Arbitrary and capricious’
In October 2014, the CFTC issued a no-action letter to the University of Victoria that allowed PredictIt to offer political futures markets, but the federal agency included several provisions, such as limiting individual investments and the number of traders per contract.
In its August letter, the commission said PredictIt violated the terms of the letter, but did not indicate the specific criteria it believes were violated.
A footnote in the memo indicated that some CFTC officials “verbally communicated their view” that some markets offered to PredictIt, such as whether legislation would pass or who would become a Supreme Court nominee, were against no action letters. However, the plaintiffs noted that the University of Victoria’s 2014 proposal called for markets to be offered for elections “and other significant political matters” not related to war, terrorism or assassination, which federal law specifically prohibits.
“This explanation for the revocation decision is not written anywhere. But to the extent that it underlies the agency’s mandate to close the market, it is arbitrary and capricious,” the plaintiffs said.