Federal regulators seeking to block wagering on next year’s presidential election were dealt a setback when a panel of three Fifth Circuit appellate judges blocked the shutdown of a website that takes bets on political events.
The Predictit website’s most popular wager is whether former President Donald Trump or Florida Governor Ron DeSantis will win the 2024 Republican nomination for president.
Other popular wagers include whether President Joe Biden will resign before his first term is over, and whether a woman will be elected president in 2024.
The site sells shares in certain outcomes, and the value of the shares changes based on market estimates of probability. If bettors maintain their bets until the event occurs and their prediction is correct, PredictIt redeems each of their shares. According to the Courthouse News Service (CN), PredictIt was formed through a partnership between its creator, American businessman John Aristotle Phillips, and Victoria University in Wellington, New Zealand.
It launched in 2014 after the university received approval of the U.S. Commodity Futures Trading Commission’s (CFTC) Division of Market Oversight via a “no-action letter.” Last summer, the division rescinded the no-action letter and gave PredictIt until February 15 to close out or liquidate all its markets. With no further explanation, the division alleged the university had not operated the platform in compliance with the terms of the no-action letter.
A group of PredictIt users, American professors who use it for data and two U.S. companies who manage it, including founder Philips’ firm Aristotle International Inc., sued the CFTC last September in federal court in Texas. The lawsuit claimed the agency violated the Administrative Procedure Act by providing no details on the alleged violations.
After a U.S. District Judge declined to rule on the plaintiffs’ motion for a preliminary injunction, the plaintiffs appealed to the Fifth Circuit in December. The New Orleans-based appellate court granted Predictit a preliminary injunction on January 26, allowing the market to continue operating past February 15 pending resolution of their appeal.
A main argument of the government was that revoking the no-action letter was not a “final agency action,” but an act of prosecutorial discretion that is non reviewable by courts. The panel disagreed, ruling that courts have jurisdiction because the no-action letter qualifies as a final agency action under the Administrative Procedure Act.
“Here, the whole point of Victoria University’s requesting the no-action letter was to obtain permission to operate an unregistered event futures market, and to get that green light before plunging significant resources into it,” the 20-page opinion said.
He remanded the case to the lower court with instructions to enter a preliminary injunction against the CFTC shutting down PredictIt, pending resolution of the case on the merits.
