Court Opinion

ID: 9410602
Source: CourtListenerOpinion
Date Created: 2023-07-22 00:00:42.073903+00
Date Added: 2024-06-11T17:20:58.698083
License: Public Domain

Case: 22-51124     Document: 00516829997         Page: 1     Date Filed: 07/21/2023

           United States Court of Appeals
                for the Fifth Circuit
                                                                     United States Court of Appeals
                                                                              Fifth Circuit

                                ____________                                FILED
                                                                        July 21, 2023
                                  No. 22-51124                         Lyle W. Cayce
                                ____________                                Clerk

   Kevin Clarke; Trevor Boeckmann; Harry Crane; Corwin
   Smidt; Aristotle International, Incorporated; Predict
   It, Incorporated; Michael Beeler; Mark Borghi;
   Richard Hanania; James D. Miller; Josiah Neeley;
   Grant Schneider; Wes Shepherd,

                                                           Plaintiffs—Appellants,

                                       versus

   Commodity Futures Trading Commission,

                                            Defendant—Appellee.
                  ______________________________

                  Appeal from the United States District Court
                       for the Western District of Texas
                            USDC No. 1:22-CV-909
                  ______________________________

   Before Graves, Ho, and Duncan, Circuit Judges.
   Stuart Kyle Duncan, Circuit Judge:
          The PredictIt Market is an online marketplace that lets people trade
   on the predicted outcomes of political events. Essentially, it is a futures
   market for politics. In 2014, a division within the Commodity Futures
   Trading Commission (“CFTC”) issued PredictIt a “no-action letter,”
   effectively allowing it to operate without registering under federal law. But,
   in 2022, the division rescinded the no-action letter, accusing PredictIt of
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   violating the letter’s terms but without explaining how. It also ordered all
   outstanding PredictIt contracts to be closed in fewer than six months.
          Various    parties    who    participate    in   PredictIt   (collectively,
   “Appellants”) challenged the no-action letter’s rescission in federal district
   court and moved for a preliminary injunction. The district court has not ruled
   on that motion, though, despite PredictIt’s looming shutdown. Appellants
   now seek our review, treating the district court’s inaction as effectively
   denying a preliminary injunction. We granted Appellants an injunction
   pending our consideration of their appeal.
          The CFTC has since raised a host of objections to our even hearing
   the appeal, arguing that it is moot, that there has been no final agency action,
   that revoking the no-action letter was within the agency’s discretion, and that
   Appellants lack standing. These threshold objections are all meritless.
          We now conclude that a preliminary injunction was warranted
   because the CFTC’s rescission of the no-action letter was likely arbitrary
   and capricious. So, we remand for the district court to enter a preliminary
   injunction while it considers Appellants’ challenge to the CFTC’s actions.
                                 I. Background
          Launched in 2014 by the Victoria University of Wellington in New
   Zealand, PredictIt was conceived as a data-gathering tool for academic
   researchers. It allows people to make small investments based on predicting
   political events, like future elections or the passage of federal legislation.
          For instance, in recent markets predicting the 2024 presidential
   nominees, Donald Trump “shares” were trading at $0.56, while Ron
   DeSantis “shares” were trading at $0.22 (on 47.5 million shares traded). Joe
   Biden was outpacing Gavin Newsom by $0.66 to $0.21 (16.4 million shares).
   And in trading on whether Alexandria Ocasio-Cortez would run for president

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   in 2024, “No” was beating “Yes” $0.97 to $0.03 (361,000 shares). If a
   trader accurately predicts an event’s outcome, each of his shares will cash
   out at $1.00. 1
          Offering these sorts of “event contracts” typically requires
   registering as “a designated contract market or swap execution facility”
   under the Commodity Exchange Act (“CEA”) and CFTC regulations. See
   7 U.S.C. § 7a-2(c)(5)(C)(i); 17 C.F.R. § 40.11. 2 But the CFTC can exempt
   certain transactions from the CEA. See 7 U.S.C. § 6(c)(1)–(2). And a
   division within the agency, the Division of Market Oversight (“DMO”), can
   issue various “letters” concerning the CEA. See 17 C.F.R. § 140.99 (setting
   out DMO authority to issue “exemptive, no-action, and interpretative
   letters”). Relevant here, a “no-action letter” provides that, as to a proposed
   transaction or activity, the DMO “will not recommend enforcement action
   to the [CFTC] for failure to comply with a specific provision of the Act or of
   a Commission rule, regulation or order.” See id. § 140.99(a)(2). Only the
   division that issued the no-action letter is bound by it and “[o]nly the
   Beneficiary may rely upon the no-action letter.” Ibid.
          In 2014, seeking to operate PredictIt without registering under the
   CEA, Victoria University sought a no-action letter. The university proposed
   a small-scale, not-for-profit market that would serve as a valuable academic
   tool for researchers. This market, the university explained, would abide by
   certain limits, such as capping trader investment at $850 and restricting each
   event contract to 5,000 total traders.

          _____________________
          1
              See https://www.predictit.org/markets (last visited July 21, 2023).
          2
             The CEA describes an “event contract” in relevant part as “agreements,
   contracts, transactions, or swaps in excluded commodities that are based upon the
   occurrence, extent of an occurrence, or contingency.” 7 U.S.C. § 7a-2(c)(5)(C)(i).

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          In October 2014, DMO issued Victoria University’s requested no-
   action letter. The letter stated that “based upon [Victoria University’s]
   representations” to abide by certain terms—such as maintaining nonprofit
   status and allowing researchers to access generated data—the DMO would
   “not recommend that the Commission take any enforcement action.” The
   letter also explained that its position “represent[ed] the views of DMO only,
   and d[id] not necessarily represent the positions or views of the
   Commission.” And the DMO purported to “retain[] the authority to
   condition further, modify, suspend, terminate or otherwise restrict the terms
   of the no-action relief . . . in its discretion.”
          Nearly eight years later, in August 2022, the DMO rescinded the no-
   action letter. The revocation stated that “[t]he University has not operated
   its market in compliance with the terms of [the no-action letter]” and that,
   therefore, the no-action letter was “hereby withdrawn.” The DMO
   provided no explanation about which terms of the letter had been violated.
   Instead, the revocation directed that “remaining listed contracts and
   positions comprising all associated open interest in such market should be
   closed out and/or liquidated no later than 11:59 p.m. eastern on February 15,
   2023.”
          In September 2022, various parties affiliated with PredictIt
   (“Appellants”) sued the CFTC in federal court. 3 They claimed the no-
   action letter’s rescission was arbitrary and capricious because it failed to
   explain the agency’s decision. See 5 U.S.C. § 706. They also claimed the
   revocation constituted a withdrawal of a license without the necessary
   procedural steps. See 5 U.S.C. § 558. Appellants moved for a preliminary
          _____________________
          3
             Victoria University is not among those parties. Rather, Appellants consist of
   various third parties—including market operators, traders, and academics—who claim to
   be negatively impacted by the no-action letter’s rescission.

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   injunction. In response, the CFTC moved to dismiss on the grounds that
   none of Appellants’ claims was justiciable. In December 2022, a magistrate
   judge recommended the case be transferred to Washington, D.C. During this
   time, spanning three months, the district court did not rule on the
   preliminary injunction motion, even after Appellants moved to expedite its
   consideration in light of the looming deadline for closing PredictIt contracts.
          Given this inaction, Appellants appealed what they deemed the
   effective denial of a preliminary injunction. The CFTC moved to dismiss
   the appeal for lack of jurisdiction. A motions panel of our court denied that
   motion, citing Carson v. Am. Brands, Inc., 450 U.S. 79 (1981). Under Carson,
   a court of appeals may review a district court’s order that, while not explicitly
   denying a preliminary injunction, “nonetheless ha[s] the practical effect of
   doing so” and might cause irreparable harm absent immediate appeal. Id. at
   83; see also, e.g., Thomas ex rel. D.M.T. v. Sch. Bd. of St. Martin Par., 756 F.3d
   380, 384 & n.7 (5th Cir. 2014); 28 U.S.C. § 1292(a)(1). The motions panel
   carried with the case Appellants’ motion for an injunction pending appeal.
   Our panel granted that injunction on January 26, 2023, and heard argument
   in February 2023.
          Less than a month later, in March 2023, the CFTC withdrew its
   August 2022 rescission of the no-action letter. Notwithstanding the
   injunction pending appeal, the agency substituted a new letter that
   “determined as a preliminary matter that [the no-action letter] is void and
   should be withdrawn.” This new letter gave some explanation for rescinding
   the no-action letter and gave Victoria University a chance to respond. Given
   these developments, the CFTC moved to dismiss this appeal as moot.
   Appellants opposed and cross-moved for sanctions, arguing the CFTC had
   violated our earlier injunction. On May 1, 2023, we denied both motions. At
   the same time, we clarified that CFTC “is ENJOINED from closing the

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   PredictIt Market or otherwise prohibiting or deterring the trading of Market
   contracts until 60 days after a final judgment in this matter.”
                             II. Threshold Issues
          Before addressing whether a preliminary injunction is warranted, we
   consider several threshold issues raised by the CFTC. Those are:
   (1) whether the appeal is moot; (2) whether withdrawal of the no-action letter
   is “final agency action”; (3) whether that withdrawal is unreviewable
   prosecutorial discretion; and (4) whether Appellants have standing.
                                   A. Mootness
          The CFTC contends this appeal is moot because the August 2022
   rescission of PredictIt’s no-action letter is no longer in effect, having been
   replaced by the March 2023 letter. And that new letter, the CFTC argues,
   gives Appellants “the full extent of post-remand relief available to [them],”
   by providing an explanation for the rescission and a chance for Victoria
   University to be heard. Moreover, because the March 2023 letter expresses
   only a “preliminary” determination, the CFTC argues there is “nothing
   before this Court to review.” In opposition, Appellants invoke the doctrine
   of voluntary cessation and also argue that the March 2023 letter remains
   procedurally deficient.
          The appeal is not moot. Post-filing events do not moot a case “[a]s
   long as the parties have a concrete interest, however small, in the outcome of
   the litigation.” Knox v. Serv. Emps. Int’l Union, Loc. 1000, 567 U.S. 298, 307
   (2012) (citation omitted) (alteration in original). That is true here. The
   parties continue to spar over whether PredictIt can operate outside the
   CEA’s strictures. Although the DMO has now taken down its August 2022
   rescission of the no-action letter, its March 2023 replacement continues to
   say the letter “is void and should be withdrawn.” It makes no difference that
   the DMO calls this new action “preliminary” and allows Victoria University

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   to lodge objections. The fact that Victoria University can try to change the
   DMO’s mind does not change the fact that the DMO has declared the no-
   action letter “void.” A case is not moot when the government rescinds one
   law only to enact a different version that “disadvantages [the plaintiffs] in the
   same fundamental way.” Ne. Fla. Chapter of Associated Gen. Contractors of
   Am. v. City of Jacksonville, 508 U.S. 656, 662 (1993). 4
           Nor is it the true that the March 2023 letter gives Appellants all they
   ask for. That letter actually gives nothing to Appellants—it lets Victoria
   University object to the no-action letter’s withdrawal but says nothing about
   Appellants. And, in any event, Appellants continue to assert that the March
   2023 letter, despite giving some explanation for the rescission, falls short of
   what the APA requires when an agency changes course. See, e.g., Wages &
   White Lion Invs., LLC v. FDA, 16 F.4th 1130, 1139 (5th Cir. 2021) (“When
   an agency changes course, . . . it must be cognizant that longstanding policies
   may have engendered serious reliance interests that must be taken into
   account.” (citation omitted)).
                                   B. Final Agency Action
           The CFTC also argues that withdrawal of the no-action letter is
   unreviewable because it is neither “agency action” nor “final.” See 5 U.S.C.

           _____________________
           4
              The voluntary cessation doctrine, invoked by Appellants, only underscores why
   this appeal is not remotely moot. See, e.g., City of Mesquite v. Aladdin’s Castle, Inc., 455 U.S.
   283, 289 (1982) (“[A] defendant’s voluntary cessation of a challenged practice does not
   deprive a federal court of its power to determine the legality of the practice.”). If the agency
   had stopped the complained-of conduct (say, by simply withdrawing the August 22
   rescission and reinstating the no-action letter), the doctrine would have us consider
   whether it is “absolutely clear” that the conduct would not recur. Already, LLC v. Nike,
   568 U.S. 85, 91 (2013). But exactly the opposite has happened: the agency has persisted in
   its conduct by reiterating that the no-action letter is “void.” See, e.g., Opulent Life Church
   v. City of Holly Springs, Miss., 697 F.3d 279, 286 (5th Cir. 2012) (“Here, as in Associated
   General Contractors, [the defendant] has already repeated its allegedly wrongful conduct.”).

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   § 704 (providing judicial review of “final agency action”). We disagree on
   both points.
           First, agency action. “Under the APA, ‘agency action’ is a defined
   term, limited to an ‘agency rule, order, license, sanction, relief, or the
   equivalent or denial thereof, or failure to act.’” Indep. Equip. Dealers Ass’n v.
   EPA, 372 F.3d 420, 428 (D.C. Cir. 2004) (quoting 5 U.S.C. § 551(13)). The
   parties joust over whether the no-action letter is a “license” under this
   definition. Appellants say yes, contending the letter is a “form of
   permission” to operate a proposed market. See 5 U.S.C. § 551(8) (defining
   “license” as “an agency permit, certificate, approval, registration, charter,
   membership, statutory exemption or other form of permission” (emphasis
   added)). The CFTC says no, because “[n]othing in the CEA or any
   regulation permits staff to license trading facilities” and that the no-action
   letter, on its face, granted “no affirmative entitlement to do anything.” We
   agree with Appellants.
           The no-action letter qualifies as agency action under the APA.
   “Agency action” has a broad sweep: the term “is meant to cover
   comprehensively every manner in which an agency may exercise its power.”
   Whitman v. Am. Trucking Ass’ns, 531 U.S. 457, 478 (2001). 5 Here, the whole
   point of Victoria University’s requesting the no-action letter was to obtain
   permission to operate an unregistered event futures market, and to get that
   green light before plunging significant resources into it.
           The no-action letter itself characterizes the university as seeking “no-
   action relief that would allow Victoria University . . . to operate” the
           _____________________
           5
            See also Abbott Lab’ys v. Gardner, 387 U.S. 136, 140–41 (1967) (explaining that the
   APA is meant to “cover a broad spectrum of administrative actions” and so its “generous
   review provisions must be given a hospitable interpretation” (citations and internal
   quotation marks omitted)); FTC v. Standard Oil Co. of Cal., 449 U.S. 232, 239 n.7 (1980).

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   proposed market. Furthermore, the letter details the proposed market, states
   that operating it outside the CEA’s strictures would not be “contrary to the
   public interest,” and affirmatively “allow[s]” proposed variations from a
   different event market. Thus, by the letter’s own terms, the no-action relief
   granted is a “form of permission.” See 5 U.S.C. § 551(8).
          Courts have previously found that such grants of permission to avoid
   compliance with administrative requirements constitute agency action. See,
   e.g., Atl. Richfield Co. v. United States, 774 F.2d 1193, 1200 (D.C. Cir. 1985)
   (discussing one such “temporary license”); Gallagher & Ascher Co. v. Simon,
   687 F.2d 1067, 1072–76 (7th Cir. 1982) (reviewing withdrawal of a special
   permit exempting customs brokers from ordinary requirements). Therefore,
   because the no-action letter here is a “license” within the meaning of the
   APA, its withdrawal constitutes agency action. Cf. 5 U.S.C. § 558(c)
   (providing procedural protections for license revocations).
          Next, finality. Agency action is final when it meets two requirements:
   “(A) the action must mark the consummation of the agency’s
   decisionmaking process—it must not be of a merely tentative or interlocutory
   nature;” and “(B) the action must be one by which rights or obligations have
   been determined, or from which legal consequences will flow.” Data Mktg.
   P’ship v. U.S. Dep’t of Lab., 45 F.4th 846, 853 (5th Cir. 2022) (citations and
   internal quotation marks omitted); see generally Bennett v. Spear, 520 U.S.
   154, 177–78 (1997). “This is generally a ‘pragmatic’ inquiry.” Data Mktg., 45
   F.4th at 853 (quoting U.S. Army Corps of Eng’rs v. Hawkes Co., 578 U.S. 590,
   599 (2016)). And it is a pragmatic inquiry colored by the APA’s embodiment
   of the “basic presumption of judicial review.” Abbott Lab’ys, 387 U.S. at 140.
          The CFTC argues that neither finality prong is met. Granting or
   revoking no-action relief, it claims, does not “consummate” the agency’s
   decisional process because it is interlocutory—meaning, it pertains only to

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   whether DMO staff will recommend enforcement action to the CFTC. Nor
   does the letter’s withdrawal trigger any legal consequences. The agency
   assures us that PredictIt “is free to continue unabated with or without any
   staff no-action relief,” and that the CFTC can commence enforcement
   “with or without a staff no-action letter.” Countering this, Appellants argue
   that the no-action letter’s withdrawal is final because it is unappealable and
   subjects impacted parties to enforcement proceedings. We again agree with
   Appellants and find that both finality prongs are met.
          As to the “consummation” prong, the key question is whether
   withdrawal of the no-action letter is “subject to further agency review.” Data
   Mktg., 45 F.4th at 854 (quoting Sackett v. EPA, 566 U.S. 120, 127 (2012)); see
   also Louisiana v. U.S. Army Corps of Eng’rs, 834 F.3d 574, 581 (5th Cir. 2016)
   (same). It is not: the DMO’s decision to issue or withdraw the letter is
   unappealable. So, it does not matter that the letter pertains only to the staff’s
   recommendation to the agency. Once the staff decide to issue or withdraw
   the letter, there is no further appeal within the agency. Illustrating that
   reality, CFTC regulations state that a beneficiary “may rely” on the
   DMO’s issuing a no-action letter. 17 C.F.R. § 140.99(a)(2).
          As to the “legal consequences” prong, once more our recent decision
   in Data Marketing is instructive. As we explained, it is “well-established that
   ‘where agency action withdraws an entity’s previously held discretion, that
   action alters the legal regime, binds the entity, and thus qualifies as final
   agency action.’” Data Mktg., 45 F.4th at 854 (quoting Texas v. EEOC, 933
   F.3d 433, 442 (5th Cir. 2019)). That condition was satisfied in Data
   Marketing because the relevant regulation stated that requestors may “rely”
   on an advisory opinion. Ibid. This reliance “bound the Department to some
   degree and withdrew its previously held discretion.” Ibid. The same can be
   said about PredictIt’s no-action letter: it withdrew some of the CFTC’s
   discretion because regulations state a beneficiary “may rely” on it. 17 C.F.R

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   § 140.99(a)(2). Thus, for the same reasons as in Data Marketing, legal
   consequences flowed from the 2014 no-action letter issued by the DMO. 6
           None of this is changed by the fact that the DMO has now issued its
   March 2023 letter. Like the August 2022 letter it supersedes, the March 2023
   letter cancels PredictIt’s no-action relief. It states: “As a result of the
   University’s non-compliance with the terms of [no-action letter], DMO has
   determined as a preliminary matter that [no-action letter] is void and should
   be withdrawn.” True, the letter purports to make that decision “as a
   preliminary matter,” and it “invite[s] the University to submit any
   objections it may have” by March 20, 2023. But the letter does not promise
   to reconsider its decision that the no-action letter “is void and should be
   withdrawn.”
           But, again, the possibility that the DMO may reconsider is irrelevant
   to our inquiry. “[T]he mere fact that the agency could—or actually does—
   reverse course in the future does not change” an action’s finality. Data
   Mktg., 45 F.4th at 854 (citing Biden v. Texas, 142 S. Ct. 2528, 2545 (2022)).
   The March 2023 letter does not say the DMO is merely considering
   withdrawing no-action relief; it accuses the university of violating the no-
   action letter’s term in numerous ways and declares the letter “void.” This
   forces Appellants “either to alter [their] conduct, or to expose [themselves]

           _____________________
           6
             The CFTC observes, and the dissent stresses, that a no-action letter “represents
   the position only of the Division that issued it” and “binds only the issuing Division . . .
   and not the Commission or other Commission staff.” 17 C.F.R. § 140.99(a)(2); see post at
   2. That does not change our analysis. That same regulation explains that a beneficiary “may
   rely upon the no-action letter.” Ibid. This, once more, suggests that the CFTC has
   withdrawn its discretion to bring enforcement proceedings against the holder of a no-action
   letter, which undermines the contention that the CFTC is in no way bound through no-
   action letters.

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   to potential liability.” Texas v. EEOC, 933 F.3d at 446 (quoting Texas v.
   EEOC, 827 F.3d 372, 383 (5th Cir. 2016)).
          For these reasons, the DMO’s withdrawal of no-action relief
   constitutes final agency action.
                      C. Committed to Agency Discretion
          The CFTC briefly argues that withdrawing no-action relief is
   unreviewable as “committed to agency discretion by law.” See 5 U.S.C.
   § 701(a)(2). It contends that no-action letters are like agency decisions not to
   prosecute or enforce and, as such, are the “classic illustration of a decision
   committed to agency discretion.” Bd. of Trade of Chi. v. SEC, 883 F.2d 525,
   530 (7th Cir. 1989); see generally Heckler v. Chaney, 470 U.S. 821, 831–32
   (1985) (discussing why agency decisions to refuse enforcement are generally
   unsuitable for judicial review). We disagree.
          This case does not challenge an agency’s discretionary decision to
   enforce (or not enforce) the law. What is challenged, rather, is the withdrawal
   of a regulatory instrument (the no-action letter) that ensured the DMO
   would not recommend that the agency enforce the CEA against PredictIt.
   And, as we have pointed out, the agency’s own regulations allow beneficiaries
   to rely on such letters. See 17 C.F.R. § 140.99(a)(2). The cases the CFTC
   cites involve the distinct scenario where third parties try to compel an agency
   to enforce penalties against recipients of no-action letters. Cf. Chicago Bd. of
   Trade, 883 F.2d at 530 (a challenge to the issuance of a no-action letter is
   unreviewable as committed to agency discretion). Those cases might apply if
   we had some third party challenging PredictIt’s no-action letter, arguing the
   DMO should never have issued it. This case is different: the no-action letter
   has been rescinded, and the affected parties claim the agency failed to do so
   properly.

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          We thus conclude that the decision to rescind a no-action letter is not
   “committed to agency discretion by law.”
                                   D. Standing
          The CFTC also argues that Victoria University’s absence spoils
   Appellants’ standing. “An individual has standing to sue if his injury is
   traceable to the defendant and a ruling would likely redress it.” Tex. State
   LULAC v. Elfant, 52 F.4th 248, 253 (5th Cir. 2022) (citations omitted). In
   other words: (1) injury, (2) traceability, and (3) redressability. See Lujan v.
   Defs. of Wildlife, 504 U.S. 555, 560–61 (1992); U.S. Const. art. III, § 2.
   Appellants say they satisfy each prong. We agree.
          Appellants—market operators, traders, and academics claiming to be
   impacted by the no-action letter’s rescission—easily satisfy the standing
   requirements. At this stage, they have shown numerous injuries stemming
   from the letter’s withdrawal and the resulting impact on the PredictIt
   Market. Academics will lose a research tool that was PredictIt’s raison d’être.
   Traders will lose value in compromised contracts. And PredictIt’s service
   providers will incur costs from having to prematurely shut down operations.
   Indeed, Appellants have shown that financial harm was already ongoing
   before this court issued a stay pending appeal, with “the CFTC’s
   prohibition on new markets and the impending shutdown order” causing
   market distortions and “a significant withdrawal of funds.”
          These injuries, moreover, are directly traceable to the no-action
   letter’s withdrawal. Operation of the PredictIt market depended on the 2014
   no-action relief; withdrawing it would obviously imperil the market, resulting
   in harms to Appellants. Finally, a favorable ruling would redress these
   injuries by allowing trading to continue on the same terms as before while the
   district court adjudicates Appellants’ challenge to the CFTC’s action.

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          The CFTC resists these conclusions. It argues that because “[o]nly
   the Beneficiary may rely on the no-action letter,” 17 C.F.R. § 140.99(a)(2),
   only a no-action letter’s beneficiary (here, Victoria University) would have
   standing to sue. It also observes that all of Appellants’ alleged injuries
   “reflect[] a downstream harm flowing directly from Victoria University’s
   hypothetical decision to continue or cease operating PredictIt.” It cites
   National Wrestling Coaches Ass’n v. Department of Education, 366 F.3d 930
   (D.C. Cir. 2004), where several interested parties in the collegiate men’s
   wrestling world (though not the universities and colleges themselves)
   challenged a policy interpretation of Title IX. Id. at 934–36. The D.C. Circuit
   found that the plaintiffs lacked standing because they failed to establish
   causation and redressability: it was unclear that the third-party colleges
   would eliminate their men’s wrestling programs in response to the Title IX
   guidance’s being enjoined. Id. at 938–45. According to the CFTC, that same
   deficiency is present here because Victoria University may choose to operate
   or close PredictIt independent of any no-action letter.
          These counterarguments miss the mark. Whatever CFTC
   regulations might say, the APA permits suit by anyone “adversely affected
   or aggrieved by agency action.” 5 U.S.C. § 702. Appellants fall into that
   category. And National Wrestling is distinguishable. In that case, the court
   reasoned that even if the challenged policy was enjoined, “Title IX and the
   1975 Regulations would still be in place,” serving as an independent
   obligation for federally funded schools to equally accommodate both genders
   in athletics. Nat’l Wrestling, 366 F.3d at 939–40. Thus, the third-party
   schools would not necessarily behave any differently than they otherwise
   would. Id. at 940. Here, by contrast, enjoining the withdrawal of no-action
   relief would reinstate the 2014 no-action letter, permitting PredictIt to
   continue operating as before. And there would be no independent obligations

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                                     No. 22-51124

   to register with the CFTC because of the promise that Victoria University
   “may rely” on its no-action relief. 17 C.F.R. § 140.99(a)(2).
          In sum, Appellants have standing.
                      III. Preliminary Injunction
          We now turn to whether the district court abused its discretion by
   denying a preliminary injunction. See Moore v. Brown, 868 F.3d 398, 402 (5th
   Cir. 2017) (per curiam). To obtain a preliminary injunction, Appellants must
   show: (1) a substantial likelihood of success on the merits, (2) a substantial
   threat of irreparable harm if the injunction does not issue, (3) that the
   threatened injury outweighs any harm that will result if the injunction is
   granted, and (4) that granting the injunction is in the public interest. Id. at
   402–03.
                      A. Substantial Likelihood of Success
          We first ask whether Appellants are substantially likely to show that
   the no-action letter’s revocation was arbitrary and capricious. “The APA’s
   arbitrary-and-capricious standard requires that agency action be reasonable
   and reasonably explained.” Data Mktg., 45 F.4th at 855 (quoting FCC v.
   Prometheus Radio Project, 141 S. Ct. 1150, 1158 (2021)). The court can only
   consider the reasoning “articulated by the agency itself,” and cannot
   consider “post hoc rationalizations for agency action.” Motor Vehicle Mfrs.
   Ass’n of U.S., Inc. v. State Farm Mut. Auto Ins. Co., 463 U.S. 29, 50 (1983).
   “[W]e must set aside any action premised on reasoning that fails to account
   for ‘relevant factors’ or evinces ‘a clear error of judgment.’” Data Mktg., 45
   F.4th at 855 (quoting Univ. of Tex. M.D. Anderson Cancer Ctr. v. HHS, 985
   F.3d 472, 475 (5th Cir. 2021)).
          The August 2022 revocation fails these standards for the obvious
   reason that it gives no explanation whatsoever. Instead of “reasonably

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                                     No. 22-51124

   explain[ing]” the withdrawal, ibid., the DMO delivered this terse missive:
   “The University has not operated its market in compliance with the terms of
   [the no-action letter].” Not a word discloses which terms were violated or
   what evidence supports the charge. Nor is any reason given why PredictIt
   must swiftly close all contracts by a certain date or why the agency rejected
   less draconian measures, given the significant reliance interests in play. See,
   e.g., Nat’l Shooting Sports Found., Inc. v. Jones, 716 F.3d 200, 215 (D.C. Cir.
   2013) (agency action is not upheld if it fails to consider “significant and viable
   and obvious alternatives” (cleaned up)). This is the epitome of arbitrary and
   capricious action. See Sprint Nextel Corp. v. FCC, 508 F.3d 1129, 1132 (D.C.
   Cir. 2007) (“We . . . require more than a result; we need the agency’s
   reasoning for that result.” (emphasis added)).
            Less than a month after oral argument, the agency tried to fix these
   glaring defects by issuing the March 2023 letter. As noted, this letter purports
   to “supersede” the August 2022 rescission while reaffirming the agency’s
   decision that the no-action letter “is void and should be withdrawn.” It also
   provides some explanation for withdrawing the no-action letter, such as the
   charge that Victoria University violated the letter’s terms by allowing a for-
   profit company (Aristotle, Inc.) to operate PredictIt. We have already
   explained why the March 2023 letter does not moot this appeal. See supra
   II(A).
            The March 2023 letter should also have no bearing on whether the
   withdrawal of the no-action letter is arbitrary and capricious. That is because
   the letter violates the injunction pending appeal our panel previously entered.
   Appellants had asked us to “enjoin the enforcement of the Commission’s
   February 15, 2023, liquidation mandate and allow the PredictIt Market event
   contracts that were offered as of the date of the agency’s decision . . . to
   continue trading pending resolution of this appeal.” We granted that
   requested injunction on January 26, 2023.

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          The March 2023 letter violates that injunction by purporting to
   withdraw no-action relief, thereby subjecting PredictIt—and all of its existing
   contracts—to regulation. Although we exercised our discretion to deny
   Appellants’ sanctions motion, we will not allow the enjoined agency to game
   the system by retrofitting its previous rescission with “reasons” after oral
   argument. See Texas v. Biden, 10 F.4th 538, 558–59 (5th Cir. 2021) (“It is a
   fundamental precept of administrative law that an administrative agency
   cannot make its decision first and explain it later.”).
          But even if we were to consider the March 2023 letter, we would still
   find serious problems with its reasons for voiding the no-action letter. To
   begin with, we have concluded that the no-action letter qualifies as a
   “license” under the APA. See supra II(B). The March 2023 letter, however,
   does not purport to follow the procedural requirements for withdrawing a
   license. See 5 U.S.C. § 558(c). The agency only provided Victoria University
   with an opportunity to respond to objections. It offered no opportunity for
   Victoria University “to demonstrate or achieve compliance” with the
   requirements that were purportedly violated. Id. § 558(c)(2). The withdrawal
   of no-action relief is therefore procedurally deficient on that basis alone.
          Aside from that defect, there are other evident flaws in the March
   2023 letter’s substance. For instance, the letter does not meaningfully
   explain why the DMO rejected alternatives like allowing currently existing
   markets to expire on their own terms. It says only that such alternatives
   would not “be appropriate,” given the likelihood of recurrence due to past
   violations. But the letter does not explain why past violations suggest a
   likelihood of recurrence in the future. This is hardly the “reasoned
   decisionmaking” required of administrative agencies. Michigan v. EPA, 576
   U.S. 743, 750 (2015) (quoting Allentown Mack Sales & Serv., Inc. v. NLRB,
   522 U.S. 359, 374 (1988)).

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          Nor does the DMO justify its conclusion that monitoring future
   compliance would require an “unreasonable use of taxpayer resources.” It
   says nothing about the magnitude of the resources required and does not
   explain why they would not be justified given longstanding reliance interests.
   See Encino Motorcars, LLC v. Navarro, 579 U.S. 211, 221–22 (2016) (“[A]n
   agency must also be cognizant that longstanding policies may have
   ‘engendered serious reliance interests that must be taken into account.’”
   (quoting FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009)));
   Michigan, 576 U.S. at 750–51 (requiring consideration of both sides of the
   cost-benefit ledger).
          Finally, the letter engages in obvious post hoc rationalization. It tries to
   partially justify the agency’s charge that Victoria University “ceded
   operational control” of PredictIt to a for-profit company by referring to
   remarks made by the company’s counsel at oral argument. That is verboten.
   What counsel said at argument cannot justify actions the agency took months
   if not years before. See DHS v. Regents of the Univ. of Cal., 140 S. Ct. 1891,
   1907 (2020) (“It is a ‘foundational principle of administrative law’ that
   judicial review of agency action is limited to ‘the grounds that the agency
   invoked when it took the action.’” (quoting Michigan, 576 U.S. at 758)); see
   also SEC v. Chenery Corp., 318 U.S. 80, 95 (1943) (“[A]n administrative order
   cannot be upheld unless the grounds upon which the agency acted in
   exercising its powers were those upon which its action can be sustained.”).
          In sum, we conclude that the revocation of the no-action letter was
   likely arbitrary and capricious because the agency gave no reasons for it. And
   the agency’s attempts to retroactively justify the revocation after oral
   argument—and in the face of our injunction—only underscore why
   Appellants are likely to prevail.

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                                     No. 22-51124

                                B. Irreparable Injury
          We now turn to irreparable injury. Appellants have alleged a number
   of harms they will suffer absent a preliminary injunction. First, investors and
   traders will not be able to see their contracts through and realize any gains
   from having predicted events correctly. Even if they wanted to cash out now,
   the prices for those contracts would be distorted due to the market
   disruptions that the no-action letter’s rescission engendered. Second, as
   traders have attempted to salvage their investments due to a looming and
   impending shutdown order, academics have had their research compromised
   by the trading irregularities that corrupted the integrity of their data. Finally,
   PredictIt’s operators have been saddled with heavy compliance costs given
   the market’s closure.
          As it did in the standing context, the CFTC claims that all of these
   harms are inherently speculative. It asserts that any possible injuries could be
   undone through monetary remedies. And, although the United States would
   enjoy sovereign immunity, Appellants could sue the market operators. See
   Dennis Melancon, Inc. v. City of New Orleans, 703 F.3d 262, 279 (5th Cir. 2012)
   (“The possibility that adequate compensatory or other corrective relief will
   be available at a later date . . . [weighs] heavily against a claim of irreparable
   harm” (quoting Morgan v. Fletcher, 518 F.3d 236, 240 (5th Cir. 1975))).
          We disagree and conclude that Appellants are likely to suffer
   irreparable harm. As noted, Appellants have shown they were already
   undergoing harm before we issued the stay pending appeal. Some of these
   harms, such as the academic value of accurate data, would be difficult to
   restore with monetary damages. And to the extent some of these harms are
   economic, the United States cannot be sued due to its sovereign immunity.
   See Wages & White Lion Invs., 16 F.4th at 1142 (“[C]omplying with an agency
   order later held invalid almost always produces the irreparable harm of

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   nonrecoverable compliance costs . . . because federal agencies generally enjoy
   sovereign immunity for any monetary damages.” (cleaned up, quotation
   omitted)). To the extent the CFTC argues that the market operators could
   always be sued, that argument neglects the simple fact that at least some of
   those operators are themselves parties to this lawsuit.
            We therefore conclude that Appellants have established a substantial
   likelihood of suffering irreparable harm absent a preliminary injunction.
                 C. Balance of the Equities and the Public Interest
            Finally, we consider the remaining preliminary injunction factors: the
   balance of the equities and the public interest. These factors “merge when
   the Government is the opposing party.” Nken v. Holder, 556 U.S. 418, 435
   (2009). When addressing these factors, “courts ‘must balance the competing
   claims of injury and must consider the effect on each party of the granting or
   withholding of the requested relief.’” Winter v. NRDC, 555 U.S. 7, 24 (2008)
   (quoting Amoco Prod. Co. v. Village of Gambell, 480 U.S. 531, 542 (1987)).
            These factors weigh in favor of granting an injunction. On Appellants’
   side, the harms include all those just discussed: investor losses, corrupted
   academic data due to market distortions, and heavy compliance costs on
   market operators. Moreover, “[t]he public interest is served when
   administrative agencies comply with their obligations under the APA.”
   Northern Mariana Islands v. United States, 686 F. Supp. 2d. 7, 21 (D.D.C.
   2009).
            As for the other side of the ledger, the CFTC points to the systemic
   harms that would arise by permitting litigation on informal no-action letters.
   It argues that requiring full-dress APA litigation on these sorts of informal
   letters would discourage the practice of giving them in the first place, and
   result in “a net loss of far greater proportions to the average citizen than any
   possible gain which would accrue.” Taylor-Callahan-Coleman Cntys. Dist.

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                                     No. 22-51124

   Adult Prob. Dep’t v. Dole, 948 F.2d 953, 959 (5th Cir. 1991) (citation omitted).
   While mindful of that possibility, that sort of a high-level, systemic
   consideration cuts both ways: agency decisionmaking is legitimated in part by
   the agency’s providing adequate reasons. Especially where, as here,
   longstanding policies have engendered serious reliance interests, agencies
   must take those considerations into account before abruptly changing course.
   See Encino Motorcars, 579 U.S. at 221–22.
          Accordingly, we conclude that the balance of the equities and the
   public interest weigh in favor of granting a preliminary injunction
                               IV. Conclusion
          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.

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                                     No. 22-51124

   James C. Ho, Circuit Judge, concurring:
          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. See, e.g., New York City Employees’ Retirement System v. SEC, 45
   F.3d 7, 12 (2nd Cir. 1995) (“No-action letters . . . do not impose or fix a legal
   relationship upon any of the parties.”); Trinity Wall Street v. Wal-Mart
   Stores, Inc., 792 F.3d 323, 331 (3rd Cir. 2015) (“[N]o-action letters are not
   binding—they reflect only informal views of the staff and are not decisions
   on the merits.”); Bd. of Trade of City of Chicago v. SEC, 883 F.2d 525, 531 (7th
   Cir. 1989) (“The petition for review of the no-action letter . . . is dismissed
   for want of a reviewable order.”). Cf. Paul v. Petroleum Equipment Tools Co.,
   708 F.2d 168, 174 n.5 (5th Cir. 1983) (“[T]his ‘no action’ position is not
   equivalent to an exemption.”).
          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.
          “The purpose of a preliminary injunction is merely to preserve the
   relative positions of the parties until a trial on the merits can be held.” Univ.
   of Tex. v. Camenisch, 451 U.S. 390, 395 (1981). “[F]indings of fact and
   conclusions of law made by a court granting a preliminary injunction are not
   binding at trial on the merits.” Id. See also Feds for Medical Freedom v. Biden,
   63 F.4th 366, 389 (5th Cir. 2023) (“We hasten to emphasize that this case
   only involves a preliminary injunction.”).
          Accordingly, I concur.

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                                     No. 22-51124

   James E. Graves, Jr., Circuit Judge, dissenting:
          Although I agree that this case is not moot, I would not issue a
   preliminary injunction in this case. As reiterated by this court on numerous
   occasions, the issuance of a preliminary injunction is an exceptional remedy
   that should be granted only when the moving party has clearly shown that
   they can meet all four requirements. See, e.g., Guy Carpenter & Co. v.
   Provenzale, 334 F.3d 459, 464 (5th Cir. 2003) (“A preliminary injunction is
   an extraordinary remedy which courts grant only if the movant has clearly
   carried the burden as to all four elements.”); Allied Marketing Group., Inc. v.
   CDL Marketing, Inc., 878 F.2d 806, 809 (5th Cir. 1989) (stating that
   preliminary injunctive relief “is an extraordinary remedy and should be
   granted only if the movant has clearly carried the burden of persuasion with
   respect to all four factors”). We do not grant such relief unless we find: (1) a
   substantial likelihood of success on the merits; (2) a substantial threat of
   irreparable injury; (3) the threatened injury to the movant outweighs the
   threatened harm to the party sought to be enjoined; and (4) granting the
   injunctive relief will not disserve the public interest. City of Dallas v. Delta
   Air Lines, Inc., 847 F.3d 279, 285 (5th Cir. 2017).
          I am not convinced that Appellants have satisfied this high burden. In
   my view, Appellants have failed to demonstrate a substantial likelihood that
   they will prevail on the merits, as there is no final agency action in this case.
   For agency action to be “final,” two conditions must be met: (1) “the action
   must mark the ‘consummation’ of the agency’s decisionmaking process”;
   and (2) “the action must be one by which ‘rights or obligations have been
   determined,’ or from which ‘legal consequences will flow.’” Bennett v.
   Spear, 520 U.S. 154, 177–78 (1997) (citations omitted). CFTC’s no-action
   letters fail to satisfy either condition: they neither mark the consummation of
   the agency’s decisionmaking process nor determine Appellants’ legal rights
   or obligations.

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                                     No. 22-51124

             CFTC rule 140.99 outlines the procedure for requesting Commission
   staff letters. See 17 C.F.R. § 140.99. The rule, among other things, requires
   that the request must be made by or on behalf of the person subject to the
   request, must relate to a proposed transaction or activity, and must set forth
   as completely as possible all material facts and circumstances. See id.
   § 140.99(b). When the CFTC staff reviews a request, the rule makes clear
   that the “[i]ssuance of a [l]etter is entirely within the discretion of
   Commission staff.” Id. § 140.99(b)(1). Rule 140.99 further explains that no-
   action letters are “a written statement” that the issuing staff, here DMO,
   “will not recommend enforcement action to the Commission,” and that such
   a statement “binds only the issuing Division . . . and not the Commission.”
   Id. § 140.99(a)(2). Thus, no-action letters are informal and advisory,
   inherently staff-level statements about whether the issuing staff might (or
   might not) recommend to the CFTC that the Commission, at the
   Commission’s sole discretion, vote to authorize civil proceedings against a
   non-compliant entity. Accordingly, these letters plainly do not mark the
   consummation of the agency’s decisionmaking. Nor do the letters represent a
   decision determining rights or obligations, or one from which legal
   consequences flow as it does not commit the CFTC to taking enforcement
   action.
             Despite this, the majority concludes that the 2014 no-action letter
   effectively constituted a “license.” See ante at 9. Under the APA, a “license”
   is defined as “an agency permit, certificate, approval, registration, charter,
   membership, statutory exemption or other form of permission.” 5 U.S.C.
   § 551(8). With such a sweeping definition at hand, the majority concludes
   that “by the letter’s own terms, the no-action relief granted is a form of
   permission.” See ante at 9 (internal quotation marks omitted). I remain

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                                        No. 22-51124

   unconvinced by this argument, as the word “permission” is commonly
   understood as a formal authorization. 1
           What happened here is in stark contrast to the concept of explicit
   consent. On its face, the no-action letter does not grant Appellants the right
   to do anything. Instead, the letter simply expresses DMO’s intention to “not
   recommend that the Commission take any enforcement action in connection
   with the operation of [the] proposed market.” The DMO’s decision was
   contingent upon information furnished by Appellants and was subject to
   certain conditions. The letter explicitly states that any alterations, omissions,
   or discrepancies in the facts or circumstances may render the granted no-
   action relief null and void. Thus, to maintain that the absence of a
   recommendation to prosecute equates to formal consent stretches the
   bounds of credulity. See Paul v. Petroleum Equip. Tools Co., 708 F.2d 168, 174
   n.5 (5th Cir. 1983) (observing that a “no-action” letter “is not equivalent to
   an exemption”) (Higginbotham, J.).
           I have not come across any instance where a court has ruled that a
   “no-action letter” constitutes a final action taken by the agency. Tellingly,
   the majority cites no such case. Contrarily, no-action letters have been
   regularly found to be non-binding and devoid of legal authority, precluding
   their review. See, e.g., Trinity Wall St. v. Wal-Mart Stores, Inc., 792 F.3d 323,
   331 (3d Cir. 2015) (recognizing that “no-action letters are not binding—they
   reflect only informal views of the staff and are not decisions on the merits”);
   Board of Trade of City of Chicago v. SEC, 883 F.2d 525, 530 (7th Cir. 1989)

           _____________________
           1
               Permission, Dictionary.com, http://www.dictionary.com/browse/permission
   (last visited June 9, 2023) (first definition) (“Permission” is defined as “authorization
   granted to do something; formal consent”); Permission, Merriam-Webster.com,
   merriamwebster.com/dictionary/permission (last visited June 9, 2023) (second definition)
   (“Permission” is defined as “formal consent: AUTHORIZATION”).

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                                    No. 22-51124

   (concluding that SEC no-action letters are not reviewable because they do
   not constitute a “final” decision concerning the status of the parties); New
   York City Emps.’ Ret. Sys. v. SEC, 45 F.3d 7, 12 (2d Cir. 1995) (“No-action
   letters are deemed interpretive because they do not impose or fix a legal
   relationship upon any of the parties.”). Because I am not persuaded that we
   should be the first court to draw the conclusion that a “no-action letter”
   constitutes “final agency action,” I respectfully dissent.

                                         26