PredictIt plans to file a motion in federal court that would seek to stop a federal regulator’s decision to require the politically focused futures trading market to liquidate all of its markets by Feb. 15, 2023.
A married couple in Massachusetts each set out their own yard sign indicating their support of a 2020 presidential candidate. PredictIt, which operates an online futures exchange tied to political outcomes, is suing a federal agency to nullify a revocation letter it received last month. (Image: ABC7News)
That move comes on the heels of the exchange and others filing a lawsuit late last week against the Commodity Futures Trading Commission (CFTC) after it pulled its “No-Action” letter last month that allowed PredictIt to operate in the US. That lawsuit, filed in the U.S. District Court for the Western District of Texas, called on the court to “enter a preliminary and then permanent injunction” that would allow futures markets that were set to end after February 2023 – including 2024 presidential election markets – to continue.
While the complaint also wants the court to vacate the CFTC’s letter, it’s uncertain if PredictIt will also seek a preliminary injunction against the entire letter.
A motion for a preliminary injunction is a separate filing (from the initial complaint), and they plan to do that within days,” PredictIt Public Relations Director Lindsey Singer told Casino.org Wednesday. “But I can’t preview the specific scope of the injunctive relief. It will be in the motion when they file.”
If PredictIt sought an injunction against the letter and if a judge approved it, that would seemingly allow the operator to offer new markets ahead of the 2022 general election. PredictIt has not unveiled any new markets since the CFTC’s Aug. 4 decision.
The CFTC declined to comment on the lawsuit.
Researchers, Investors Join Lawsuit
PredictIt, which was established by the Victoria University of Wellington in New Zealand eight years ago, filed the lawsuit with Aristotle International, a Washington, DC-based information technology firm for political campaigns that also provides clearing house and other services for PredictIt. The university itself is not a part of the lawsuit.
When Victoria University sought to create the exchange, it told the CFTC that the exchange would be conducted for research purposes. Two professors, Rutgers University Statistics Professor Harry Crane and Michigan State University Associate Professor of Political Science Corwin Smidt, also are plaintiffs in the case.
According to the lawsuit, Crane analyzed PredictIt data from 2018 to 2020, which “suggests that the Market’s percentage-trading price is a more accurate predicter overall than predictions made on the opinion-poll analysis website FiveThirtyEight.”
Forcing PredictIt’s shutdown would hinder the work of Crane, Smidt, and other researchers, plaintiffs’ lawyers for Steptoe & Johnson argued in the initial filing.
“If contracts predicting the outcome of the 2024 presidential election were liquidated prior to their close-out event… the trading data from those contracts would be worthless from an academic perspective, foreclosing future use of the Market as a research resource,” the complaint states.
Two active traders on PredictIt markets, Kevin Clark and Trevor Boeckmann, also are plaintiffs who hold contracts on the outcome of the 2024 presidential election, and the lawsuit claims the CFTC’s actions have “distorted the value” of their holdings. Both have invested thousands of dollars into the exchange.
Political Betting in the US
Since its creation, PredictIt has been the closest opportunity for Americans to wager on political elections. When the CFTC said that it would not take action against PredictIt, it also gave several stipulations, including limits on how much people could invest in each market and the number of traders for each opportunity.
Last month’s letter did not indicate which specific criteria PredictIt violated to cause the revocation, and Singer defended the exchange’s operations in an interview with Casino.org last month.
While the CFTC has revoked PredictIt’s status, it’s also considering a request by commercial online exchange Kalshi to offer markets on the outcome of the 2022 and future US House and US Senate election cycle.
A 30-day public comment period is expected to run through Sept. 25, and the CFTC said late last month that it strives to give a determination by Oct. 28.
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