Securities Regulation Daily Wrap Up, EXCHANGES AND MARKET REGULATION—W.D. Tex.: Court vacates CFTC withdrawal of no-action relief, enjoins PredictIt market shutdown, (Jul 23, 2025)

By Lene Powell, J.D.

The judgment in favor of an online predictions market follows a Fifth Circuit order finding for the first time that CFTC no-action letters constituted final agency action.

A federal district court in Texas cleared the way for the PredictIt event contracts market to continue operations, vacating the CFTC’s withdrawal of no-action relief as “arbitrary and capricious.” The court permanently enjoined the CFTC from closing the PredictIt market, finding that the CFTC’s assertions that PredictIt was violating the no-action conditions were “legally insufficient,” (Clarke v. CFTC, No. 1:24-cv-00614-DAE (W.D. Tex. July 22, 2025)).

While the court’s order closes the books on a tangled chapter involving one of the original political predictions markets, it may raise new complications, including the prospect of for-profit trading platforms being able to offer event contracts without registering with the CFTC.

No-action relief. The PredictIt trading platform offers contracts on political elections and events. The CFTC provided no-action relief in 2014 allowing Victoria University of Wellington, New Zealand, to operate the PredictIt platform without CFTC registration. The relief included conditions related to non-profit status and restrictions on contract size, fees, and commissions, among others.

The CFTC then withdrew the relief in 2022, stating that the university had not operated its market “in compliance with the terms of Letter 14-130.” A group of plaintiffs including Predict It, Inc., a Delaware corporation and subsidiary of Aristotle International, sued the CFTC in the federal Western District of Texas, arguing that the CFTC’s withdrawal of the no-action relief was “arbitrary and capricious” under the Administrative Procedure Act.

Fifth Circuit order. In 2023 on an interlocutory appeal, the Fifth Circuit remanded to the district court with instructions to enter a preliminary injunction, finding the plaintiffs were likely to succeed.

Judgment on the pleadings. Following the Fifth Circuit order, the CFTC filed for judgment on the pleadings asking the court to vacate the two no-action letters at the heart of the dispute.

The CFTC initially argued that the plaintiffs were not entitled to more relief than that and that the court should not enter an injunction prohibiting the CFTC from taking any actions relating to closing the platform. The plaintiffs countered that the CFTC’s proposed judgment provided “only a fraction of the relief requested” and would let the CFTC shut down PredictIt if it chose.

In 2025, under a new CFTC chairman, the CFTC changed course and did not oppose the plaintiffs’ request for additional relief.

Accordingly, the court entered judgment as follows:

• Vacated CFTC’s withdrawal of no-action relief as “arbitrary, capricious, and contrary to law”;

• Declared the CFTC’s justifications stated in the letters to be “arbitrary, capricious, and legally insufficient” as grounds for the Commission taking any action to close the PredictIt Market, to cancel the PredictIt Market’s No-Action Relief, or to impose any other form of sanction on the plaintiffs;

• Enjoined the CFTC from seeking to close the PredictIt Market or imposing any other sanction on PredictIt Market sponsors, operations, or participants based on facts or events or facts or features of the PredictIt Market known to the Commission prior to or on 7/22/2024;

• Denied the plaintiffs’ motion to amend the complaint as moot and denied the plaintiffs’ request for additional relief including litigation costs and attorney fees.

This is case No. 1:24-cv-00614-DAE.

Judge: Ezra, D.

Attorneys: John J. Byron (Steptoe LLP) for Kevin Clarke. Anne Whitford Stukes for the CFTC.

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