The US Commodity Futures Trading Commission (CFTC) informed a federal appeals court on Thursday that it is providing the founder of the online political futures exchange PredictIt with an adequate opportunity to refute the commission’s claims that the exchange has violated the terms of a no-action letter. The letter, issued by the CFTC on March 2, detailed the agency’s allegations and retracted an August 4, 2022, letter to Victoria University of Wellington, which allowed the exchange to operate since 2014.
The CFTC’s filing stated that the March 2 letter stands as a “preliminary determination,” and the agency’s Division of Market Oversight (DMO) has allowed the university to respond to its findings, with an April 5 deadline. Depending on their response, the DMO may decide not to withdraw the no-action letter or continue their no-action position for unexpired contracts.
The CFTC’s filing on Thursday was a response to the plaintiffs’ appeal to the Fifth Circuit to prevent the exchange from being shut down, based on language in the August letter calling for existing markets to be liquidated by February 15. The court granted an injunction nearly two months ago.
According to the CFTC, their evidence suggests that PredictIt may never have been what the university had originally represented–a small-scale, not-for-profit exchange run by the New Zealand school for research purposes. The agency also noted that Aristotle International, a DC-based political consulting and technology firm, had paid the university subsidiary for the right to manage the exchange, an action which would go against the CFTC’s initial decision.
The CFTC further argued against any sanctions, claiming that their conduct throughout the litigation has been consistent, taken in good faith, and substantially justified. They also noted that the court’s January 26, 2023, order did not incorporate or reference any text in the plaintiffs’ briefs.