PredictIt, a company that offers futures bets on political events, has had a district court verdict overturned in the Fifth Circuit Court of Appeals allowing it to continue operating for the time being.
The platform has been in a legal battle with the Commodity Futures Trading Commission (CFTC) after the body ordered PredictIt to cease operations back in February.
While political betting is illegal in the US, the CFTC allowed PredictIt to operate if it stuck to certain conditions, including not operating for a profit and limiting the number of bettors, via a no-action letter.
Given that PredictIt was mainly used for data-gathering for academic researchers rather than for recreational wagering purposes, the CFTC allowed it to operate in the US, where it allowed users to bet on future political outcomes such as election winners.
The license was issued in 2014 and the platform operated for eight years without much interruption.
However, last August the Commission withdrew the no-action letter and told PredictIt, which is owned by Victoria University in Wellington, New Zealand, to close its site by February 2023.
As a result, PredictIt alongside several other plaintiffs sued the CFTC in a bid to save its future. The action did not get off to a promising start for PredictIt, however, as the Western District Court of Texas dismissed the case for an injunction.
But the firm scored a win as the Fifth Circuit appeals court overturned this decision and referred the case to the District Court to further examine the platform’s case.
The court documents read: “We reverse the district court’s effective denial of a preliminary injunction and remand with instructions that the district court enter a preliminary injunction pending its consideration of Appellants’ claims.”
James C Ho, the Circuit Judge, wrote: “Plaintiffs’ theory of final agency action admittedly conflicts with the precedents of our sister circuits. To my knowledge, no circuit has held that a no-action letter or its withdrawal is sufficient to constitute “final agency action” under the Administrative Procedure Act. And some have held the opposite.
“That said, we need not reach a definitive conclusion on this issue at this time. As detailed in the majority opinion, the issues presented in this case are sufficiently close that Plaintiffs have demonstrated a substantial likelihood of success, and satisfied the remaining elements required for a preliminary injunction as well.”
Following the Fifth Circuit court’s outcome, the case will now go to the District Court. In the meantime, the CFTC cannot force PredictIt to close down its operations or take any further action against the platform.