PredictIt has continued its hot streak in the courts, as the New Zealand-based political futures market won a 2-1 decision at the Fifth Circuit Court of Appeals last Friday.
PredictIt has been fighting for its life ever since last August, when the Commodity Futures Trading Division (CFTC), based out of Washington, D.C., rescinded the company’s “no-action” letter that allowed the firm to operate what is effectively a political betting market. Wagers were limited to $850, and no more than 5,000 traders could engage in a single market.
PredictIt operates as a futures market. For instance, as of this writing, shares of Donald Trump to be the GOP nominee in the 2024 presidential election are trading at 59 cents. If he wins the nomination, those shares will close at $1. If he doesn’t win the nomination, the shares will be worthless. Traders can move in and out of the market as they see fit.
Zigging and zagging through the courts
The company, which operates as a not-for-profit out of Victoria University in New Zealand, has seen its case zig-zag through the courts since the call last year by the CFTC to end operations, which was originally supposed to happen this past February.
In January, the same Fifth Circuit Court of Appeals issued an injunction allowing PredictIt to continue operating while it looked at the case. In February, the court heard arguments from both sides.
The court found the CFTC’s actions “likely arbitrary and capricious” and ordered the U.S. District Court for the Western District of Texas to grant a preliminary injunction against CFTC’s action.
In a press release celebrating the victory, Russ Ryan, the senior litigation counsel for the New Civil Liberties Alliance, which filed an amicus brief in the case, said, “This case is just the latest example of unelected bureaucrats pulling a ‘surprise switcheroo’ on private parties who have long relied on existing regulatory policy. NCLA is deeply gratified by the Fifth Circuit’s confirmation that agencies not only must explicitly consider reliance interests before reversing prior policy positions, but also must articulate a reasoned explanation for overriding those interests or not reasonably accommodating them.”
The case will now head to district court, but PredictIt is free to operate in the meantime.
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