CFTC’s Actions Threaten First Amendment Rights Says Media

Washington, DC, Jan. 10, 2025 (GLOBE NEWSWIRE) — Online newspaper, The Washington Free Beacon (Free Beacon), joins Aristotle International and a dozen plaintiffs in a lawsuit against the Commodity Futures Trading Commission (CFTC) to save the prediction market, PredictIt. The lawsuit is currently pending in federal district court in the Western District of Texas.

“By attempting to silence PredictIt and other election forecasting sites, the CFTC is limiting the information available to the Beacon, and therefore to the public, about public opinion on politics and government,” said Free Beacon editor-in-chief Eliana Johnson.

The CFTC’s efforts to close PredictIt would block media organizations’ access to vital information concerning elections and key political events, unconstitutionally interfering with their rights to both receive and convey political information to readers. Limiting the media’s ability to inform the public and engage in meaningful discourse about the political landscape is a straightforward attack on First Amendment rights.

“We’re thrilled that the Free Beacon has joined us in bringing attention to the First Amendment violations obvious in the CFTC’s attempts to shut down the PredictIt Market, and to stall the creation of responsible election prediction markets. We will continue to advocate for the preservation of access to political data for traders, academic researchers, the media and the public. Afterall, what is more important in a democratic society than the free flow of information,” said John Aristotle Phillips, Aristotle co-founder and CEO.

The Free Beacon reports from Washington, DC, on politics and policy and is among the many media organizations that turn to PredictIt as a source of data and information for reporting on political topics and events. The news media’s access to important data is crucial to their reporting on American politics, and the CFTC’s efforts restrict access to information created by the market regarding the real-time effects of events on the likely outcome of elections is a clear violation.

The addition of news site The Free Beacon bolsters the already strong case against the CTFC and contributes to the conversation by telling the full story of the harm posed by future closure of PredictIt.

Background

Kevin Clarke et al. v. CFTC is currently pending in federal district court in the Western District of Texas.

The PredictIt Market has operated since its inception under a “no action letter” agreement with the CFTC. In August 2022, the CFTC decided to revoke that letter agreement. The agency did not provide any reason for its decision, except for the vague assertion that the Market was not operating in compliance with the terms of the agreement. Aristotle, the service provider for the PredictIt Market, and a group of traders and academics immediately challenged the CFTC’s revocation in court and asked that the court prevent the CFTC from closing the Market during the litigation.

After the court failed to act for over three months, the plaintiffs appealed the decision to the Fifth Circuit Court of Appeals, which granted a preliminary order protecting PredictIt during the appeal, and ultimately instructing the district court to enter an injunction preventing the closure of PredictIt until the end of the case. In reaching the latter conclusion, the Fifth Circuit validated many of the plaintiffs’ core arguments, including that the CFTC’s efforts to close PredictIt were likely arbitrary and capricious and that the decision was harming traders and scholars. Recognition that “no action letters” can be a form of final agency action challengeable in court was a key element of the Fifth Circuit ruling.

The case returned to the district court in September 2023 and the court implemented the Fifth Circuit’s instruction to protect PredictIt during the pendency of the case. Shortly thereafter, the CFTC moved to transfer the case to Washington, D.C. The district court obliged the request, and the parties spent several months disputing the proper location of the suit. After another emergency trip to the Fifth Circuit, the plaintiffs vindicated the Western District of Texas as a proper location for the case.

At a hearing on Jan. 7 a Magistrate Judge indicated he intends to require the CFTC to be more forthcoming about its reasoning for attempting to withdraw the PredictIt NAL.

The PredictIt Market provides members of the public with an opportunity to make investments based on their views about the likely outcome of future elections or other significant political events. The trading price of election- and political-event contracts offered on PredictIt has been found to be a remarkably accurate predictor of the outcomes, as informed onlookers tend to put aside biases and other views when they wager even a modest financial investment on the outcome. This accuracy is reflected by the heavy reliance of media organizations on political-event markets in reporting on projected political outcomes. Aristotle International is the service provider for the PredictIt Market.

Attachment

• Kevin Clarke et al. v. CFTC

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