1 00:00:02,880 --> 00:00:08,000 Speaker 1: This is Bloomberg Law with June Grossel from Bloomberg Radio. 2 00:00:10,640 --> 00:00:15,920 Speaker 2: Thirteen environmental groups are suing the Trump administration, asking federal 3 00:00:16,000 --> 00:00:20,079 Speaker 2: courts in California and Washington State to throw out the 4 00:00:20,120 --> 00:00:25,640 Speaker 2: administration's deletion of the Endangered Species Acts definition of harm. 5 00:00:25,840 --> 00:00:30,840 Speaker 2: The deletion allows developers and private landowners to modify or 6 00:00:30,920 --> 00:00:35,840 Speaker 2: even destroy endangered species habitat without it being considered harm 7 00:00:35,920 --> 00:00:39,160 Speaker 2: to the species, even though the destruction of their habitat 8 00:00:39,400 --> 00:00:43,839 Speaker 2: is the main reason that species become endangered. An attorney 9 00:00:43,880 --> 00:00:48,800 Speaker 2: at the Western Environmental Law Center representing the plaintiffs, Pete Front, 10 00:00:48,840 --> 00:00:53,280 Speaker 2: said in a statement, no longer protecting where grizzlies, salmon, 11 00:00:53,360 --> 00:00:57,040 Speaker 2: and owls live will make them go extinct. We're hopeful 12 00:00:57,080 --> 00:01:00,600 Speaker 2: the court will clarify what the Endangered Species Act has 13 00:01:00,680 --> 00:01:05,479 Speaker 2: always meant. Joining me is an expert environmental law, Pat Parento, 14 00:01:05,640 --> 00:01:08,880 Speaker 2: a professor at the Vermont Law and Graduate School. Pat 15 00:01:08,959 --> 00:01:12,720 Speaker 2: start by explaining what the Trump administration has done here 16 00:01:12,880 --> 00:01:14,680 Speaker 2: to the Endangered Species Act. 17 00:01:15,319 --> 00:01:20,559 Speaker 1: Well, they have just published a final rule rescinding what's 18 00:01:20,600 --> 00:01:25,200 Speaker 1: called the harm rule under the Endangered Species Act, which 19 00:01:25,240 --> 00:01:28,280 Speaker 1: has been on the books for over fifty years. Was 20 00:01:28,280 --> 00:01:33,080 Speaker 1: first enacted in nineteen seventy five in the gerald Ford administration, 21 00:01:33,520 --> 00:01:36,920 Speaker 1: and it's been upheld by the US Supreme Court in 22 00:01:37,000 --> 00:01:41,240 Speaker 1: nineteen ninety five in the case Sweet Home versus BABBITTT. 23 00:01:41,440 --> 00:01:45,480 Speaker 1: So now the Trump administration is saying, forget about all that. 24 00:01:45,959 --> 00:01:50,960 Speaker 1: We hereby rescind the harm rule, and oh, by the way, 25 00:01:51,120 --> 00:01:54,160 Speaker 1: we're not going to propose a replacement. We're just going 26 00:01:54,240 --> 00:01:57,280 Speaker 1: to say we don't need a harm rule at all. 27 00:01:57,320 --> 00:01:59,720 Speaker 1: We don't need to define the word harm, which is 28 00:01:59,720 --> 00:02:02,480 Speaker 1: in the statute, right, we don't even need to do that. 29 00:02:03,040 --> 00:02:05,760 Speaker 1: So we're just going to repeal it. We're not going 30 00:02:05,840 --> 00:02:07,920 Speaker 1: to comply with NIPA. We're not going to do an 31 00:02:07,960 --> 00:02:10,880 Speaker 1: environmental impact statement. We're not going to comply with the 32 00:02:11,280 --> 00:02:18,320 Speaker 1: Endangered Species Act itself, which requires consultation, its internal consultation 33 00:02:19,160 --> 00:02:23,080 Speaker 1: before you take an action like this and produce what's 34 00:02:23,120 --> 00:02:28,200 Speaker 1: called a biological opinion to demonstrate that the action that 35 00:02:28,280 --> 00:02:35,880 Speaker 1: you're taking will not jeopardize endangered species or result in 36 00:02:35,960 --> 00:02:43,040 Speaker 1: the adverse modification of their critical habitat. So it's crazy 37 00:02:43,080 --> 00:02:46,760 Speaker 1: on stilts what we're talking about. If you can boil 38 00:02:46,800 --> 00:02:51,080 Speaker 1: it down to this, the Trump administration has hereby decreed 39 00:02:51,520 --> 00:02:57,519 Speaker 1: that destroying the habitat of endangered species is not harmful. 40 00:02:58,160 --> 00:03:03,919 Speaker 2: The Administration claims that this change would reduce permitting requirements 41 00:03:04,080 --> 00:03:10,200 Speaker 2: and compliance costs for farmers, landowners, and energy producers. 42 00:03:10,080 --> 00:03:14,639 Speaker 1: Right without producing real data to show that this rule 43 00:03:15,240 --> 00:03:18,200 Speaker 1: is responsible for what I guess you would call it 44 00:03:18,639 --> 00:03:23,320 Speaker 1: unreasonable costs. I mean, it's certainly true that every law 45 00:03:23,400 --> 00:03:28,480 Speaker 1: that Congress enacts is going to impose certain obligations on 46 00:03:28,639 --> 00:03:32,520 Speaker 1: people that will in turn require the expenditure of some money. 47 00:03:32,760 --> 00:03:37,000 Speaker 1: That's what regulation is all about. The money being spent 48 00:03:37,640 --> 00:03:40,760 Speaker 1: is for a good purpose, a public purpose. Right. You 49 00:03:40,800 --> 00:03:45,480 Speaker 1: can argue about how important saving endangered species is. If 50 00:03:45,520 --> 00:03:48,839 Speaker 1: you ask the American people, they will tell you it's 51 00:03:49,160 --> 00:03:54,440 Speaker 1: really important. That has been a consistent polling result over 52 00:03:54,520 --> 00:03:57,840 Speaker 1: the life of the Endangered Species Act from nineteen seventy 53 00:03:57,920 --> 00:04:01,840 Speaker 1: three to today. The amount of public support for this 54 00:04:02,080 --> 00:04:06,800 Speaker 1: law is in the ninety percent range. Okay, so yeah, 55 00:04:07,440 --> 00:04:12,600 Speaker 1: do compliance with laws require money? Sure they do. 56 00:04:13,400 --> 00:04:16,880 Speaker 2: And is it true that the loss of habitat causes 57 00:04:16,920 --> 00:04:20,800 Speaker 2: more species to go extinct than any other single factor. 58 00:04:21,560 --> 00:04:24,520 Speaker 1: Yes, it is the leading cause of species extinction in 59 00:04:24,560 --> 00:04:28,120 Speaker 1: the US, and globally. The other thing about it is 60 00:04:28,800 --> 00:04:32,400 Speaker 1: the Endangered Species Act is all about habitat. I mean, 61 00:04:32,440 --> 00:04:36,000 Speaker 1: the very stated purpose of the law is to conserve 62 00:04:36,560 --> 00:04:41,479 Speaker 1: the ecosystems upon which these species depend. So right from 63 00:04:41,480 --> 00:04:44,640 Speaker 1: the get go in nineteen seventy three, this is really 64 00:04:44,800 --> 00:04:48,480 Speaker 1: kind of amazing for Congress to be this ecologically literate. 65 00:04:48,839 --> 00:04:52,760 Speaker 1: In nineteen seventy three, they were talking about ecosystems, they 66 00:04:52,800 --> 00:04:56,960 Speaker 1: were talking about habitat. That was the whole point of 67 00:04:57,040 --> 00:05:01,520 Speaker 1: the law. Congress recognized that law loss of habitat was 68 00:05:01,640 --> 00:05:06,000 Speaker 1: driving species to extinction, and unless it was both stopped 69 00:05:06,279 --> 00:05:10,080 Speaker 1: or arrested and mitigated, more and more of the species 70 00:05:10,160 --> 00:05:11,200 Speaker 1: would go extinct. 71 00:05:11,760 --> 00:05:15,800 Speaker 2: Right now, thirteen environmental groups are suing in two different 72 00:05:15,800 --> 00:05:19,960 Speaker 2: federal courts, one in California and Washington State. What is 73 00:05:20,000 --> 00:05:22,280 Speaker 2: the basis of their lawsuit? 74 00:05:22,880 --> 00:05:26,839 Speaker 1: Multiple grounds for all three. There's three lawsuits now and 75 00:05:26,880 --> 00:05:29,440 Speaker 1: there's more in the works. By the way, they start 76 00:05:29,520 --> 00:05:33,640 Speaker 1: by saying, the sweet Home decision in nineteen ninety five 77 00:05:33,800 --> 00:05:37,000 Speaker 1: is still the law of the land. It has not 78 00:05:37,240 --> 00:05:43,120 Speaker 1: been overturned. The Trump administration is clearly aiming to get 79 00:05:43,120 --> 00:05:45,919 Speaker 1: this issue back in front of the Supreme Court. In 80 00:05:45,960 --> 00:05:49,960 Speaker 1: their Pope that the Supreme Court will reverse its decision 81 00:05:50,160 --> 00:05:54,520 Speaker 1: in Sweet Home and basically adopt the dissent in Sweet 82 00:05:54,520 --> 00:05:59,640 Speaker 1: Home written by the late Justice antonin Scalia. Mean, what 83 00:05:59,680 --> 00:06:02,720 Speaker 1: we're seeing is almost a resurrection of Scalia. You know 84 00:06:02,760 --> 00:06:05,640 Speaker 1: there's an echo here, right, because this is the same 85 00:06:05,760 --> 00:06:10,320 Speaker 1: strategy that Lee Zelden is pursuing under the Clean Air 86 00:06:10,440 --> 00:06:15,159 Speaker 1: Act to repeal the endangerment finding once again EPA. The 87 00:06:15,200 --> 00:06:19,120 Speaker 1: Trump administration is saying, the Supreme Court got it wrong 88 00:06:19,640 --> 00:06:24,320 Speaker 1: in Massachusetts versus CPA. We don't have authority to regulate 89 00:06:24,360 --> 00:06:27,320 Speaker 1: greenhouse gases, and we're going to get that issue back 90 00:06:27,360 --> 00:06:30,440 Speaker 1: in front of the court so they can overturn mass 91 00:06:30,480 --> 00:06:34,760 Speaker 1: versus CPA. Same thing is happening here with the harm rule. 92 00:06:34,800 --> 00:06:37,240 Speaker 1: They want to get this case back to the court 93 00:06:37,600 --> 00:06:40,279 Speaker 1: and the hopes that they can get a decision overturning 94 00:06:40,320 --> 00:06:43,599 Speaker 1: the Sweet Home decision. The reason they believe they have 95 00:06:43,680 --> 00:06:47,320 Speaker 1: a shot at this, of course, is because the Supreme 96 00:06:47,360 --> 00:06:51,760 Speaker 1: Court has now overturned the Chevron doctrine with deference to 97 00:06:51,800 --> 00:06:56,400 Speaker 1: agency interpretations. It's true that the Sweet Home decision was 98 00:06:56,720 --> 00:07:00,320 Speaker 1: based on Chevron because at that time, nineteen ninety five, 99 00:07:00,760 --> 00:07:04,640 Speaker 1: that was the framework that the Supreme Court was using 100 00:07:05,040 --> 00:07:10,320 Speaker 1: to evaluate statutory terms that were ambiguous, right, And the 101 00:07:10,360 --> 00:07:14,200 Speaker 1: principle of Chevron was if the words of a statute 102 00:07:14,200 --> 00:07:18,560 Speaker 1: are ambiguous, And I suppose some might say the word 103 00:07:18,640 --> 00:07:22,240 Speaker 1: harm is ambiguous, although the dictionary makes it crystal clear 104 00:07:22,320 --> 00:07:26,760 Speaker 1: that it includes anything that hurts something. You know, the 105 00:07:26,800 --> 00:07:32,200 Speaker 1: interpretation that harm does involve destruction of habitat which causes, 106 00:07:32,240 --> 00:07:35,040 Speaker 1: by the way, actual injury. The rule I didn't really 107 00:07:35,080 --> 00:07:40,360 Speaker 1: explain it. The rule says habitat modification or destruction that 108 00:07:40,600 --> 00:07:45,200 Speaker 1: actually injures or kills a species. So the test is 109 00:07:45,240 --> 00:07:48,360 Speaker 1: a proximate cause test. That's what the Supreme Court said 110 00:07:48,400 --> 00:07:51,720 Speaker 1: in Sweet Home. So you know, it's not an easy 111 00:07:51,840 --> 00:07:54,640 Speaker 1: test to me. You really have to be able to 112 00:07:54,680 --> 00:07:58,120 Speaker 1: say the cutting of these trees, which will take down 113 00:07:58,240 --> 00:08:01,320 Speaker 1: nests of the spot at owl, will lead to actual 114 00:08:01,400 --> 00:08:07,000 Speaker 1: injury of an identifiable owl. So the test is stringent. Okay, 115 00:08:07,040 --> 00:08:10,040 Speaker 1: it's not loose at all, but it is a vital 116 00:08:10,120 --> 00:08:15,160 Speaker 1: test because if you don't save nesting habitat, breeding habitat 117 00:08:15,400 --> 00:08:18,280 Speaker 1: of species, guess what they go extinct. 118 00:08:19,200 --> 00:08:23,400 Speaker 2: You spoke about the late Justice Scalia and the Interior 119 00:08:23,440 --> 00:08:27,160 Speaker 2: Department said in a statement that it was reversing a 120 00:08:27,280 --> 00:08:32,120 Speaker 2: regulatory overreach not authorized by Congress and will defend its 121 00:08:32,120 --> 00:08:37,000 Speaker 2: authority to honor the laws playing text. Are they basically saying, yeah, 122 00:08:37,000 --> 00:08:39,640 Speaker 2: we're going to follow what Justice Scalia said. 123 00:08:40,160 --> 00:08:44,600 Speaker 1: Oh yeah, they've adopted the Scalia dissent in sweet Home, Lockstock, 124 00:08:44,679 --> 00:08:48,520 Speaker 1: and Beryl. But here's two problems with that. Number One, 125 00:08:49,240 --> 00:08:53,120 Speaker 1: in Justice Stephens's majority opinion in sweet Home, which by 126 00:08:53,120 --> 00:08:56,640 Speaker 1: the way, was six to three, with the late Justice 127 00:08:56,920 --> 00:09:01,760 Speaker 1: O'Connor filing a very strong concur opinion and taking on 128 00:09:02,440 --> 00:09:07,400 Speaker 1: the Scalia dissent wholeheartedly, shall we say so? In Justice 129 00:09:07,400 --> 00:09:11,240 Speaker 1: Stevens's majority opinion in sweet Home, a majority of the 130 00:09:11,240 --> 00:09:15,959 Speaker 1: Court agreed that the Scalia interpretation was not supported by 131 00:09:16,000 --> 00:09:19,360 Speaker 1: the text of the law, or the context of the law, 132 00:09:19,800 --> 00:09:22,880 Speaker 1: or the history of the law, or the purpose of 133 00:09:22,920 --> 00:09:27,760 Speaker 1: the law. In other words, it was roundly rejected. And 134 00:09:27,920 --> 00:09:31,520 Speaker 1: they weren't relying on Chevron for that. They were taking 135 00:09:31,559 --> 00:09:36,640 Speaker 1: on Scalia's interpretation and saying it is not the best reading. 136 00:09:36,840 --> 00:09:38,840 Speaker 1: They didn't use those words in those days. That's what 137 00:09:38,880 --> 00:09:42,800 Speaker 1: the Court will use today is the best reading test 138 00:09:42,960 --> 00:09:46,640 Speaker 1: for interpreting a statute. Right, But the point is again 139 00:09:46,960 --> 00:09:51,560 Speaker 1: the majority in sweet Home rejected the test that the 140 00:09:51,600 --> 00:09:55,680 Speaker 1: Trump administration now wants to adopt. The second problem here 141 00:09:56,200 --> 00:10:01,319 Speaker 1: with what Scalia was saying is that in nineteen eighty two, 142 00:10:01,480 --> 00:10:05,640 Speaker 1: Congress amended the Endangered Species Act to create what's called 143 00:10:05,679 --> 00:10:11,439 Speaker 1: the Incidental Take Permit program. Okay, I testified in support 144 00:10:11,640 --> 00:10:14,200 Speaker 1: of that amendment, by the way, But the point is 145 00:10:14,600 --> 00:10:20,160 Speaker 1: that amendment was addressing the harm rule. It was addressing 146 00:10:20,200 --> 00:10:23,600 Speaker 1: the fact that the Ninth Circuit, in a very famous case, 147 00:10:23,960 --> 00:10:28,800 Speaker 1: the Paalila case out of Hawaii, involving this endangered bird 148 00:10:29,120 --> 00:10:34,280 Speaker 1: on Monakia in Hawaii, the Ninth Circuit had said, yeah, 149 00:10:34,520 --> 00:10:37,920 Speaker 1: the harm rule is the law, and yes, destroying the 150 00:10:37,960 --> 00:10:42,520 Speaker 1: habitat of the Palila is unlawful under the Endangered Species Act, 151 00:10:42,520 --> 00:10:45,600 Speaker 1: and the court the Ninth Circuit ordered the State of 152 00:10:45,640 --> 00:10:50,640 Speaker 1: Hawaii to remove the exotic sheep that were being imported 153 00:10:50,679 --> 00:10:55,000 Speaker 1: for hunters to shoot because it was destroying the habitat. 154 00:10:55,080 --> 00:11:00,920 Speaker 1: So Congress was reacting to a specific court decision applying 155 00:11:01,000 --> 00:11:05,200 Speaker 1: the harm rule, and instead of overturning the harm rule, 156 00:11:05,679 --> 00:11:09,520 Speaker 1: which is what the Trump administration is saying, Congress would 157 00:11:09,520 --> 00:11:11,760 Speaker 1: have done if it had the chance to do it, 158 00:11:12,160 --> 00:11:17,000 Speaker 1: instead of that, Congress basically codified the harm rule by 159 00:11:17,040 --> 00:11:20,000 Speaker 1: saying you need a permit, and you need a permit 160 00:11:20,080 --> 00:11:24,040 Speaker 1: for habitat destruction or modification, and oh, by the way, 161 00:11:24,559 --> 00:11:27,880 Speaker 1: to get the permit, you have to prepare a habitat 162 00:11:27,960 --> 00:11:33,040 Speaker 1: conservation plan to offset the impact on the habitat from 163 00:11:33,080 --> 00:11:37,040 Speaker 1: your activity. So there you go. You have two really 164 00:11:37,200 --> 00:11:42,080 Speaker 1: strong arguments against what the Trump administration is trying to 165 00:11:42,160 --> 00:11:47,480 Speaker 1: do in resurrecting the late Justice Scalia's dissent in Sweet 166 00:11:47,520 --> 00:11:49,240 Speaker 1: Home and making it the law of the land. 167 00:11:49,559 --> 00:11:54,319 Speaker 2: Well, many of the Conservatives on this super majority revere 168 00:11:55,280 --> 00:11:59,400 Speaker 2: Justice Scalia. That's one point. Another is that this last 169 00:11:59,480 --> 00:12:05,679 Speaker 2: term they reversed two long standing decisions, one Humphrey's Executor 170 00:12:06,040 --> 00:12:09,560 Speaker 2: more than ninety years old and a twenty five year 171 00:12:09,559 --> 00:12:15,640 Speaker 2: old campaign finance rule, plus effectively reversing the Voting Rights Act. 172 00:12:15,720 --> 00:12:20,120 Speaker 2: So do you have any confidence that they will follow precedent? 173 00:12:21,200 --> 00:12:24,640 Speaker 1: Well, we know, of course that the Court will do 174 00:12:24,679 --> 00:12:28,600 Speaker 1: what the Court will do with five votes. I think 175 00:12:28,640 --> 00:12:32,480 Speaker 1: this one will be a closer call. I don't rule, out, 176 00:12:32,559 --> 00:12:36,280 Speaker 1: of course, the prospect or the danger that the Supreme 177 00:12:36,320 --> 00:12:38,480 Speaker 1: Court might do what Trump is asking it to do. 178 00:12:38,840 --> 00:12:42,959 Speaker 1: You can't rule that out. But here's the thing. Justice Roberts, 179 00:12:43,120 --> 00:12:48,559 Speaker 1: in the lower Bright case which overturned the Chevron doctrine, 180 00:12:48,760 --> 00:12:55,559 Speaker 1: said very clearly, our overturning Chevron does not mean that 181 00:12:55,760 --> 00:13:00,520 Speaker 1: prior decisions of this Court that relied on s. Evron 182 00:13:00,840 --> 00:13:04,640 Speaker 1: are not still the law. They are still the law 183 00:13:04,920 --> 00:13:09,360 Speaker 1: unless and until, of course, the Supreme Court changes the law. 184 00:13:09,760 --> 00:13:15,920 Speaker 1: So the argument that Loper Bright automatically means Trump wins 185 00:13:16,440 --> 00:13:19,800 Speaker 1: is wrong. It's just flat wrong. On the face of 186 00:13:20,160 --> 00:13:24,680 Speaker 1: the Loper Bright decision, it's certainly true that if this 187 00:13:24,920 --> 00:13:28,080 Speaker 1: case gets to the Supreme Court, there's a risk that 188 00:13:28,160 --> 00:13:31,480 Speaker 1: it'll do the wrong thing from the standpoint of protecting 189 00:13:31,559 --> 00:13:35,800 Speaker 1: endangered species. I would be naive to the extreme to 190 00:13:35,880 --> 00:13:38,720 Speaker 1: think that, you know, the Supreme Court is bleeding over 191 00:13:38,720 --> 00:13:42,040 Speaker 1: the fate of endangered species. But on the other hand, 192 00:13:42,240 --> 00:13:47,320 Speaker 1: this principle, which is called statutory starry decisives when the 193 00:13:47,360 --> 00:13:52,840 Speaker 1: Supreme Court has said that a statute means something specifically 194 00:13:53,400 --> 00:13:57,120 Speaker 1: that is a strong precedent, so it doesn't get overruled 195 00:13:57,160 --> 00:13:59,439 Speaker 1: with the snap of a finger or the fact that 196 00:13:59,480 --> 00:14:03,200 Speaker 1: there's a new administration in town who doesn't like the 197 00:14:03,200 --> 00:14:07,840 Speaker 1: prior ruling. So that's not enough to get that victory 198 00:14:07,880 --> 00:14:09,320 Speaker 1: that Trump is hoping for. 199 00:14:09,559 --> 00:14:12,880 Speaker 2: In this case, I'll ask you the question I usually 200 00:14:12,920 --> 00:14:15,640 Speaker 2: ask you, which is, So, let's say that there's a 201 00:14:15,679 --> 00:14:21,280 Speaker 2: democratic administration that comes in next and overturns the overturning 202 00:14:21,760 --> 00:14:25,360 Speaker 2: of the Harm Rule. How much damage can be done 203 00:14:25,720 --> 00:14:28,320 Speaker 2: in the remaining two years of the Trump administration if 204 00:14:28,640 --> 00:14:30,960 Speaker 2: there's not an injunction put in place. 205 00:14:31,600 --> 00:14:34,000 Speaker 1: Yeah, well, there is going to be a request for 206 00:14:34,040 --> 00:14:37,200 Speaker 1: a preliminary injunction and maybe even a temporary restraining order 207 00:14:37,440 --> 00:14:40,360 Speaker 1: right out of the box. The Earth Justice is handling 208 00:14:40,360 --> 00:14:42,840 Speaker 1: that one of the major cases in Boy, that's the 209 00:14:42,880 --> 00:14:46,560 Speaker 1: most formidable environmental litigating group in the country. They will 210 00:14:46,600 --> 00:14:51,560 Speaker 1: leave no stone unturned. So the problem is by saying 211 00:14:52,160 --> 00:14:56,640 Speaker 1: that the harm Rule is no longer in effect, that 212 00:14:56,840 --> 00:15:01,400 Speaker 1: influences all kinds of activities that are ongoing. It means 213 00:15:01,440 --> 00:15:05,080 Speaker 1: that the Forest Service, now the Trump administration wants to 214 00:15:05,160 --> 00:15:09,760 Speaker 1: ramp up timber harvest is in the habitat of many 215 00:15:09,840 --> 00:15:12,840 Speaker 1: endangered species, spotted owl's, marble murau ats, you go down 216 00:15:12,880 --> 00:15:16,760 Speaker 1: the list a whole bunch, right, So what happens now 217 00:15:16,800 --> 00:15:21,080 Speaker 1: in that context of when agencies still have the obligation 218 00:15:21,440 --> 00:15:24,840 Speaker 1: to ensure that their actions do not result in jeopardy 219 00:15:25,200 --> 00:15:29,000 Speaker 1: or adverse modification of critical habitat. If the Fish and 220 00:15:29,040 --> 00:15:33,400 Speaker 1: Wildlife Service and NOAH with regard to marine species, if 221 00:15:33,440 --> 00:15:38,280 Speaker 1: they are no longer engaged in analyzing whether the destruction 222 00:15:38,840 --> 00:15:42,120 Speaker 1: of the habitat is going to result in harm to 223 00:15:42,200 --> 00:15:45,160 Speaker 1: the species, that's going to affect a lot of the 224 00:15:45,200 --> 00:15:49,520 Speaker 1: decision making that multiple agencies are doing. The Fish and 225 00:15:49,520 --> 00:15:53,120 Speaker 1: Wildlife Service won't be providing them with the kind of 226 00:15:53,160 --> 00:15:57,520 Speaker 1: biological information they need to meet the demand of the 227 00:15:57,600 --> 00:16:00,840 Speaker 1: Endangered Species Act, so they'll be subject to more litigation 228 00:16:01,320 --> 00:16:04,720 Speaker 1: over that. Now, the Trump administration doesn't really care about that. 229 00:16:05,080 --> 00:16:08,520 Speaker 1: They're happy to see chaos in litigation that seems to 230 00:16:08,840 --> 00:16:12,240 Speaker 1: make their day, But the regulated community is not going 231 00:16:12,320 --> 00:16:15,200 Speaker 1: to be happy about that. Timber companies that are relying 232 00:16:15,240 --> 00:16:20,520 Speaker 1: on Forest Service decisions or BLM decisions for grazing or mining, 233 00:16:20,640 --> 00:16:23,880 Speaker 1: or any number of things. You know, if you start 234 00:16:23,920 --> 00:16:28,120 Speaker 1: tearing out the foundation of how the Endangered Species Act 235 00:16:28,360 --> 00:16:32,320 Speaker 1: is supposed to work, including looking at the effects of 236 00:16:32,400 --> 00:16:38,240 Speaker 1: habitat loss, you're going to destabilize the whole regulatory framework. 237 00:16:38,360 --> 00:16:41,400 Speaker 1: So some of this is being laid out already. I've 238 00:16:41,440 --> 00:16:44,760 Speaker 1: seen it in the complaint that Earth Justice has filed. 239 00:16:45,120 --> 00:16:49,480 Speaker 1: They've called out specific projects that will be affected by 240 00:16:49,520 --> 00:16:53,200 Speaker 1: this decision. Right now today, I predict we will see 241 00:16:53,560 --> 00:16:57,160 Speaker 1: a motion for at least a preliminary injunction very soon. 242 00:16:57,520 --> 00:17:02,280 Speaker 2: I think the administration is just ignoring that endangered species 243 00:17:02,320 --> 00:17:06,040 Speaker 2: are something that people care about. No one wants to 244 00:17:06,040 --> 00:17:07,880 Speaker 2: see a species go extinct. 245 00:17:08,160 --> 00:17:10,760 Speaker 1: They will. I think in time you're going to see 246 00:17:10,800 --> 00:17:14,040 Speaker 1: more and more, maybe backlashes the word, I don't know, 247 00:17:14,520 --> 00:17:18,119 Speaker 1: more reaction from the public over this, and communities that 248 00:17:18,240 --> 00:17:21,880 Speaker 1: have seen the value of the restoration of endangered species. 249 00:17:21,880 --> 00:17:26,280 Speaker 1: If you think about the wolf reintroduction or the fact 250 00:17:26,280 --> 00:17:29,920 Speaker 1: that the grizzly bear population has improved. Whether it's been 251 00:17:30,000 --> 00:17:34,000 Speaker 1: fully recovered is another question, but they certainly have improved. 252 00:17:34,119 --> 00:17:38,200 Speaker 1: And what has that created. It's created a really robust 253 00:17:38,600 --> 00:17:43,800 Speaker 1: ecotourism industry, if you will, recreation based. Those gateway communities 254 00:17:43,840 --> 00:17:47,840 Speaker 1: around Yellowstone are there to see the wolves, and that's 255 00:17:47,960 --> 00:17:52,000 Speaker 1: money in the pocket of local businesses, local communities and 256 00:17:52,040 --> 00:17:55,679 Speaker 1: schools and all the rest. So it's not true that 257 00:17:55,800 --> 00:18:00,000 Speaker 1: restoring endangered species, you know, is a cost without taking 258 00:18:00,200 --> 00:18:03,680 Speaker 1: account of the benefits that it creates. So I don't 259 00:18:03,720 --> 00:18:06,959 Speaker 1: think you can make a case, frankly, that the investment 260 00:18:07,520 --> 00:18:11,480 Speaker 1: in recovering these species isn't worth it. Quite the contrary, 261 00:18:11,800 --> 00:18:15,880 Speaker 1: beyond the sort of ethical or moral dimensions of the question, 262 00:18:16,840 --> 00:18:21,240 Speaker 1: on the ground, benefits of restoring ecosystems, which is what 263 00:18:21,280 --> 00:18:25,399 Speaker 1: the law is all about, benefits local communities economically and 264 00:18:25,440 --> 00:18:26,399 Speaker 1: in many other ways. 265 00:18:26,560 --> 00:18:29,720 Speaker 2: And Pat, you've written an article for The Conversation that 266 00:18:29,880 --> 00:18:33,480 Speaker 2: breaks all the legalities down in a way that's easy 267 00:18:33,520 --> 00:18:37,639 Speaker 2: to understand. It's entitled why Trump's move to gut the 268 00:18:37,760 --> 00:18:42,320 Speaker 2: Endangered Species Act likely won't hold up in court. A 269 00:18:42,359 --> 00:18:45,800 Speaker 2: pleasure as always, Pat, thanks so much. That's Professor Pat 270 00:18:45,840 --> 00:18:49,520 Speaker 2: Parento of the Vermont Law and Graduate School. Turning out 271 00:18:49,520 --> 00:18:52,960 Speaker 2: of the prediction markets, which have gone from obscurity to 272 00:18:53,400 --> 00:18:58,439 Speaker 2: being everywhere. There's fierce litigation between the states and the 273 00:18:58,480 --> 00:19:03,679 Speaker 2: Commodity Futures Trading Commission over whether those platforms like Calshian 274 00:19:03,800 --> 00:19:10,800 Speaker 2: Polymarket constitute illegal gambling or federally regulated financial derivatives. More 275 00:19:10,840 --> 00:19:14,800 Speaker 2: than twenty lawsuits and cease and desist actions have been 276 00:19:14,840 --> 00:19:19,520 Speaker 2: filed by states against the platforms, and the CFTC has 277 00:19:19,600 --> 00:19:24,280 Speaker 2: now initiated legal actions against nine states over their push 278 00:19:24,440 --> 00:19:28,399 Speaker 2: to rein in prediction markets. In a case involving a 279 00:19:28,480 --> 00:19:33,640 Speaker 2: White House teleprompter operator that's drawn attention, it's the CFTC 280 00:19:34,000 --> 00:19:37,520 Speaker 2: doing the enforcing. My guest is Columbia Law School professor 281 00:19:37,600 --> 00:19:41,240 Speaker 2: Joshua Mitts. He's a leading authority on prediction markets and 282 00:19:41,440 --> 00:19:45,760 Speaker 2: insider trading. His new paper is entitled from Iran to 283 00:19:45,840 --> 00:19:51,639 Speaker 2: Taylor Swift Informed Trading in Prediction Markets. So President Trump's 284 00:19:51,720 --> 00:19:55,840 Speaker 2: teleprompter operator is on unpaid leave from the White House 285 00:19:56,480 --> 00:20:00,520 Speaker 2: after reports that he used inside knowledge to make bets 286 00:20:00,760 --> 00:20:05,040 Speaker 2: about President Trump's speeches. What do we know about this? 287 00:20:05,560 --> 00:20:08,760 Speaker 3: I don't think there's been a lot of detail released, 288 00:20:08,760 --> 00:20:12,520 Speaker 3: but my understanding is that he essentially traded on Calshi 289 00:20:13,200 --> 00:20:17,679 Speaker 3: and it was basically a market which paid off. My 290 00:20:17,800 --> 00:20:20,400 Speaker 3: understanding is that it's a mention market, meaning a market 291 00:20:20,480 --> 00:20:24,240 Speaker 3: that essentially paid off when certain words or phrases or 292 00:20:24,280 --> 00:20:27,560 Speaker 3: texts are read aloud, and of course, or a statement 293 00:20:27,600 --> 00:20:29,760 Speaker 3: is made at a press conference, and of course a 294 00:20:29,800 --> 00:20:34,920 Speaker 3: teleprompter operator would have access to information regarding what was 295 00:20:34,960 --> 00:20:37,879 Speaker 3: going to be said. Presumably would have the transcript of 296 00:20:37,920 --> 00:20:40,960 Speaker 3: the planned statements. So would be uniquely in a position 297 00:20:41,040 --> 00:20:43,720 Speaker 3: to profit from trading based on that information. 298 00:20:44,119 --> 00:20:48,480 Speaker 2: Cal she is the one that alerted the CFTC to 299 00:20:48,920 --> 00:20:51,600 Speaker 2: what was going on. I'm not sure how they knew 300 00:20:51,680 --> 00:20:53,480 Speaker 2: that there was suspicious activity. 301 00:20:54,000 --> 00:20:58,560 Speaker 3: Yeah, So calsh runs quite a bit of surveillance on 302 00:20:58,600 --> 00:21:02,119 Speaker 3: their platform, and this is something we talk about in 303 00:21:02,160 --> 00:21:05,720 Speaker 3: our paper, the role of platforms to surveil and police 304 00:21:06,240 --> 00:21:11,160 Speaker 3: this kind of activity. What they look for is abnormal trading, 305 00:21:11,280 --> 00:21:15,080 Speaker 3: trading that seems to reflect some sort of either you 306 00:21:15,119 --> 00:21:19,600 Speaker 3: were very lucky or you had potentially an informational advantage. 307 00:21:19,960 --> 00:21:23,200 Speaker 3: Part of calshi's process is a Know your Customer so 308 00:21:23,280 --> 00:21:27,800 Speaker 3: called KYC process, by which in order to trade on 309 00:21:27,840 --> 00:21:31,400 Speaker 3: their platform, you have to provide certain information about yourself, 310 00:21:31,760 --> 00:21:34,040 Speaker 3: where you work, what the source of your funds are, 311 00:21:34,080 --> 00:21:39,280 Speaker 3: and so forth. So presumably, and this is really just speculation, 312 00:21:39,440 --> 00:21:42,320 Speaker 3: but I think it's consistent with what we've seen. CALSHI 313 00:21:42,400 --> 00:21:47,040 Speaker 3: would have undergone some sort of surveillance review for abnormally 314 00:21:47,080 --> 00:21:50,000 Speaker 3: profitable trades and then look to see if there was 315 00:21:50,000 --> 00:21:54,200 Speaker 3: any possible connection between the individual and the source of 316 00:21:54,240 --> 00:21:57,080 Speaker 3: the information that might be in fact a material to 317 00:21:57,160 --> 00:21:57,919 Speaker 3: a given market. 318 00:21:58,359 --> 00:22:03,520 Speaker 2: During the investigation, report. The CFTC alerted the federal prosecutors 319 00:22:03,520 --> 00:22:07,880 Speaker 2: in Manhattan. They didn't open a criminal investigation, and I'm 320 00:22:07,920 --> 00:22:11,919 Speaker 2: wondering why not when they have opened two criminal investigations, 321 00:22:12,040 --> 00:22:16,040 Speaker 2: one involving a Special Forces soldier who allegedly bet on 322 00:22:16,080 --> 00:22:20,600 Speaker 2: the capture of Venezuelan President Nicolas Maduro and a Google 323 00:22:20,640 --> 00:22:25,840 Speaker 2: employee who allegedly bet on user searches using internal company data. 324 00:22:25,920 --> 00:22:28,080 Speaker 2: I mean, isn't this similar to those? 325 00:22:29,080 --> 00:22:31,959 Speaker 3: So for a criminal case, we're going to need to 326 00:22:32,040 --> 00:22:37,320 Speaker 3: see more, typically than simply taking advantage of the information. 327 00:22:37,680 --> 00:22:40,920 Speaker 3: But what prosecutors are often looking for is a kind 328 00:22:40,920 --> 00:22:46,080 Speaker 3: of conscious awareness of wrongdoing or sort of obvious departure 329 00:22:46,240 --> 00:22:51,160 Speaker 3: from ordinary norms of behavior to where it's just straightforward 330 00:22:51,200 --> 00:22:55,240 Speaker 3: to conclude that you were operating with criminal intent. The 331 00:22:55,720 --> 00:22:58,600 Speaker 3: issue here, and I don't have any just to be clear, 332 00:22:58,680 --> 00:23:02,240 Speaker 3: any information myself self about this case other than what's 333 00:23:02,280 --> 00:23:05,720 Speaker 3: been publicly reported. But the issue here may be that 334 00:23:05,880 --> 00:23:10,280 Speaker 3: I believe it was reported that the words were relatively 335 00:23:10,640 --> 00:23:14,520 Speaker 3: common words or words that may have occurred in a 336 00:23:14,560 --> 00:23:18,040 Speaker 3: given speech by random chance alone. Is sort of like 337 00:23:18,119 --> 00:23:20,640 Speaker 3: words that may have been used in the speech regardless, 338 00:23:20,760 --> 00:23:23,000 Speaker 3: and that might make it a little bit more difficult 339 00:23:23,119 --> 00:23:27,679 Speaker 3: for a criminal prosecutor, because if there's even some reasonable 340 00:23:27,760 --> 00:23:30,919 Speaker 3: doubt that the individual may have been in possession of 341 00:23:30,960 --> 00:23:34,640 Speaker 3: the information but may have nonetheless believed at the time 342 00:23:34,680 --> 00:23:37,680 Speaker 3: of the bet that they were not actually using the 343 00:23:37,760 --> 00:23:41,119 Speaker 3: non public information, but that they were essentially wagering on 344 00:23:41,240 --> 00:23:44,440 Speaker 3: the same sort of probabilities that anyone else could have 345 00:23:44,520 --> 00:23:48,520 Speaker 3: wagered on, and that the likelihood of using a particular 346 00:23:48,560 --> 00:23:52,080 Speaker 3: word was sufficiently sort of well known or it would 347 00:23:52,080 --> 00:23:56,199 Speaker 3: have happened anyway, then you know, there's at least possibly 348 00:23:56,240 --> 00:24:00,119 Speaker 3: a defense that could have given prosecutors some concern, and 349 00:24:00,160 --> 00:24:04,000 Speaker 3: that the information was not actually used. The other possibility 350 00:24:04,040 --> 00:24:09,640 Speaker 3: here is that the individual may have not necessarily sort 351 00:24:09,680 --> 00:24:12,680 Speaker 3: of set out in an intentional way, and it could 352 00:24:12,680 --> 00:24:15,280 Speaker 3: have been that there was some other data that we're 353 00:24:15,320 --> 00:24:18,080 Speaker 3: not aware of, which showed perhaps, for example, let's say 354 00:24:18,080 --> 00:24:20,720 Speaker 3: they were betting on lots and lots of words, and 355 00:24:20,800 --> 00:24:23,439 Speaker 3: when you look at the totality of what they were doing, 356 00:24:23,480 --> 00:24:26,560 Speaker 3: the intent points in a slightly different direction, or at 357 00:24:26,640 --> 00:24:30,520 Speaker 3: least there's an interpretation that this particular trade was part 358 00:24:30,520 --> 00:24:33,680 Speaker 3: of some broader set of trades where the intent may 359 00:24:33,840 --> 00:24:36,360 Speaker 3: not have been to use this information. So if there 360 00:24:36,560 --> 00:24:38,760 Speaker 3: was evidence of this kind, and again I have no 361 00:24:38,840 --> 00:24:41,560 Speaker 3: information one way or the other. If there was evidence 362 00:24:41,600 --> 00:24:44,160 Speaker 3: of this kind, it might have given criminal prosecutors some 363 00:24:44,240 --> 00:24:46,479 Speaker 3: pause about bringing criminal charges. 364 00:24:46,880 --> 00:24:51,760 Speaker 2: Coming up next, the CFTC fights the States. This is Bloomberg. 365 00:24:52,240 --> 00:24:55,639 Speaker 2: I've been talking to Columbia Law School professor Joshua Mits. 366 00:24:56,240 --> 00:24:59,880 Speaker 2: His new paper is entitled from Iran to Taylor Swift 367 00:25:00,400 --> 00:25:05,480 Speaker 2: Informed Trading in Prediction Markets. These prediction markets seem to 368 00:25:05,480 --> 00:25:10,440 Speaker 2: have really taken hold. They've struck deals with major sports 369 00:25:10,560 --> 00:25:15,320 Speaker 2: leagues to provide data during games. During the Golden Globes 370 00:25:15,359 --> 00:25:20,600 Speaker 2: in January, a polymarket chiron flashed before each award was 371 00:25:20,640 --> 00:25:25,720 Speaker 2: handed out, correctly predicting nearly all twenty eight winners. And 372 00:25:25,760 --> 00:25:29,960 Speaker 2: I'm just wondering how much the prediction markets are now 373 00:25:30,359 --> 00:25:33,160 Speaker 2: a part of the fabric of our life. 374 00:25:33,320 --> 00:25:35,600 Speaker 3: If they've become a part of the fabric of our lives, 375 00:25:35,680 --> 00:25:39,960 Speaker 3: that's happened pretty quickly, given that these platforms I've seen 376 00:25:40,000 --> 00:25:43,159 Speaker 3: explosive growth recently, So I would want to see a 377 00:25:43,160 --> 00:25:45,880 Speaker 3: little bit more evidence over time. But I do think 378 00:25:45,960 --> 00:25:49,920 Speaker 3: your question is getting at something that I've observed now 379 00:25:50,000 --> 00:25:55,119 Speaker 3: for several years, which is the increasing acceptance of gamification 380 00:25:55,400 --> 00:26:00,240 Speaker 3: or speculation financial wagering in the form of apps or 381 00:26:00,280 --> 00:26:05,240 Speaker 3: sort of digital technologies, which has really displaced traditional gambling 382 00:26:05,320 --> 00:26:09,320 Speaker 3: venues in lots of ways. People are flocking and gravitating 383 00:26:09,320 --> 00:26:13,679 Speaker 3: towards apps which allow them essentially to bet, gamble, wager money. 384 00:26:14,160 --> 00:26:17,880 Speaker 3: Now you can really go back years ago, about five 385 00:26:17,960 --> 00:26:22,000 Speaker 3: years ago, to the rise of game stop and meme stocks, 386 00:26:22,119 --> 00:26:26,040 Speaker 3: which was a kind of more teame and early version 387 00:26:26,520 --> 00:26:29,200 Speaker 3: of I think what we're seeing now in the years since, 388 00:26:29,240 --> 00:26:33,000 Speaker 3: we've seen crypto being used, for example, by politicians and 389 00:26:33,359 --> 00:26:35,600 Speaker 3: those who are closer to positions of power or in 390 00:26:35,640 --> 00:26:38,320 Speaker 3: positions of power themselves. So I think when you look 391 00:26:38,359 --> 00:26:41,040 Speaker 3: at it as a trend, prediction markets may be the 392 00:26:41,160 --> 00:26:45,160 Speaker 3: latest and greatest iteration, if you will, of this sort 393 00:26:45,240 --> 00:26:49,960 Speaker 3: of financial gambling, but it's really just that I think 394 00:26:50,040 --> 00:26:53,560 Speaker 3: the underlying trend is that we've gotten much more comfortable 395 00:26:53,560 --> 00:26:56,480 Speaker 3: with speculation and wagering, and some would say in a 396 00:26:56,520 --> 00:26:59,959 Speaker 3: way that's similar to the nineteen twenties. That's not my argument. 397 00:27:00,280 --> 00:27:02,800 Speaker 3: Others have made that argument, But there's a real question 398 00:27:03,400 --> 00:27:05,840 Speaker 3: as to what it is in our society that has 399 00:27:05,920 --> 00:27:09,959 Speaker 3: made these sorts of speculative bets much more socially acceptable 400 00:27:09,960 --> 00:27:11,240 Speaker 3: maybe than they were in the past. 401 00:27:11,760 --> 00:27:15,600 Speaker 2: So we have many states and the CFTC locked in 402 00:27:16,240 --> 00:27:20,000 Speaker 2: a battle for who's going to control this. There are 403 00:27:20,040 --> 00:27:23,400 Speaker 2: over twenty lawsuits and cease and desist actions have been 404 00:27:23,440 --> 00:27:28,240 Speaker 2: filed by the states against these platforms, but the CFTC 405 00:27:28,320 --> 00:27:33,040 Speaker 2: has initiated legal actions against nine states. I mean, what 406 00:27:33,119 --> 00:27:36,760 Speaker 2: you just describe sounds like it's gambling, and why shouldn't 407 00:27:36,800 --> 00:27:38,840 Speaker 2: the states be regulating it? 408 00:27:39,520 --> 00:27:45,320 Speaker 3: Well, gambling as a economic activity is much broader than 409 00:27:45,480 --> 00:27:49,280 Speaker 3: the form of gambling that's been traditionally regulated by state 410 00:27:49,359 --> 00:27:52,440 Speaker 3: gambling laws. So you could look at the stock market 411 00:27:52,480 --> 00:27:55,080 Speaker 3: as a whole as a form of gambling trading frequently. 412 00:27:55,440 --> 00:27:59,240 Speaker 3: You could look at commodities futures trading in other areas. 413 00:27:59,240 --> 00:28:02,760 Speaker 3: If you want to trade made silver futures or gold 414 00:28:02,800 --> 00:28:07,880 Speaker 3: futures or oil futures, those are all commodities or derivatives 415 00:28:07,880 --> 00:28:11,879 Speaker 3: of commodities, and one can argue if you're basically wagering 416 00:28:11,920 --> 00:28:13,800 Speaker 3: that the price is going to go up or go down, 417 00:28:14,200 --> 00:28:17,720 Speaker 3: you're placing a bet just like a high frequency trader 418 00:28:17,760 --> 00:28:21,040 Speaker 3: would be, and none of that activity would be regulated 419 00:28:21,040 --> 00:28:25,159 Speaker 3: by state gambling laws. So it's a bit tautological to 420 00:28:25,240 --> 00:28:28,879 Speaker 3: say that gambling should be regulated by states, because states 421 00:28:28,880 --> 00:28:32,280 Speaker 3: are regulated gambling. The question really is what forms of 422 00:28:32,320 --> 00:28:37,320 Speaker 3: gambling have and should be under state jurisdiction, and which 423 00:28:37,359 --> 00:28:41,400 Speaker 3: forms belong within the federal regulatory scheme. I think one 424 00:28:42,080 --> 00:28:46,360 Speaker 3: very important difference is that Calshi and poly Market, these 425 00:28:46,400 --> 00:28:51,360 Speaker 3: prediction platforms operate much more like two sided financial markets, 426 00:28:51,440 --> 00:28:55,880 Speaker 3: with market participants essentially trading with each other or with 427 00:28:56,000 --> 00:29:00,680 Speaker 3: liquidity providers, rather than players who are inter acting with 428 00:29:01,360 --> 00:29:05,600 Speaker 3: an establishment. And I'm not suggesting that's necessarily an operative 429 00:29:05,720 --> 00:29:08,600 Speaker 3: legal differentiator, but I think if you look at the 430 00:29:08,680 --> 00:29:12,240 Speaker 3: economic nature of the activity on these markets, there is, 431 00:29:12,400 --> 00:29:16,480 Speaker 3: I would suggest, perhaps a much closer similarity between an 432 00:29:16,480 --> 00:29:19,640 Speaker 3: oil futures market and a prediction market, and they both 433 00:29:19,720 --> 00:29:24,320 Speaker 3: involve essentially matching bids and offers, and the platform is 434 00:29:24,360 --> 00:29:29,160 Speaker 3: serving as an intermediary for this contract. It's to be sure, 435 00:29:29,280 --> 00:29:31,600 Speaker 3: I think to your point, there's a lot of friction 436 00:29:31,720 --> 00:29:37,120 Speaker 3: right now because this activity, unlike commodities trading or futures trading, 437 00:29:37,600 --> 00:29:40,400 Speaker 3: really does feel much more like the sort of consumer 438 00:29:40,440 --> 00:29:44,080 Speaker 3: gambling that has been traditionally regulated by the States. 439 00:29:44,840 --> 00:29:47,840 Speaker 2: Is there a split among the courts about how these 440 00:29:47,840 --> 00:29:48,719 Speaker 2: should be viewed? 441 00:29:49,400 --> 00:29:51,440 Speaker 3: Well, I think a couple things. I mean, I've been 442 00:29:51,480 --> 00:29:55,080 Speaker 3: speaking in economic terms. I mean, the legal question in 443 00:29:55,120 --> 00:29:59,680 Speaker 3: these cases really concerns preemption and the language of the 444 00:29:59,680 --> 00:30:03,440 Speaker 3: comm Bodies Exchange Act and the whether or not state 445 00:30:03,640 --> 00:30:09,640 Speaker 3: power to regulate gambling falls and covers, particularly sports related contracts. 446 00:30:09,680 --> 00:30:13,760 Speaker 3: Not every contract on a prediction market necessarily has the 447 00:30:13,840 --> 00:30:18,760 Speaker 3: same legal standing under state gambling law. So contracts involving 448 00:30:19,000 --> 00:30:23,920 Speaker 3: sports games in particular seem to fit squarely within the 449 00:30:23,960 --> 00:30:29,240 Speaker 3: traditional domain of state gambling laws and activity gambling activity 450 00:30:29,440 --> 00:30:32,959 Speaker 3: at the state level. Sports contracts are kind of your 451 00:30:33,000 --> 00:30:37,120 Speaker 3: quintessential example. Some of the other contracts, like you know, 452 00:30:37,240 --> 00:30:40,240 Speaker 3: crypto derivatives for example, I think it's a much harder argument. 453 00:30:40,560 --> 00:30:43,680 Speaker 3: So what we're seeing right now in the circuits is 454 00:30:44,200 --> 00:30:50,160 Speaker 3: some grappling with the exact language of the Commodities Exchange Act, 455 00:30:50,240 --> 00:30:53,760 Speaker 3: which defines the CFTC's jurisdiction. And what the CFTC is 456 00:30:53,800 --> 00:30:57,200 Speaker 3: really trying to do is to preserve maximum jurisdiction and 457 00:30:57,320 --> 00:30:59,640 Speaker 3: essentially to say, look, I mean, there's no question that 458 00:31:00,280 --> 00:31:03,960 Speaker 3: certain kinds of prediction contracts, which are themselves derivatives of 459 00:31:04,360 --> 00:31:07,920 Speaker 3: let's say crypto or other financial instruments. There's no question 460 00:31:07,960 --> 00:31:10,600 Speaker 3: at least most of those are within our authority. So 461 00:31:10,760 --> 00:31:14,280 Speaker 3: why would that not also be true for gaming or 462 00:31:14,400 --> 00:31:18,120 Speaker 3: other kinds of contracts just because they happen to involve 463 00:31:18,160 --> 00:31:21,760 Speaker 3: areas that were traditionally under state regulation. And it's really 464 00:31:21,800 --> 00:31:25,320 Speaker 3: more of a statutory interpretation question before the circuit courts 465 00:31:25,400 --> 00:31:27,880 Speaker 3: right now. But I think fundamentally as an economic matter, 466 00:31:28,240 --> 00:31:31,480 Speaker 3: there are some differences, but it probably will ultimately have 467 00:31:31,520 --> 00:31:33,920 Speaker 3: to be resolved by the Supreme Court, and I would 468 00:31:33,920 --> 00:31:36,760 Speaker 3: expect that if I had to put a prediction on it, 469 00:31:36,840 --> 00:31:39,080 Speaker 3: that the CFTC will win in the. 470 00:31:39,160 --> 00:31:42,760 Speaker 2: End, in light of the fact that the Trump administration 471 00:31:42,960 --> 00:31:47,840 Speaker 2: is all in on the prediction markets. Is enforcement by 472 00:31:47,840 --> 00:31:49,000 Speaker 2: the CFTC enough. 473 00:31:49,720 --> 00:31:52,200 Speaker 3: Well, what we talk about in our paper is that 474 00:31:52,560 --> 00:31:57,040 Speaker 3: enforcement here can occur on multiple levels. So there's actor 475 00:31:57,160 --> 00:31:59,880 Speaker 3: or contract based enforcement, where you say, here there's some 476 00:32:00,080 --> 00:32:03,440 Speaker 3: particular trades, we're going to look at these trades. We're 477 00:32:03,440 --> 00:32:05,960 Speaker 3: going to dig into an individual's trading history and bring 478 00:32:05,960 --> 00:32:09,120 Speaker 3: an enforcement action against that individual or in extreme cases, 479 00:32:09,160 --> 00:32:14,000 Speaker 3: perhaps criminal indictment. But there's also platform level surveillance and 480 00:32:14,040 --> 00:32:17,360 Speaker 3: platform level regulation. And while it's true that the Trump 481 00:32:17,400 --> 00:32:22,240 Speaker 3: administration has been relatively pro innovation or pro sort of 482 00:32:22,240 --> 00:32:25,640 Speaker 3: a hands off approach when it comes to financial innovation 483 00:32:25,840 --> 00:32:28,600 Speaker 3: in the crypto space, digital offset space, and now to 484 00:32:28,640 --> 00:32:31,560 Speaker 3: some extent in the prediction market space, it's also true 485 00:32:31,600 --> 00:32:34,880 Speaker 3: that these platforms have been at least Kyle she and 486 00:32:34,960 --> 00:32:38,200 Speaker 3: to a certain extent, Polymarket US as well their US ARM. 487 00:32:38,600 --> 00:32:40,760 Speaker 3: They've been really stepping up to show that they are 488 00:32:41,200 --> 00:32:45,479 Speaker 3: enforcing these sorts of insider trading, fraud and manipulation rules 489 00:32:45,840 --> 00:32:48,360 Speaker 3: on the platform. And we've talked about insider trading, but 490 00:32:48,400 --> 00:32:50,520 Speaker 3: it's not only insider trading. I mean, some of these 491 00:32:50,560 --> 00:32:55,400 Speaker 3: smaller markets in particular are amenable to manipulation where individuals 492 00:32:55,400 --> 00:32:58,920 Speaker 3: can control the outcome of the market, so outcome based manipulation. 493 00:32:59,600 --> 00:33:02,600 Speaker 3: And we know that in many cases, you know, is 494 00:33:02,640 --> 00:33:05,000 Speaker 3: something like over ninety percent, maybe as high as ninety 495 00:33:05,040 --> 00:33:08,320 Speaker 3: nine percent of the participants on these platforms are losing money, 496 00:33:08,760 --> 00:33:11,720 Speaker 3: So you know, there needs to be adequate disclosure regarding 497 00:33:11,720 --> 00:33:15,000 Speaker 3: the risks of participating and so forth. Platforms I think 498 00:33:15,000 --> 00:33:18,120 Speaker 3: have taken some actions that are helpful in that direction 499 00:33:18,200 --> 00:33:21,560 Speaker 3: in terms of both combating misconducting and protecting consumers. But 500 00:33:21,840 --> 00:33:23,800 Speaker 3: there's more that can be done there, and that seems 501 00:33:23,840 --> 00:33:26,320 Speaker 3: to be an area where maybe there's some openness on 502 00:33:26,360 --> 00:33:28,959 Speaker 3: the part of the Trump administration to sort of enlist 503 00:33:29,040 --> 00:33:33,640 Speaker 3: platforms in kind of inducing a more informed and hopefully 504 00:33:33,800 --> 00:33:35,840 Speaker 3: fairer and safer market for consumers. 505 00:33:36,000 --> 00:33:37,680 Speaker 2: Tell us a little more about your paper. 506 00:33:37,960 --> 00:33:42,480 Speaker 3: Well, the paper looks systematically at polymarket and identifies over 507 00:33:42,640 --> 00:33:48,200 Speaker 3: two hundred thousand episodes of potentially informed trading, and we 508 00:33:48,320 --> 00:33:52,440 Speaker 3: basically identify across a wide range of We have five 509 00:33:52,480 --> 00:33:57,240 Speaker 3: criteria that we employ to identify what we consider potentially 510 00:33:57,560 --> 00:34:01,400 Speaker 3: informed trading that we don't necessarily can include reflects the 511 00:34:01,520 --> 00:34:05,680 Speaker 3: use of material non public information. We recognize that some 512 00:34:05,760 --> 00:34:09,560 Speaker 3: of this activity might be in fact informed trading which 513 00:34:09,600 --> 00:34:12,760 Speaker 3: is lawfully acquired, but we think that what it shows 514 00:34:12,800 --> 00:34:16,160 Speaker 3: is that the prediction markets are in fact facilitating the 515 00:34:16,239 --> 00:34:22,200 Speaker 3: systematic exploitation of information that is non public and there's 516 00:34:22,400 --> 00:34:24,840 Speaker 3: a number of consequences which follow from that. So we 517 00:34:24,920 --> 00:34:28,359 Speaker 3: talked about surveillance at the platform level. We also think 518 00:34:28,480 --> 00:34:30,560 Speaker 3: in the paper talk about some of the proposals. There've 519 00:34:30,560 --> 00:34:35,520 Speaker 3: been some legislative proposals to outlaw certain uses of information, 520 00:34:35,600 --> 00:34:39,200 Speaker 3: certain kinds of contracts. We think that some of these 521 00:34:39,200 --> 00:34:42,319 Speaker 3: proposals are in fact moving the ball forward, others are 522 00:34:42,760 --> 00:34:45,880 Speaker 3: essentially summarizing existing law. I'll just say part of the 523 00:34:45,880 --> 00:34:50,040 Speaker 3: problem here is not only having strong legal rules, but 524 00:34:50,239 --> 00:34:55,400 Speaker 3: thinking about enforcement, because when actors are trading globally using 525 00:34:55,520 --> 00:34:58,800 Speaker 3: anonymous identities on the blockchain and so forth, the problem 526 00:34:58,920 --> 00:35:01,880 Speaker 3: is just as much a prac one of identifying who's 527 00:35:01,920 --> 00:35:05,399 Speaker 3: engaging in the trading and who's sharing the information as 528 00:35:05,480 --> 00:35:08,839 Speaker 3: it is figuring out what the rule should be. So 529 00:35:09,000 --> 00:35:11,840 Speaker 3: we talk in the paper about just the role of 530 00:35:12,120 --> 00:35:15,040 Speaker 3: as I mentioned, platforms, not only in surveillance but in 531 00:35:15,080 --> 00:35:19,560 Speaker 3: cooperating and in fact, we really need a global perspective 532 00:35:19,640 --> 00:35:21,960 Speaker 3: because you know, it can't be enough for the United 533 00:35:21,960 --> 00:35:25,239 Speaker 3: States to take actions on its own. We really need 534 00:35:25,280 --> 00:35:29,920 Speaker 3: to see international cooperation, especially when there are transnational networks, 535 00:35:30,080 --> 00:35:33,240 Speaker 3: which is something that we've seen in insider trading. More broadly, 536 00:35:33,280 --> 00:35:36,160 Speaker 3: I mean, this is how insider trading rings are brought down, 537 00:35:36,280 --> 00:35:38,719 Speaker 3: and so that same sort of approach needs to be 538 00:35:38,800 --> 00:35:40,800 Speaker 3: taken for the prediction markets as well. 539 00:35:40,960 --> 00:35:43,520 Speaker 2: Thanks so much for sharing your thoughts with us. That's 540 00:35:43,560 --> 00:35:47,200 Speaker 2: Professor Joshua Amidst of Columbia Law School. And that's it 541 00:35:47,280 --> 00:35:49,880 Speaker 2: for this edition of The Bloomberg Law Show. Remember you 542 00:35:49,880 --> 00:35:52,360 Speaker 2: can always get the latest legal news on our Bloomberg 543 00:35:52,440 --> 00:35:56,040 Speaker 2: Law Podcast. You can find them on Apple Podcasts, Spotify, 544 00:35:56,239 --> 00:36:00,400 Speaker 2: and at www dot Bloomberg dot com, slash podcas cast 545 00:36:00,560 --> 00:36:03,480 Speaker 2: slash Law, and remember to tune into The Bloomberg Law 546 00:36:03,560 --> 00:36:07,440 Speaker 2: Show every weeknight at ten pm Wall Street Time. I'm 547 00:36:07,520 --> 00:36:09,960 Speaker 2: June Grosso and you're listening to Bloomberg