PredictIt is a popular website that offers US gambling in the form of exchanges on political and financial events.
The Commodity Futures Trading Commission (CFTC) revoked a letter issued in August to PredictIt sponsors that removed its no-action status. The federal agency also said it is taking new steps against the site.
That information was revealed in a court filing before the US Fifth Circuit Court of Appeals on Friday, Mar. 3.
The Commission sent a letter on Aug. 4, 2022, directing PredictIt to shut down. On Mar. 2, the Commission sent a new letter to PredictIt sponsor and founder, Victoria University of Wellington in New Zealand. The CFTC withdraw its August letter, reissuing a preliminary shutdown decision.
The CFTC argued on Friday that by pulling the Aug. 4 revocation letter and sending a new one, the court should dismiss PredictIt’s appeal.
The Commission’s letter lists allegations of violations
In 2014, the CFTC granted a New Zealand university a no-action letter to establish an online political futures exchange, PredictIt. Almost nine years later, the Commission’s latest letter lists allegations of violations regarding findings on PredictIt.
In a letter sent on Mar. 2 to Victoria University, CFTC Division of Market Oversight (DMO) Director, Vincent McGonagle, revealed new information. He said his staff determined that:
- Aristotle International has been the actual operator of the exchange. Aristotle International is a profit company based in Washington, DC.
- The division also stated that Aristotle International paid a university subsidiary to manage PredictIt.
- PredictIt market had listed numerous event contracts falling outside the limitations of the 2014 no-action letter. The university also started to include Aristotle in its communications with the CFTC.
It all happened during the two months from that meeting to Aug. 4 letter issuing.
The court allowed PredictIt to keep existing markets open for trading until Feb. 15, as recommended by the CFTC. After the deadline, PredictIt is requested to liquidate all remaining markets, including those for the 2024 presidential election.
The Commission has also requested the institution that formed PredictIt nine years ago to respond with objections by Mar. 20, 2023. McGonagle also emphasized any response should come from the university, not Aristotle International.
Aristotle responds to the CFTC’s latest actions
Aristotle International, a service provider for the prediction market PredictIt, responded to the latest actions by the CFTC against the US gambling site. David Mason, Aristotle’s General Counsel and former Federal Election Commission (FEC) Chairman said via a release:
“This action is an acknowledgment that they haven’t treated PredictIt or its traders and education partners in a fair or just way so they’re trying to go back and change history.”
Aristotle has the following statement in response to these developments:
“The CFTC’s letter on PredictIt today is an acknowledgment that its action last August to withdraw the no-action letter was illegal because it lacked basic procedural fairness and transparency. While this belated admission of wrongdoing is welcome, the Commission’s new letter is a desperate attempt to escape the consequences of its prior ill-considered action by avoiding judicial review and the ruling we have requested requiring the Commission to treat those affected by its actions fairly.
“We reject the CFTC’s characterization of the facts. In particular, we note that we have been transparent with and responsive to the Commission about all the matters addressed in their letter for more than eight years. We are disappointed that the CFTC insists that traders and others impacted by its regulatory decisions have no voice in decisions affecting them. We plan to continue to fight this prejudiced attempt to shut down this useful market.”