As much of the American political betting sphere waits on the Fifth Circuit Court of Appeals to issue its ruling in the case related to the shutdown of political futures trading site, PredictIt, the Commodity Futures Trading Commission (CFTC) threw a potential curveball to the court and plaintiffs, suggesting that the case might be moot.
Indeed, this was the title of the filing “Suggestion of Mootness.” As you may recall, the plaintiffs filed a lawsuit seeking to stop the shutdown of PredictIt that had been slated for February 15, 2023, just before midnight.
The CFTC argued for its part that they had not actually ordered the shutdown of the site. Instead, they had just revoked a no-action letter, even though that no-action letter was effectively ensuring that the CFTC would not go after the site, and its removal seemed like a foregone conclusion that the site would run afoul of the regulator at some point down the road.
PredictIt injunction kept political betting site open
Eventually, an injunction was granted stopping the shutdown while the case played out.
After what some interpreted to be a positive oral argument for the plaintiffs, the government agency has now filed a brief titled suggestion of mootness.
It included a note that the agency had withdrawn its withdrawal of no-action letter, and then issued a new letter on March 2, 2023, which identifies alleged non-compliance with the agency’s 2014 no-action letter.
What is in CFTC filing?
The filing with the suggestive title notes that on March 2, 2023, the CFTC sent a letter to Victoria University of Wellington, New Zealand, to whom the original letter was issued (but is not a party to the lawsuit.) In the new letter sent to the University, the Division of Market Oversight (DMO), identifies three key areas that it alleges are out-of-whack with the terms set forth in the 2014 grant of no-action relief:
- “Aristotle International, Inc. (“Aristotle”)—not the University or its faculty—had been responsible for operating the PredictIt event-contracts market;
- “that the University, through a wholly owned subsidiary, appears to have received compensation from Aristotle for the latter’s operation of the PredictIt market; and
- that the PredictIt market had listed numerous event contracts falling outside of the limitations enumerated in the 2014 no-action letter.”
The filing also notes that the CFTC had previously alerted the University to concerns on June 8, 2022, which were then reportedly followed by subsequent phone calls and electronic communication, which included the reported participation of the site operator Aristotle.
Mootness in PredictIt case?
The filing argues that as the letter which was the basis for the motion for preliminary injunction is no longer active, the basis for the lawsuit is moot and should be dismissed.
Mootness is a legal doctrine, which effectively says that there needs to be an active case or controversy in order for the Court to resolve. For instance, we do not permit federal courts to have hearings on hypotheticals or to issue advisory opinions. The matter must be ripe in order for a federal court to proceed with a hearing.
As the letter, which was the basis for the case has been removed, the CFTC argues that the case should be dismissed.
Not so fast, my friend?
The plaintiffs, who according to the filing oppose the suggestion of mootness, are very likely to argue that the removal of the revocation and effective replacement with a new letter does not in fact render the case moot.
Despite the added context provided in the replacement letter, there remains a live matter for the Fifth Circuit Court of Appeals to resolve, it might hold.
Digging deeper into new letter
The March 2, 2023, letter addressed to Dr. Margaret Hyland, Vice Provost for Research at Victoria University, spells out the initial terms under which the no-action letter was originally issued back in 2014. It then goes on to specify three reasons that the DMO reportedly laid out the University representatives in June as to why there was a forthcoming public notice of withdrawal of no-action relief.
The letter goes on to spell out that the no-action letter was issued on the condition that the market would be overseen by faculty from the University, as part of their day-to-day responsibilities. The letter argues that the agreement with Aristotle goes beyond what was permitted in the no-action relief and that the University has allowed the market to list contracts beyond those permitted.
The letter goes on to highlight more than a dozen reported contracts that allegedly exceeded the permissible scope of the no-action letter including whether the U.S. would indict former FIFA president Sepp Blatter in 2015. The letter then asks that the University send its response to the new letter by March 20, 2023.
What to make of PredictIt filing
It feels like things are heating up. Was this new letter a response to a bad feeling about how the Fifth Circuit Court of Appeals might be leaning? Perhaps.
There is also the possibility that there was some agreement at the CFTC that the initial withdrawal letter was not sufficiently clear as to the rationale for withdrawal, even if there had been communication with the University outside of the context of the letter.
In the meantime, we have at least three things to watch in this case. First, we are waiting on a decision from the Fifth Circuit on mootness. Second, we are looking for any response from the plaintiffs, and finally, third, we are waiting on the March 20, 2023 deadline in the letter to see if Victoria University files any sort of public response to the CFTC.