Political betting battle heads to DC after Texas court ruling
PredictIt lawsuit moved to US capital court as market closure deadline looms large
The high-profile lawsuit by political betting markets operator PredictIt against the Commodity Futures Trading Commission (CFTC) will move to Washington DC following a ruling in a Texas court.
On Monday (December 12), US District Court for the Western District of Texas magistrate Mark Lane issued an eight-page ruling following the filing of an injunction by PredictIt to keep its political betting markets system open beyond a CFTC deadline of February 15, 2023.
The suit was initially filed in Texas, where many of the plaintiffs named are based, including Kevin Clarke, a prominent trader on the site.
However, in his ruling, Lane ordered the suit to be moved to the US District Court in Washington DC, something which was argued for by the CTFC in its counterclaim against the injunction.
“Plaintiffs repeatedly emphasized Mr Clarke’s residency, although they conceded that from an economic perspective Mr Clarke was not the largest investor or faces the greatest potential financial loss of the plaintiffs,” Lane wrote in his ruling on the case.
“Indeed, even though there are numerous other plaintiffs, plaintiffs consistently argue this case is about how the withdrawal of the no-action letter has harmed Mr Clarke.
“Plaintiffs’ insistence on the importance of Mr Clarke and reasons for filing the suit here still confound the court, even after the hearing. The two entity plaintiffs – PredictIt, Inc. and Aristotle International, Inc. – are both based in the District of Columbia,” the magistrate added.
Based in New Zealand, PredictIt offers Americans the chance to browse a variety of political markets and bet on whether an event will or will not happen by purchasing a ‘share’ in that event. It also allows trading on shares in different events between users with all purchases/bets capped at $850.
PredictIt operates on a prior CTFC permission first given in 2014 which has been allocated to the Victoria University of Wellington, with all betting supposed to take place under the condition that it operates on a non-profit basis purely for research purposes.
The site allows quasi-wagering on political events and had become a popular one used by US broadcasters in the run-up to political events such as the US Senate and Presidential elections.
In August it was ordered to cease operation in the US by the CTFC following the withdrawal of a no-action letter by the US watchdog.
The enforced closure of the site will lead to the liquidation of many markets, including those concerning the 2024 US elections, something which PredictIt and its backer Aristotle International Inc have fiercely opposed.
The argument for the injunction rests on 75 existing markets, which would not expire by the CTFC deadline date, with more than 14,500 so-called ‘traders’ operating contracts in markets affected.
It is understood representatives of PredictIt are planning to appeal against the recommendation made.
Lane, however, was downbeat over the chances of the PredictIt suit in a footnote to his recommendation.
“The CFTC argues that issuance of a no-action letter and its withdrawal are not final agency actions and that Plaintiffs lack standing to sue,” Lane wrote.
“Plaintiffs argue the no-action letter constituted a license, and they are beneficiaries of the no-action letter. However, at best, Plaintiffs can only strain to analogize to other cases.
Lane continued: “Plaintiffs’ inability to cite cases directly holding that a no-action letter is the equivalent of a license or other final action or that third parties are beneficiaries to a no-action letter with standing sue leaves the court highly skeptical of their arguments.
“Nonetheless, as this court is not reaching the motion to dismiss, Plaintiffs will have a second chance to convince a court that their claims should move forward,” he added.
The case continues.