Speaker 1: Hello, and welcome to the Votes and Verdicts podcast, hosted
Speaker 1: by the Litigation and Policy team at Bloomberg Intelligence, the
Speaker 1: investment research platform of Bloomberg LP. This podcast series examines
Speaker 1: the intersection of business policy and law, and today we'll
Speaker 1: be looking at the litigation and policy catalysts that we're
Speaker 1: watching in October twenty twenty three and that we think
Speaker 1: will impact companies across a number of different sectors. My
Speaker 1: name's Elliott Stein. I'm a senior litigation analyst covering litigation
Speaker 1: in the financial sector, and I'll be your host for today,
Speaker 1: September twenty ninth, twenty twenty three. If you have any
Speaker 1: questions about any of the matters that we'll be discussing
Speaker 1: on this episode, please don't hesitate to reach out to
Speaker 1: us at your convenience with question. So we'll be discussing
Speaker 1: a handful of sectors today. First, Holly Frome will discuss
Speaker 1: litigation by Merk and other drug makers challenging Medicare drug
Speaker 1: negotiation provisions of the Inflation Reduction Act the IRA, as
Speaker 1: it's known. She'll also preview a Bellweather trial against Buyer
Speaker 1: concerning claims that its roundup weed killer causes cancer. After that,
Speaker 1: Tish Walker, who covers healthcare patent litigation for US, we'll
Speaker 1: preview a hearing where Bousch Health will try to stop
Speaker 1: Norwich's bid for approval of its si faxin copy, and
Speaker 1: she'll also discuss an upcoming trial in Exelixis's bid to
Speaker 1: keep Cabometics Generics off the market. After that, Matt Shettenhelm,
Speaker 1: our TMT litigation and policy analyst, will preview a hearing
Speaker 1: on a motion by Meta to stop the FTC from
Speaker 1: blocking the company's use of teen data. After that, Nathan
Speaker 1: dean Or, a senior financials policy analyst, we'll talk about
Speaker 1: marijuana banking legislation. He'll also talk about regional bank long
Speaker 1: term debt requirements and the impending government shutdown. And last
Speaker 1: but not least, I'll wrap up by talking about an
Speaker 1: upcoming Supreme Court argument in a case challenging the CFPB's constitutionality,
Speaker 1: and also talk about upcoming dates in the SEC's recent
Speaker 1: lawsuit against marketmaker Virtue, as well as Grayscales lawsuit against
Speaker 1: the SEC concerning the spot bitcoin etf. Let me also
Speaker 1: just add that our colleague Jen Ree, who covers all
Speaker 1: things antitrust for US, couldn't be on today's episode, But
Speaker 1: if you're interested in the FTC's recent lawsuit against Amazon,
Speaker 1: or in October trial that's upcoming in the Justice Department's
Speaker 1: case against the Jet Blue Spirit tie up, or anything
Speaker 1: else anti trust related, I highly recommend that you can
Speaker 1: see her research on the Bloomberg terminal. All of our research,
Speaker 1: of course, is available on the Bloomberg terminal at bi go.
Speaker 1: And just a quick word about Bloomberg Intelligence for those
Speaker 1: who are unfamiliar. We are the investment research platform on
Speaker 1: the Bloomberg Terminal, providing in depth research on industries, companies,
Speaker 1: and markets and delivering key data from BI analysts in
Speaker 1: their respective industries. All right, so with all that out
Speaker 1: of the way, let's get started with the content. Holly.
Speaker 1: Let's start with you. This litigation by drug makers challenging
Speaker 1: the Medicare drug negotiation provisions of the Inflation Reduction Act
Speaker 1: is really interesting. I know there's a lot of litigation
Speaker 1: around it, and you're expecting an important court ruling by
Speaker 1: October first, and then separately you're also watching an upcoming
Speaker 1: trial over buyers Roundup. We'd killer why don't you come
Speaker 1: in and tell us more about these cases?
Speaker 2: And what investors. Jane Day and other drug makers and
Speaker 2: trade groups have sued the Department of Health and Human
Speaker 2: Services and Centers for Medicare and Medicaid, the agencies that
Speaker 2: administer Medicare and Medicaid, challenging a negotiation program that the
Speaker 2: drug companies say force them to agree to a twenty
Speaker 2: five to sixty percent discount on drugs selected for the program.
Speaker 2: Drug makers don't who are selected for the program, don't
Speaker 2: agree to negotiate, and don't withdraw from Medicare, they are
Speaker 2: subject to attacks which could amount to ninety five percent
Speaker 2: of the selected drugs gross US revenue on the drug
Speaker 2: including non Medicare sales. So drug makers have filed several
Speaker 2: lawsuits in various districts nationwide arguing that the drug program
Speaker 2: is unconstitutional. They've made several arguments, including that it's an
Speaker 2: unconstitutional taking, that it violates the First Amendment, that it
Speaker 2: imposes excessive fines, violates to process, and violates separation of powers.
Speaker 2: The cases are at various stages, but one case we
Speaker 2: are watching, but the possible ruling on the horizon, was
Speaker 2: brought by a trade group for drug makers in federal
Speaker 2: court in Ohio. The trade group filed a motion for
Speaker 2: a preliminary injunction seeking to enjoying implementation of the program.
Speaker 2: We said we don't think the motion will be granted
Speaker 2: because we think the case fails on the merits. The
Speaker 2: trade group has argued that the negotiation program violates their
Speaker 2: due process rights because it deprives them of a property
Speaker 2: interest without procedural protections. We think this argument fails because
Speaker 2: drug makers rely on a case where a utility was
Speaker 2: forced to provide services at a certain rate, allegedly without
Speaker 2: a fair process to determine the rate. The difference here
Speaker 2: is that drugmakers can withdraw from Medicare. The utility was
Speaker 2: required by Lawn to provide services, so that motion. The
Speaker 2: preliminary injunction motion was argued September fifteenth. We think a
Speaker 2: ruling could come by the October first deadline for manufacturers
Speaker 2: to agree to negotiate. If they lose, we expect the
Speaker 2: Trade group to file or requests for a media to appeal,
Speaker 2: and if accept an appellate ruling could come in one age.
Speaker 2: Shifting gears. Beayor mon Santo faces a trial in Philadelphia
Speaker 2: State Court in October. The plaintiff claims in October fifth
Speaker 2: the plaintiff claims its weed killer roundup causes cancer. Bear
Speaker 2: faced over one hundred thousand cases alleging injury from its
Speaker 2: weak killer. Most of the case is settled, but there's
Speaker 2: still an estimated between forty to fifty thousand cases left
Speaker 2: that remain pending and unsettled. Jury selection in the Philadelphia
Speaker 2: trial begins October fifth, and this is the first case
Speaker 2: that will be tried in that jurisdiction. It's a bell
Speaker 2: Weather case for Philadelphia. Several trials are scheduled into twenty
Speaker 2: twenty four. Bear has won the last several trials in
Speaker 2: different jurisdictions, but Philadelphia is a historically plaintive friendly form,
Speaker 2: so it will be interesting to see what happens there.
Speaker 2: And with that, I'll turn it back to you.
Speaker 1: Elliott, Great, thanks so much, Holly. All right, Tish, let's
Speaker 1: bring you in to talk healthcare patent litigation. You have
Speaker 1: a couple of catalysts that you're watching as well. First,
Speaker 1: bouch Health has in October sixth tier in to stop
Speaker 1: Norwich's bid to compel approval of its si faxin copy.
Speaker 1: And you're also watching a trial that starts October twenty
Speaker 1: third in Exilexis's bid to keep Cabo Metics generics off
Speaker 1: the market. All these names make me want to ask
Speaker 1: you why so many of these names in the drug
Speaker 1: space have X in them? But you don't have to
Speaker 1: answer that if you don't know. But why don't you
Speaker 1: come in and tell us what these cases are about? Nonetheless,
Speaker 1: thanks Elliott. I have no idea why they have X
Speaker 1: in it. Maybe it's just to keep it interesting, or
Speaker 1: perhaps now it's to be cool like the former Twitter.
Speaker 3: Who knows. But for the I'm going to start with
Speaker 3: Bausch And for those of you that follow my research,
Speaker 3: and hopefully that's everyone listening, you know that Bausch has
Speaker 3: been in a drawn out patent litigation with Norwich trying
Speaker 3: to block Norwich's genericsy Fax and copy from coming to
Speaker 3: the market of key patent expirations and so coming up
Speaker 3: on October six, there's going to be a hearing in
Speaker 3: the District Court of DC and Norwich is related lawsuit
Speaker 3: against the FDA where it's seeking to compel the FDA
Speaker 3: to grant final approval to its generic sy faxin application. Now,
Speaker 3: this suit is separate from the patent litigation suit which
Speaker 3: is currently on appeal, So on October six, this court
Speaker 3: is going to hear arguments on Norwich's request for preliminary
Speaker 3: injunction to compel the FDA to grant final approval, and
Speaker 3: it's also going to hear the FDA and Bausch's arguments
Speaker 3: for summary judgment or dismissal of this case. And then Teva,
Speaker 3: who so far remains eligible for the one hundred and
Speaker 3: eighty day generic first filer exclusivity for Zyfaxine, has also
Speaker 3: sought to intervene in this case, though at least as
Speaker 3: of yesterday, there's no indication from the record that this
Speaker 3: has been granted. So in terms of the outcome, we
Speaker 3: Bousch and the FDA to prevail this hearing, as we
Speaker 3: think the court will either dismiss the case or possibly
Speaker 3: remand it back to the FDA, at least on the
Speaker 3: issue of Teva's first filer exclusivity. This is because, you know,
Speaker 3: the Delaware court order that the FDA is saying blocks
Speaker 3: it from giving Norwich. Norwich's generic final approval isn't the
Speaker 3: only thing that's blocking final approval. Teva's first filer exclusivity
Speaker 3: is also blocking it, and the FDA has yet to
Speaker 3: make any forfeiture decision as to it. And then moreover,
Speaker 3: the appeal is also ongoing at the federal circuit from
Speaker 3: the patent litigation, which also includes the issue of the
Speaker 3: Delaware court order. So why is this hearing important to Bausch?
Speaker 3: This is really all about timing for generic sye faxine
Speaker 3: to come to market. Norwich was a late generic filer.
Speaker 3: Bausch had settled three patent litigations with other generic filers
Speaker 3: for January first, twenty twenty eight entry date. Yet Norwich
Speaker 3: took its case all the way through trial and actually
Speaker 3: had a verdict at the trial level that could allow
Speaker 3: it to come to market earlier. But there's currently a
Speaker 3: court order from the District Court of Delaware that's blocking
Speaker 3: the FDA from granting final approval until certain hepatic and
Speaker 3: selfalopathy method of treatment patents expire in October twenty twenty nine. Now,
Speaker 3: at the time the court issued this ruling, Norwich was
Speaker 3: seeking approval for both the hepatic and selfalopathy indication and
Speaker 3: for IBSD. Then there was this split ruling in the
Speaker 3: patent case where the court found that the polymorph and
Speaker 3: IBSD patents were invalid, but the h patents remained valid,
Speaker 3: so after the final judgment was issued, Norwich amended its
Speaker 3: generic application to remove that h and the hepatic and
Speaker 3: selfalopathy indication and is now only seeking approval of its
Speaker 3: five hundred and fifty milligrams I FAX and copy for IBSD.
Speaker 3: Now that generic application was tentatively approved by the FDA,
Speaker 3: and then the tentative approval letter the FDA said that
Speaker 3: this district court order is barring approval or barring final approval.
Speaker 3: So Norwich then sued the FDA. But I think one
Speaker 3: of the key elements here, you know, which has been
Speaker 3: discussed frequently in this FDA case is Tev's eligibility for
Speaker 3: first filer status still stands in the way of an
Speaker 3: FDA approval despite the court order. So you know, I
Speaker 3: don't think this case will help clear the barriers for
Speaker 3: Norwich and its effort to get its generic copy to market,
Speaker 3: especially because the appeal of the patent case is still
Speaker 3: pending and still being briefed, and given all these litigation complexities,
Speaker 3: you know, I'm still pointing to a time somewhere between
Speaker 3: twenty twenty six but before twenty twenty eight for Norwich entry.
Speaker 3: But in the unlikely event that Norwich does prevail in
Speaker 3: this October sixth hearing, I do think that that would
Speaker 3: expose Bouch to generic competition as early as next year,
Speaker 3: in twenty twenty four. This is an extremely complicated litigation,
Speaker 3: so I encourage anyone who has any questions please feel
Speaker 3: free to reach out to me. I'm always happy to discuss.
Speaker 3: So moving on to Exolexis and it's cabametics litigation, a
Speaker 3: trial is set to start on October twenty third and
Speaker 3: Xolexis's suit against generic maker MSN to block copies of
Speaker 3: MSN's generic cabametics before the expiration of certain key patents. Now,
Speaker 3: this is going to be the second trial between the parties,
Speaker 3: and we favor Xlexis here to prevail on at least
Speaker 3: one of the patents that expire in twenty thirty but
Speaker 3: to lose on the patent expiring in twenty thirty two,
Speaker 3: and this ultimately would then block Emson's entry until at
Speaker 3: least January twenty thirty. Now, besides MSN, there are two
Speaker 3: other generics that we know of looking to bring a
Speaker 3: cabamatics generic to market, Teva and Sipla. Exlicis settled its
Speaker 3: litigation with Teva in July for a January twenty thirty
Speaker 3: one generic entry date, and its litigation against Sipla has
Speaker 3: been stayed pending resolution of this suit against MSN. Back
Speaker 3: in January, there was a decision from the first trial
Speaker 3: that was held in May twenty twenty two, where the
Speaker 3: court found that Exolexis's twenty twenty six expiring patent was valid,
Speaker 3: but that EMSN did not infringe to twenty thirty expiring
Speaker 3: polymorph patent. So that decision in the first trial blocks
Speaker 3: any at risk launch by MSN while this second trial
Speaker 3: plays out, and in this October trial, we think Exlexis
Speaker 3: again has the advantage to prevail on the twenty thirty
Speaker 3: expiring patent but not the twenty thirty two expiring one.
Speaker 3: A pre trial conference is set for October sixth, and
Speaker 3: the pre trial order is due next week, which will
Speaker 3: likely give a closer look at the specific arguments that
Speaker 3: each of the parties are going to be set forth
Speaker 3: we're going to be setting for at that trial. And
Speaker 3: with that, back to you, Elliott.
Speaker 1: Great, thanks Tish. All right, Matt, let's turn to tech
Speaker 1: and bring you in. You'll be watching in October seventeenth
Speaker 1: hearing involving Meta, the FTC and Meta's use of team data.
Speaker 1: What's this case all about?
Speaker 4: Yeah, so, thanks Elliott. Meta makes tens of billions of
Speaker 4: dollars a year from its AD business, and reaching young
Speaker 4: people with ads is a particularly important piece of that market,
Speaker 4: and this case is about that. In May of this year,
Speaker 4: the Federal Trade Commission unilaterally proposed to change the terms
Speaker 4: of Meta's twenty twenty settlement agreement with the agency to
Speaker 4: bar Meta from using data from users who are thirteen, fourteen, fifteen, sixteen,
Speaker 4: or seventeen years of age. And this case is about
Speaker 4: can the FTC do that? Can it take aim at
Speaker 4: Meta's business model by changing this settlement? So some background here,
Speaker 4: there's no US federal law banning the use of kids data.
Speaker 4: Congress has worked to do that, to impose strict limits
Speaker 4: on that, it hasn't been able to pass anything. The
Speaker 4: Federal Trade Commission has tried to make rules on this.
Speaker 4: It started a process to make rules about data use,
Speaker 4: but it hasn't finished that rule making, And so this
Speaker 4: case is really coming in the absence of a binding
Speaker 4: law or rule. The FTC is effectively trying to impose
Speaker 4: that limit in another way by reopening a settlement agreement.
Speaker 4: That settlement was in twenty eighteen. Twenty nineteen, FTC investigated
Speaker 4: then Facebook about the Cambridge Analytics matter, whether engaged in
Speaker 4: unfair or deceptive practices. META and the FTC settled that
Speaker 4: for five billion dollars, and a court approved that in
Speaker 4: twenty twenty. It had some terms attached to it. Now,
Speaker 4: the FDC says META hasn't adequately complied with the terms
Speaker 4: of that twenty twenty settlement, and the FTC claims the
Speaker 4: statutory authority to modify that settlement and now add this
Speaker 4: term beginning the use of advertising of data to advertise
Speaker 4: the kids. META has run to federal court, the same
Speaker 4: federal court that approved the twenty twenty settlement, to try
Speaker 4: to stop the FDC's modification process before it can start.
Speaker 4: That's where we are now. That's what happens. In two
Speaker 4: or three weeks October seventeenth. This judge will say, can
Speaker 4: the FDC even start the process to modify the order
Speaker 4: in this way? So META has two chances to stop
Speaker 4: this now before the process starts, or after the FDC
Speaker 4: modifies the order, Medican challenge it again. Either way, I
Speaker 4: think this is going to be good news for the company.
Speaker 4: I think this judge at the October seventeenth tiering is
Speaker 4: going to have a lot of sympathy with Meta to
Speaker 4: the idea that the FTC you really shouldn't be unilaterally
Speaker 4: changing the terms of the settlement deal. The FDC has
Speaker 4: a hyper technical argument that it can do this that
Speaker 4: might let it eke by past this first hurtle. I
Speaker 4: give Meta about a forty percent chance to succeed.
Speaker 1: Now.
Speaker 4: Even if that fails, though, Meta is going to do
Speaker 4: well challenging this After the fact, even democrats at the
Speaker 4: FTC raise concerns about the agency's power to do this. Ultimately,
Speaker 4: that's going to sync this effort. In my view, one
Speaker 4: way or the other, this should be good news for
Speaker 4: Meta to dodge this attack on its business model. Back
Speaker 4: to you, Elliott, Great.
Speaker 1: Thanks Matt. So many really interesting and novel issues around
Speaker 1: social media companies and use of data. All right, let's
Speaker 1: turn to financials Now and bring in Nathan Dean, our
Speaker 1: senior policy analyst down in Washington. Nathan, what's going on
Speaker 1: with the anticipated government shutdown and should we be concerned
Speaker 1: about it? And I should probably just mention again that
Speaker 1: We're recording this on September twenty ninth, so by the
Speaker 1: time you know, you the listener are hearing this, we
Speaker 1: may be in the middle of the shutdown already. But Nathan,
Speaker 1: you've also written about a marijuana banking bill that made
Speaker 1: some progress this past week, and also regional bank long
Speaker 1: term debt requirements. So a lot to discuss. But why
Speaker 1: don't you come in and lay the knowledge on us.
Speaker 5: Yep, no, it sounds good. So let me start with
Speaker 5: the rule on the regional bank debt. So this was
Speaker 5: something that was anticipated. There was actually coming out prior
Speaker 5: to the Silicon Valley Bank a default if you call that,
Speaker 5: the signature bank issues and so forth like that. Regulators
Speaker 5: had talked about this, about requiring banks that are above
Speaker 5: two hundred and fifty billion in assets to issue what
Speaker 5: is known as te lack det total loss absorbing capacity
Speaker 5: debt as a way to safeguard against systemic risk. This
Speaker 5: is a long term debt. Now Silicon Valley Bank and
Speaker 5: Signature Bank happen, and the regulators are like, well, now
Speaker 5: we actually have to really look at this proposal, and
Speaker 5: we're going to push that threshold from two hundred and
Speaker 5: fifty billion down to one hundred billion. So this proposal
Speaker 5: impacts all nineteen banks that are one hundred billion in
Speaker 5: assets in up and what it does is it requires
Speaker 5: in the issue this long term debt. Now, the regulators
Speaker 5: decided not to go with tea lacked debt. Tea lack
Speaker 5: debt is something that the big banks, the Bank of
Speaker 5: Americas and the GP Morgans have to adhere to. They
Speaker 5: decided to go with the less onerous version of long
Speaker 5: term debt. And based upon our calculations, you're looking around
Speaker 5: for these nineteen banks or so around found sixty to
Speaker 5: seventy billion dollars in new debt. That's based off of
Speaker 5: the twenty twenty two bounds sheet data. Maybe a little
Speaker 5: bit less today once you take to twenty twenty three
Speaker 5: data into account. But essentially, these large regionals have to
Speaker 5: equate six percent of risquated assets, three point five percent
Speaker 5: of average total consolidation assets, and for banks that are
Speaker 5: subject to the supplementary leverage ratio, two point five percent
Speaker 5: of the total leverage ratio. Now, this proposal is likely
Speaker 5: going to be finalized about one year from now, and
Speaker 5: then it will start going into effect over a three
Speaker 5: year transition period. Starting on July first, twenty twenty five.
Speaker 5: So that's the regional bank t. Like Ish debt when
Speaker 5: it comes to marijuana banking. We have this big hearing
Speaker 5: over in the Senate Banking Committee today, I'm sorry, this
Speaker 5: week on what's known as the Safer Banking Act. If
Speaker 5: you're in this space, you know it used to be
Speaker 5: called the Safe Banking Act. The only difference between Safer
Speaker 5: and Safe is language regarding what's known as Section ten
Speaker 5: over the power of law enforcement agencies. Actually has nothing
Speaker 5: to do with if actual marijuana being used in the
Speaker 5: banking sector. But you know, there was a lot of
Speaker 5: disagreement a both parties. Now this went through committee fourteen
Speaker 5: to nine. You would think it's bipartisan. It is, But
Speaker 5: there were two main takeaways that I took from that hearing.
Speaker 5: One is is that this Section ten language is nowhere
Speaker 5: near close to final in order to get this to
Speaker 5: become law. There's a lot of Republicans out there that
Speaker 5: are concerned with this language, and if they were to
Speaker 5: try and pass this as is, I don't think you're
Speaker 5: going to get the Republicans support, at least in the
Speaker 5: House to put this into law.
Speaker 1: And the second thing is is that.
Speaker 5: Senator Warnock out of Georgia, the Democrat, voted no against
Speaker 5: the bill because it didn't go far enough in terms
Speaker 5: of criminal justice reform. So it did pass. Senator Schumer
Speaker 5: said that he was going to put it onto the
Speaker 5: floor as soon as possible, but he also said that
Speaker 5: he's going to tie it with criminal justice reform, and
Speaker 5: by expanding this bill, he's essentially dooming its chances in
Speaker 5: the Senate. This is the same thing that happened in
Speaker 5: twenty twenty two. To have a specific vote on this
Speaker 5: bill without the criminal justice reform, he could probably pass.
Speaker 5: And I think as eventually that's going to be the
Speaker 5: scenario here. But I think the Washington's gonna have to
Speaker 5: play its games and so forth like that. They're gonna
Speaker 5: have to try first with criminal justice reform that will fail.
Speaker 5: I think this passes the Senate sometime in the first
Speaker 5: four or five months of next year, then it goes
Speaker 5: to the House. I don't think the House has any
Speaker 5: desire whatsoever to take this up at the moment, but
Speaker 5: I do think that if you know, the regulatory gaps
Speaker 5: that exist for marijuana banking is a bipartisan issue, there
Speaker 5: is bipartisan support. I think towards the end of twenty
Speaker 5: twenty four, maybe even after the elections during the lame
Speaker 5: duck period. This has a decent chance of passage. So
Speaker 5: not the story that the marijuana companies want to sing
Speaker 5: at the moment, but at least it was some good
Speaker 5: momentum for the least to get it out of committee.
Speaker 5: And then finally when it comes to the government shutdown,
Speaker 5: obviously when you're listening to this, we could be in
Speaker 5: a government shutdown. The status is is that, you know,
Speaker 5: the Senate is trying to pass a CRT the moment,
Speaker 5: they're not going to get it done before the Saturday
Speaker 5: at midday deadline. You'll probably see them on Sunday try
Speaker 5: and vote on this. The House is pursuing its own
Speaker 5: packages at the moment, none of which actually have any
Speaker 5: chance of passing into the in the Senate. So yes,
Speaker 5: we are most likely going to have a shutdown. Now,
Speaker 5: what are the impacts, Well, minimal impact when it comes
Speaker 5: to equity stocks. I mean we've looked at the thirty
Speaker 5: five days shutdown that happened at the end of the
Speaker 5: Trump administration. You know, stocks were a little bit if
Speaker 5: he you know, there was some uncertainty once people realized,
Speaker 5: oh my god, this could actually last for a while.
Speaker 5: But ultimately stocks started acting normally once people realized that
Speaker 5: the economic impact wasn't all that big. We've seen certain
Speaker 5: statements from like Delta Airlines who said they lost twenty
Speaker 5: five million dollars and in the last shutdown. You know, I
Speaker 5: certainly don't want to say twenty five million dollars isn't
Speaker 5: a lot. I would love to have twenty five million dollars,
Speaker 5: but for a company like Delta Airlines, it's something that
Speaker 5: can work around. When it comes to contractors, you would
Speaker 5: think contractors don't get paid well. Most large publicly traded
Speaker 5: contractors are pre funded. These contracts are long term in nature,
Speaker 5: so you know, yes, their workers may may be furlough themselves,
Speaker 5: but at least when it comes to the revenue perspective
Speaker 5: of the large contractors, they are somewhat protected there. When
Speaker 5: it comes to reporting, however, we are telling our traders
Speaker 5: to keep an eye on this because a lot of
Speaker 5: key reports that traders use, for example, like the Commodity
Speaker 5: Futures Training Commission Commandity reports that come out on Fridays,
Speaker 5: those are going to stop the Bureau of labor to
Speaker 5: statistics reports, those are going to stop. And so as
Speaker 5: long as it shut down continues, those reports that traders
Speaker 5: like to use aren't going to be there. And then finally,
Speaker 5: you know, I would just say that in terms of
Speaker 5: the other like you know, just general economic impacts, just
Speaker 5: note that government workers will get their first paycheck around
Speaker 5: October eighteenth. It's the second paycheck that they don't, So
Speaker 5: you know, when it comes to if you're trying to
Speaker 5: like figure out like economic spending, consumer spending and so forth,
Speaker 5: the first two weeks government workers, all eight hundred thousand
Speaker 5: of them should get paid. It's when you start getting
Speaker 5: into October and November and so forth, things get a
Speaker 5: little bit more scary. So with that, Elliott, Oh, the
Speaker 5: last thing I would just say is that we're anticipating
Speaker 5: the shutdown to be probably around one to two weeks.
Speaker 5: We don't see this last thing as much as the
Speaker 5: thirty five day one at the end of the Trump arrows.
Speaker 6: So with that, Elliott, I'll pass it back to you. Great, thanks, Nathan,
Speaker 6: good stuff. All right, I'm going to wrap up with
Speaker 6: some discussion of a few things that I'm watching in
Speaker 6: October in the financials litigation space. First, we have a
Speaker 6: Supreme Court argument on October third in a lawsuit challenging
Speaker 6: the constitutionality of the Consumer Financial Protection Bureau, or the
Speaker 6: CFPB as it's commonly known for those who aren't familiar
Speaker 6: with this space. The CFPB is the.
Speaker 1: Main regulator for consumer finance. It has jurisdiction over a
Speaker 1: broad array of industries, including banks, credit bureaus, FinTechs, payday lenders,
Speaker 1: and non bank servicers. Uh. Last, so the background here
Speaker 1: is at last October, the Fifth Circuit Federal Appeals Court
Speaker 1: held that the agency's funding structure is unconstitutional because the
Speaker 1: CFPB's funding comes out of the Federal Reserves budget rather
Speaker 1: than through the normal congressional appropriations process. The CFPB, of
Speaker 1: course wants the Supreme Court to reverse that ruling, but
Speaker 1: I don't think the agency is going to succeed. I
Speaker 1: think at least five, if not all, six, of the
Speaker 1: conservative justices on the High Court will largely agree with
Speaker 1: the Fifth Circuit because the CFPB's current funding structure basically
Speaker 1: eliminates congressional oversight and that raises separation of power concerns. So,
Speaker 1: assuming that the Supreme Court rules the way I think,
Speaker 1: they will. Congress will then need to revisit how the
Speaker 1: CFPB gets funded, and I think the CFPB, which is
Speaker 1: currently led by one director, could become a multi member
Speaker 1: commission in that process, much like many other agencies, and
Speaker 1: that'll sort of dilute the power of the agency. I
Speaker 1: also think that pending rules and pending enforcement actions before
Speaker 1: the CFPB, or that the CFPB has brought could be
Speaker 1: at jeopardy since anything that hasn't been finalized will likely
Speaker 1: need to be ratified by the agency if and when
Speaker 1: it becomes properly funded down the road. And so for
Speaker 1: companies like Naviant, the student loan servicer, which has raised
Speaker 1: this issue early in its defense when it was sued
Speaker 1: by the CFPB in twenty seventeen, I think it could
Speaker 1: result in the case against Naviant being dismissed because any
Speaker 1: ratification by the CFPB would likely be past the statute
Speaker 1: of limitations. So there's a whole lot of, you know,
Speaker 1: ripple effects from this potential ruling in the Supreme Court.
Speaker 1: But we'll be watching on October third at the oral
Speaker 1: argument to see where the court go in and then
Speaker 1: we expect a ruling in the first half of twenty
Speaker 1: twenty four. A couple other cases that I'm watching in October.
Speaker 1: Both of these concern the SEC. The first is a
Speaker 1: lawsuit by the SEC filed on September twelfth against marketmaker
Speaker 1: Virtue against the broker dealer units, accusing the company of
Speaker 1: failing to protect information barriers around sensitive customer information. I
Speaker 1: expect Virtue to respond, likely with emotion to dismiss in
Speaker 1: early October, and I think the company is a good
Speaker 1: chance to win dismissal of the fraud type claims that
Speaker 1: were alleged against it, because the alleged false statements that
Speaker 1: Virtue is alleged to have made don't really pertain to
Speaker 1: the sale of any specific securities, as I think the
Speaker 1: relevant statute contemplates, so regardless, you know, I think Virtue's
Speaker 1: monetary risk in this case is relatively small, probably less
Speaker 1: than twenty five million dollars. But if it can win
Speaker 1: dismissal of these fraud type claims early in the litigation,
Speaker 1: I think it reduces that exposure even more, perhaps to
Speaker 1: the single digit millions. And then, finally, the last case
Speaker 1: I want to talk about this is a crypto company,
Speaker 1: Gray Scales case against the SEC over Grayscale's bid for
Speaker 1: a spot bitcoin ETF. You know, if you follow crypto
Speaker 1: on Twitter, you know this gets a lot of a
Speaker 1: lot of activity on Twitter. I've spoken about this case
Speaker 1: a few times, but as a refresher, Grayscale has been
Speaker 1: trying to convert its Grayscale Bitcoin Trust known as GBTC
Speaker 1: to an ETF, which would you know, make it a
Speaker 1: lot easier for investors, both retail and institutional, to gain
Speaker 1: exposure to bitcoin. Just by way of background, the SEC
Speaker 1: rejected Grayscale's application last year. Grayscale thensued just as past August.
Speaker 1: August twenty ninth, we finally got a court ruling from
Speaker 1: the DC Circuit, at least the panel of three judges there,
Speaker 1: and they vacated the SEC's rejection order. And they said
Speaker 1: that the agency had essentially acted arbitrarily because it rejected
Speaker 1: gray scales bid for a spot bitcoin ETF after having
Speaker 1: previously approved bitcoin futures ETFs. And you know, the court
Speaker 1: said that you can't really distinguish between these products, and
Speaker 1: so you shouldn't be allowed to reject one while approving
Speaker 1: the other. We're waiting to see what the SEC does next.
Speaker 1: It has in October thirteenth deadline to ask for n
Speaker 1: bank review by the DC Circuit. That would mean that
Speaker 1: all the non senior judges on the court review the case.
Speaker 1: But keep in mind that in bank review is not automatic.
Speaker 1: The Court has discretion to either you know, allow it
Speaker 1: or not allow it. And I think it's unlikely that
Speaker 1: the Court would grant an SEC petition for in bank
Speaker 1: review in part because you sort of had You had
Speaker 1: judges on that panel from different ideologies. You had one
Speaker 1: who's very libertarian, you had two who were appointed by Democrats,
Speaker 1: and you also had the chief judge of the Court
Speaker 1: on the panel. So I think it's unlikely that the
Speaker 1: rest of the judges on that court would want to
Speaker 1: revisit their ruling. And then, assuming no end bank review,
Speaker 1: the SEC could alternatively ask the Supreme Court for review,
Speaker 1: but I think that's also unlikely. You just don't see
Speaker 1: the type of you know, circuit split or federal question
Speaker 1: issues that the Supreme Court usually takes up. And then,
Speaker 1: assuming that there's no further court review of the August
Speaker 1: twenty nine DC Circuit Panel ruling, the ball then goes
Speaker 1: back to the SEC and they'll have to revisit Gray
Speaker 1: Skills application. Again and based on you know, the August
Speaker 1: twenty ninth ruin, I don't think the SEC has a
Speaker 1: lot of wiggle room to try to reject Gray Skille's
Speaker 1: application again. But again, the key date there is the
Speaker 1: October thirteenth date for the SEC to file for in
Speaker 1: bank review. All right, so you know, lots of interesting
Speaker 1: things to watch in October that we've all been talking about,
Speaker 1: but I think we'll probably wrap up here and so
Speaker 1: this will conclude this episode of Votes and Verdicts. As always,
Speaker 1: thank you for listening, and as a reminder, you can
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