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The commodities exchange PredictIt might want to toy with the notion of creating a category based on its fate. While many of the usual rules regarding the regulation of such platforms; wherein people can buy and sell futures in various items of value, seemed to suggest a bleak future for PredictIt, recent events have already shown the website’s potential for breaking those rules.
PredictIt couldn’t have selected a more favorable assignment for its petition to the United States Fifth Circuit Court of Appeals and as a result, got some temporary protection from any adverse action by the US Commodity and Futures Trading Commission (CFTC). However, that’s no guarantee that the Fifth will behave correspondingly in future proceedings.
Fifth Circuit keeps PredictIt alive, for now
On Friday, a three-judge panel of the Fifth Circuit in New Orleans remanded an appeal for a petition to the federal court for the Western District of Texas back to that district court with instructions to grant the petition. The petition sought a preliminary injunction against the CFTC. In plainer language, the CFTC is barred from taking action against PredictIt at least until the district court rules on the merits of the lawsuit.
That is a threat because while the CFTC originally issued a letter stating that it would not take action against the exchange, it rescinded that letter in August 2022. In the same letter, it also ordered PredictIt to shutter its operations.
The panel’s ruling now means the plaintiffs who filed suit against the CFTC will get their day in court in the Western District of Texas. Those include an operational partner, Aristotle International, and users of the platform among others.
The CFTC had moved to dismiss the lawsuit. Amid that consideration, the district court essentially pretended the plaintiffs’ petition for an injunction didn’t exist. That is no longer possible given the action from the Fifth Circuit panel.
It’s unclear how soon the district court will hear oral arguments and render a decision. What seems quite certain, though, is that will probably be a mere prelude to this case heading back to New Orleans. PredictIt shouldn’t take that as a sign of inevitable ultimate victory.
Why PredictIt’s long-term fate is still murky
It would have been difficult for PredictIt to have selected a more favorable three-judge panel for the appeal of its injunction petition. The majority in the decision were both appointed during the Trump Administration. As Alex Weldon of Bonus.com points out, that same administration appointed a CFTC commissioner whose stated objectives included weakening the CFTC.
Also, both of the judges voting to remand telegraphed their intentions to do so early on in the proceedings. Conditions may not be as favorable upon this dispute’s return to the Fifth, though.
In that extremely likely scenario, the full Fifth will be weighing in on whether the CFTC erred in taking action against PredictIt. The entire bench does not appear as hostile to the CFTC as the two judges who represented the majority in Friday’s decision.
Nonetheless, PredictIt has already defied logic by landing that decision. In doing so, the majority opinion not only ignored precedent but also sought to establish a new one. The issue those judges introduced a novel interpretation of was whether the CFTC’s rescinding of its no-action letter represented the agency’s final action on the matter.
At this point, anything is possible but not everything is probable for PredictIt’s long-term future.
