Speaker 1: This is Bloomberg Law with June Grossel from Bloomberg Radio.
Speaker 2: The problem with confirming Todd Blanche is that he has
Speaker 2: never been able to shed his role as criminal defense
Speaker 2: lawyer for Donald Trump. He just can't do it. He
Speaker 2: does not represent the American people now. He will never
Speaker 2: represent the American people. He will never do what's best
Speaker 2: for the American people. He will only do its best
Speaker 2: for Donald Trump.
Speaker 3: When he has sworn in as Attorney General, he will
Speaker 3: have to swear to uphold, support and defend the Constitution,
Speaker 3: but we know that oath will take a back seat
Speaker 3: to his loyalty to the president.
Speaker 4: It was a consistent criticism from Democratic senators like Adam
Speaker 4: Schiff and Masie Herono to the nomination of Todd Blanche
Speaker 4: to be the next Attorney General. He's apparent willingness to
Speaker 4: aggressively push to meet all of President Trump's demands, eroding
Speaker 4: the traditional independence of the Department of Justice. It had
Speaker 4: looked like Blanche's nomination was in jeopardy under pressure from
Speaker 4: two Republicans over the controversial deal settling Trump's lawsuit against
Speaker 4: the IRS with a one point eight billion dollar so
Speaker 4: called anti Weaponization fund to compensate his allies, but Republican
Speaker 4: Senators John Cornyn and Tom Tillis dropped their opposition after
Speaker 4: Blanche posted an order rescinding the fund late Sunday night.
Speaker 5: I've never liked this seventeen seventy six fund. It made
Speaker 5: no sense to me, and I thought it was an
Speaker 5: insult to the police officers of the people that defended
Speaker 5: us on January sixth. It's done, it's been rescinded, and
Speaker 5: I am satisfied.
Speaker 4: Tillis may be satisfied, but Democratic senators like Corey Booker
Speaker 4: say the papers attached to Blanche's post have no legal
Speaker 4: significance at all.
Speaker 6: This is ridiculous. We got nothing, no guarantees whatsoever that
Speaker 6: this slush one still can't go forward. We got nothing
Speaker 6: that the president of the United States can't cheat on
Speaker 6: his taxes and have no accountability.
Speaker 4: The vote to advance Blanche's nomination was twelve to ten,
Speaker 4: along party lines. Joining me is an expert in constitutional law,
Speaker 4: David super, a professor at Georgetown Law. David so tell
Speaker 4: us about the two pages Blanche posted, an order signed
Speaker 4: by him, and an unsigned memo from the Justice Department.
Speaker 7: He basically typed up what he said at the hearing
Speaker 7: and posted it. There's literally nothing new there, and indeed
Speaker 7: he said there was nothing new there. He's telling the
Speaker 7: truth on that. I'm sure he prepared his talking points
Speaker 7: for the hearing very very carefully, that those words were
Speaker 7: not extemporaneous, and these are the same. He says, looking
Speaker 7: entirely retrospectively, that the so called weaponization fund did not
Speaker 7: get off the ground. He does not make any promises
Speaker 7: that they won't do something like that tomorrow, but he says,
Speaker 7: and I think this is historically actuate, it did not start.
Speaker 7: And then he says that the immunity for Trump is
Speaker 7: limited to Trump, his family, and his organization, which were
Speaker 7: the parties the case. We always knew them. So he
Speaker 7: is setting to rest the fears of people who can't read,
Speaker 7: but he is leaving the rest of us just as
Speaker 7: nervous as we were before.
Speaker 4: The settlement agreement. Says, this settlement agreement may be modified
Speaker 4: only with the written agreement of the parties. And President
Speaker 4: Trump didn't sign anything, and he told reporters on Wednesday
Speaker 4: that he didn't even look at this.
Speaker 7: Yeah, there's many holes here, it's hard to count them.
Speaker 7: Blanche says, the agreement didn't go forward, but as you note,
Speaker 7: they don't modify it, and he doesn't have authority to
Speaker 7: modify it, unless you say, well, actually, he's Trump's lawyer
Speaker 7: in all respects, so he can modify it on behalf
Speaker 7: of both the plaintiffs and the defendants, which I don't
Speaker 7: think is quite the case. But he has no authority
Speaker 7: to modify it because it requires the agreement of the
Speaker 7: plaintiff's council. So he didn't modify it. He just said
Speaker 7: they didn't act on it, which is true, but doesn't
Speaker 7: mean they won't act on it in the immediate future
Speaker 7: as soon as he's confirmed. And he says that they
Speaker 7: haven't put the money out there, but he doesn't promise
Speaker 7: not to raid the Justice Fund for payoffs for more
Speaker 7: Trump affiliated law breakers. The judgment Fund is still there,
Speaker 7: and if Senator Cornyin really was concerned about this, he
Speaker 7: should have asked mister blanche for the administration's agreement to
Speaker 7: an amendment to the Justice Fund, a quick unanimous consent
Speaker 7: bill amending the Justice Fund to make it unavailable to
Speaker 7: pay for settlements with anyone affiliated with the president. That
Speaker 7: would be an easy fix to make sure this never
Speaker 7: happens again, as far as we can tell, that was
Speaker 7: even requested, much less done.
Speaker 4: Cornyn admitted that the written assurances Blanche gave could later
Speaker 4: be reversed, but said despite that, he believed the commitments
Speaker 4: that Blanche had given him in recent days. I mean,
Speaker 4: this reminds me of Susan Collins saying she believed Brett
Speaker 4: Kavanaugh when he said that, you know, roe versus Wade
Speaker 4: was safe.
Speaker 7: And then when we looked at it, it turned out
Speaker 7: that Senator Collins had accepted as an assurance something that
Speaker 7: Shirley wasn't Justice Kavanaugh and did the justice as Alito
Speaker 7: and Roberts before him had said that Roe v. Wade
Speaker 7: was settled law, which is obviously true, but he also
Speaker 7: was seeking a job where he would have the authority
Speaker 7: to unsettle it, which he did. And so they describe
Speaker 7: the present willout making any promises for the future, and
Speaker 7: the senators that vote for their confirmation then pretend to
Speaker 7: be surprised when they act on powers that they clearly
Speaker 7: had clearly retained and never swore off. I can absolutely
Speaker 7: believe that if all Todd Blanche said in private to
Speaker 7: Senator Cornyn was more or less what he said in
Speaker 7: public at the hearing that he will adhere to that
Speaker 7: the old settlement fund won't go forward. There will be
Speaker 7: a new settlement fund that you and I and anybody
Speaker 7: else who doesn't have an electron microscope won't be able
Speaker 7: to tell from the old one, but it'll be new.
Speaker 7: So he will have nominally kept his word.
Speaker 4: Also, a federal judge in Florida had issued a ruling
Speaker 4: preventing Trump from enforcing the settlements, saying that the lawsuit
Speaker 4: was brought for an improper purpose to gain the imprimature
Speaker 4: of judicial legitimacy for a settlement that had no viable
Speaker 4: basis in law or fact. Trump on July thirty first
Speaker 4: filed notice with the court that he's going to appeal
Speaker 4: that ruling. What does that tell you?
Speaker 7: It tells you that the weaponization Fund is not dead,
Speaker 7: that the tax community is not gone, and that this
Speaker 7: is just a second saga in the collusive litigation. Because
Speaker 7: of course Trump appeals that decision, and then he orders
Speaker 7: the Justice Department not to fight the appeal, so it
Speaker 7: will be uncontested in the appellate court. I hope the
Speaker 7: Eleventh Circuit has the integrity to appoint someone to participate
Speaker 7: as a friend of the court to make the arguments
Speaker 7: for affirming what the district court did. But saying we're
Speaker 7: going through more judicial proceedings where we control both sides
Speaker 7: of the case should give nobody any reassurance. The whole
Speaker 7: point of our system is that is an adversary system,
Speaker 7: and it only works well, it only purports to work
Speaker 7: well when there are serious advocates on both sides. There's
Speaker 7: never been that in this case.
Speaker 4: Democratic centers voice their opposition to Blanche for other reasons,
Speaker 4: the departure of thousands of attorneys and staff at the
Speaker 4: Justice Department, the weaponization of the department to pursue Trump's
Speaker 4: political enemies. He's protecting Trump in the bungle release of
Speaker 4: the Epstein files, to name a few. How do you
Speaker 4: judge his performance as acting Attorney General?
Speaker 7: Mister Blanche has taken more than two hundred years of careful,
Speaker 7: mostly nonpartisan professionalism at the Justice Department and thrown it
Speaker 7: in the trash. And he has shown everybody just how
Speaker 7: politicized the Department could be. When someone single handedly destroys
Speaker 7: the tradition of an agency, he should not be continued
Speaker 7: in a position of leading that agency. And if mister
Speaker 7: Trump is determined to have Todd Blanche there. He should
Speaker 7: be serving in an unconfirmed capacity. What he will now
Speaker 7: have is the blessing of the United States Senate, which
Speaker 7: was well aware of all the things that he did.
Speaker 7: This will, of course become enormously controversial next time we
Speaker 7: have a democratic administration and a democratic Attorney general tries
Speaker 7: to follow some of the presidents that mister Blanche set.
Speaker 7: I hope a democratic attorney general won't follow these precedents
Speaker 7: because they're just bad for the country. Whatever side of
Speaker 7: the artisan eil you're on. But he is completely reconceived
Speaker 7: the Justice Department. Mister Trump has famously complained that he
Speaker 7: needed a roy Cohne, he needed a dirty lawyer to
Speaker 7: push the limits and get him what he wants, and
Speaker 7: I think he's found one.
Speaker 4: I was surprised that the Epstein victim's opposition to Blench
Speaker 4: and all that went on there didn't cause more Republicans
Speaker 4: to hesitate about Blench, because that's been an issue that
Speaker 4: President Trump has been unable to put behind him.
Speaker 7: I think the word must have gone out that they've
Speaker 7: released pretty much everything they have that doesn't terribly incriminate
Speaker 7: the president or perhaps some members of Congress as well,
Speaker 7: and that the word is that they don't dare push
Speaker 7: any farther because the results will be catastrophic. I think
Speaker 7: a great many people who voted for the president, and
Speaker 7: who voted for Republican members of Congress to support the
Speaker 7: president would be shocked, appalled, and deeply disillusioned if they
Speaker 7: found out that the President was as closely involved in
Speaker 7: mister Epstein's criminal activities as we keep being told. And
Speaker 7: the presence in these files of references to documents that
Speaker 7: have not been released is an ongoing problem. I think
Speaker 7: the decision has been made by Republicans and that they're
Speaker 7: largely following the party line to not press further on
Speaker 7: this because there's nothing else that could be done that
Speaker 7: wouldn't be destructive.
Speaker 4: Stay with me, David. Coming up next, I'll continue this
Speaker 4: conversation with Georgetown law professor David Super. What's likely to
Speaker 4: happen when the full Senate votes on the confirmation of
Speaker 4: Blanche This is Bloomberg.
Speaker 2: I know I'm on that list. The President reiterated just
Speaker 2: the other night that he hates me, which I could
Speaker 2: tell you wounds me deeply. He's entitled to his own
Speaker 2: views about me or anybody else. He is not entitled, however,
Speaker 2: to use the Department of Justice to go after his
Speaker 2: political opponents. And the day we say that's okay, and
Speaker 2: the day we confirm an attorney general who says that's okay,
Speaker 2: is the day that the rule of law becomes merely
Speaker 2: an unenforceable idea.
Speaker 4: Senator Adam Schiff was one of the Democrats on the
Speaker 4: Senate Judiciary Committee who voiced their opposition to the nomination
Speaker 4: of President Trump's former criminal defense lawyer to be the
Speaker 4: next Attorney General of the United States. But Blanche cleared
Speaker 4: that first Senate hurdle after he struck a deal with
Speaker 4: two outgoing Republican members about President Trump's one point eight
Speaker 4: billion dollar so called Anti Weaponization Fund. But Senator Dick Durbin,
Speaker 4: the ranking Democrat on the committee, accused Blood of perjuring himself,
Speaker 4: saying Blanche told him creating the fund was a mistake
Speaker 4: in front of witnesses during a private meeting in his
Speaker 4: office and then lied by denying that during his confirmation hearing.
Speaker 8: Prior to this hearing, mister Blanche told me the quote
Speaker 8: made a mistake close quote. By creating the January sixth
Speaker 8: slush fund? Where did he say it? In my office
Speaker 8: with witnesses myself to what I'm about to say. When
Speaker 8: asking me about this under oath, mister Blanche falsely claimed
Speaker 8: that he never made this statement. That's not true. Mister
Speaker 8: Blanche's willingness to casually lie under oath about a statement
Speaker 8: he made in a room full of witnesses shows the
Speaker 8: links he will go to to avoid offending President Trump.
Speaker 4: Almost every Democratic senator expressed concerns about Blanche's weaponization of
Speaker 4: the Justice Department to pursue Trump's agenda and go after
Speaker 4: his political enemies. I've been talking to Georgetown law professor
Speaker 4: David Super. Do you think Durbin was setting up a
Speaker 4: possible impeachment action against Blanche? If the Democrats retake Congress?
Speaker 7: Even if every single Republican seat turns over in the
Speaker 7: election this fall, which it obviously won't, Democrats would not
Speaker 7: have enough votes to convict on impeachment anybody. And Dick
Speaker 7: Durbins a smart man who knows how to count, so
Speaker 7: I don't think he's seriously thinking about impeachment. I think
Speaker 7: impeachment serves no useful purpose under these circumstances. But I
Speaker 7: do think that he is trying to lay down a
Speaker 7: marker for some of these trumped up perjury cases that
Speaker 7: the Justice Department is bringing, the suggestion that mister Comy
Speaker 7: perjured himself by saying something that was allegedly a little
Speaker 7: bit unclear at hearing the assertions that doctor Fauci perjured himself.
Speaker 7: I think that mister Drmann is trying to show that
Speaker 7: two can play at that game.
Speaker 4: So now the nomination advances to the full Senate, where
Speaker 4: the Republicans hold fifty three seats. All the Democrats will
Speaker 4: vote against Blanche. Is there any Republican in the Senate
Speaker 4: who might vote against him?
Speaker 7: Susan Collins will vote no because she's in a tough
Speaker 7: reelection fight, and they always let Susan Collins vote in
Speaker 7: the liberal way when she's up for reelection. Social vote no.
Speaker 7: I think Lisa Markowski will vote no because I think
Speaker 7: she has integrity and recognizes that mister Blanche is weak
Speaker 7: in that area. But I don't think you get a third.
Speaker 7: Your two best bets for a third vote would be
Speaker 7: corn in Antillis, and they've now declared themselves.
Speaker 4: A few of the Democrats, in particular Sheldon Whitehouse and
Speaker 4: Corey Booker mention that this was an embarrassment for the
Speaker 4: Judiciary Committee that's supposed to be sort of a check
Speaker 4: on the other branches of government and especially protective of
Speaker 4: the justice system.
Speaker 6: We are this is the Judiciary Committee. We're supposed to
Speaker 6: be checking and balancing this nation. Why have people on
Speaker 6: both sides of the aisle given up on any trust
Speaker 6: in government is because we're surrendering any shred of integrity left.
Speaker 6: And now we're letting an attorney general become the highest
Speaker 6: law enforcement officer in the land and putting no holds whatsoever.
Speaker 4: I mean, the Judiciary Committee has yet to reject a
Speaker 4: nomination that came to them during Trump's second term. I mean,
Speaker 4: what does that say about the Judiciary Committee.
Speaker 7: Well, it says the institutional identity is dead, that the
Speaker 7: time when members of Congress felt that they were members
Speaker 7: of Congress first and Democrats are Republicans second is over,
Speaker 7: and that they have taken orders from the administration in
Speaker 7: a way that their predecessors not that long ago would
Speaker 7: become very angry if they were asked to vote for
Speaker 7: someone embarrassing like this, and they are now just falling
Speaker 7: into line. The argument that was floated over the weekend,
Speaker 7: is we won't get a better nominee from the president.
Speaker 7: I'm not sure they would, But getting someone who has
Speaker 7: not committed the gross violations of public trusts that mister
Speaker 7: Blanche already has is better than waiving someone through who
Speaker 7: has committed those acts.
Speaker 4: What kind of an attorney general do you think he'll be?
Speaker 4: Sometimes when people go into positions like that, they change
Speaker 4: for the better.
Speaker 7: Sometimes, Oh, I think this is what you see is
Speaker 7: what you get, situation. He by all accounts, was a
Speaker 7: competent and not particularly ideological prosecutor when he started out
Speaker 7: as a lawyer, so he knows how to be a
Speaker 7: good lawyer. But he's made a decision in his life
Speaker 7: and there's no reason to think he would change, particularly
Speaker 7: since he can be dismissed at any time. So I
Speaker 7: would not expect him to stand up to the president now.
Speaker 7: I would not expect him to say no to the president.
Speaker 7: I would not expect any scintilla of moderation out of him.
Speaker 7: The Justice Department is just a great, big Trump law firm. Now. Obviously,
Speaker 7: Pam Bondi looked like a complete Trump acolyte coming in,
Speaker 7: and she served as Attorney General in exactly that way.
Speaker 7: She was fired basically for doing something that she had
Speaker 7: promised to do with Trump's blessing that blew up in
Speaker 7: his face. Concerning the Epstein files, I think that Todd
Speaker 7: Blanche has seen how even complete loyalty like hers was
Speaker 7: not good enough to save her job. So he's not
Speaker 7: going to be under any illusions that he can show
Speaker 7: any independence at all and keep his job. And he
Speaker 7: has made very clear he is not the sort of
Speaker 7: person who will resign on principle, because just about any
Speaker 7: principle that is relevant to serving as Attorney General he's
Speaker 7: been asked to violate already. The only thing that may
Speaker 7: keep him in his job is that he's a man,
Speaker 7: and Trump seems to be more inclined to file women.
Speaker 4: I believe you're right there. So far, Trump has only
Speaker 4: fired women from his cabinet. There was Attorney General Pam Bondi,
Speaker 4: DHS Secretary Christy Nome, and the Director of National Intelligence
Speaker 4: Chelsea Gabbard. Those are the only three I can think of.
Speaker 4: Back to Blench, he could have stayed in the job
Speaker 4: as acting Attorney General the same power, So is there
Speaker 4: any real difference in him being confirmed as Attorney General.
Speaker 7: I think there's a lot of difference in prestige. It
Speaker 7: makes it all so much easier to bring someone of
Speaker 7: some or temperament in as deputy Attorney General his current
Speaker 7: soon to be former job, and he does then get
Speaker 7: the blessing of the United States Senate for everything he's done,
Speaker 7: and he will very reasonably be able to say, when
Speaker 7: he's criticized for new things, he does, you saw me
Speaker 7: do similar things and confirm to me, so don't go
Speaker 7: pointing fingers. When he revives the Weaponization Fund or raids
Speaker 7: the Judgment Fund for other Trump personal expenditures, he will say,
Speaker 7: I never promised I wouldn't do it in the future.
Speaker 7: I just said that that particular thing had not gone forward,
Speaker 7: which it happened. The Senators are leaving themselves wide open
Speaker 7: to his doing exactly what he wants to do and
Speaker 7: blaming their lack of thoroughness for it, and apparently they
Speaker 7: don't care.
Speaker 4: Can you think of another Attorney general in history who
Speaker 4: was as willing to do the president's big as Blanche
Speaker 4: appears to be, and you know BONDI was before him.
Speaker 7: Well, the only name that comes to mind, of course,
Speaker 7: is John Mitchell. Nixon's attorney general and Nixon's attorney general,
Speaker 7: was a frequent visitor to the White House, but he
Speaker 7: ended up in the Big House.
Speaker 4: Yep. Mitchell was convicted of conspiracy, perjury, and obstruction of
Speaker 4: justice for his role in the Watergate scandal and the
Speaker 4: cover up. And by the way, David, to your earlier point,
Speaker 4: now you have another woman whose job maybe in jeopardy,
Speaker 4: and that's the DCUs attorney Janine Piro. Trump is very
Speaker 4: unhappy that she dismissed the charges against former Olympic rower
Speaker 4: David Hearn, charges of vandalizing the reflecting pool.
Speaker 7: Indeed, I mean the news reports today or that her
Speaker 7: job seems to be safe, but we read that about
Speaker 7: Christine Home and Pam Bondy and others, so it's a
Speaker 7: little hard to tell. But the problem with her position
Speaker 7: is that if what she's saying is true, then their
Speaker 7: corrupt no bid contract to get the reflecting pool done
Speaker 7: by a contractor with no experience doing this kind of
Speaker 7: work looks like a payoff to a political donor, which
Speaker 7: is surely what it is.
Speaker 4: It's always great to talk to you, David, thanks so much.
Speaker 4: That's Professor David super of Georgetown Law coming up. Next,
Speaker 4: a US Army soldier charged with making winning polymarket predictions
Speaker 4: based on classified information about the raid to capture then
Speaker 4: Venezuelan president Nicolas Maduro, says the alleged bets aren't a crime,
Speaker 4: and he's asking a judge to throw out the case.
Speaker 4: I'm June Grosso, and you're listening to Bloomberg. A US
Speaker 4: Army soldier charged with making winning polymarket predictions based on
Speaker 4: class fight information about the raid to capture then Venezuelan
Speaker 4: president Nicolas Maduro, is asking a judge to throw out
Speaker 4: the case. Lawyers for gannon Ken Vandyke, a Special Forces
Speaker 4: soldier who prosecutors said was involved in the planning and
Speaker 4: execution of the raid, called the prosecution over zealous and
Speaker 4: said the alleged bets are in a crime. Van Dyke
Speaker 4: faces a maximum of twenty years behind bars on the
Speaker 4: most serious charge, wire fraud. Joining me is Columbia Law
Speaker 4: School professor Eric Tally, an expert in business law. Eric,
Speaker 4: will you explain what he did what he's charged with doing?
Speaker 1: Yeah, Mister van Dyke was charged with illegally making a
Speaker 1: prediction market bet on poly market having to do with
Speaker 1: whether Nicholas Maduro was going to continue being the president
Speaker 1: of Venezuela or continue to be in power. Mister van
Speaker 1: Dyke knew about the plans for the operation to go
Speaker 1: into Venezuela and capture Maduro, and based on that information,
Speaker 1: he ended up opening up a poly market account and
Speaker 1: making several bets in favor of Madureau no longer being
Speaker 1: in power, and made a fair amount of money off
Speaker 1: of that process. And that's what gave rise to the
Speaker 1: charges that are being brought now against him.
Speaker 4: So they're saying he used classified information. Exactly what does
Speaker 4: he charged with?
Speaker 1: Yeah, this kind of looks almost like a securities fraud
Speaker 1: insider trading type of case, but he was not buying
Speaker 1: and selling stocks or bonds or the things that we
Speaker 1: usually think of as being securities. He was purchasing this
Speaker 1: event driven contract, which is effectively a bet. And so
Speaker 1: as a result, standard insider trading approaches don't work as well.
Speaker 1: But what does is just another section of federal law
Speaker 1: called the Commodities Exchange Act. And there there is a
Speaker 1: kind of an interesting debate that's going to be going
Speaker 1: on in court as to whether event driven contracts prediction
Speaker 1: market contracts fall under the Commodities Exchange Act, and particularly
Speaker 1: a specific definition of a contract that the Exchange Act
Speaker 1: has involving something known as a swap. Now that sounds
Speaker 1: kind of like very Wall Street speak, but what it
Speaker 1: really is is just a contract agreeing that you and
Speaker 1: I are going to swap piles of money under some circumstances.
Speaker 1: And so this can be any contract in which the
Speaker 1: decision of whether I pay you or you pay me
Speaker 1: is dependent on the occurrence or the non occurrence of
Speaker 1: some event that has economic, financial, or commercial consequences. That's
Speaker 1: effectively the definition. And to the extent that that definition
Speaker 1: fits event driven contracts, and there's been at least one
Speaker 1: case that holds that they do, then these types of
Speaker 1: contracts would fall under federal law. If that's what happens,
Speaker 1: then mister Van Dyke's chances look pretty grim. There are
Speaker 1: direct statutes in the US federal law that prohibit informed
Speaker 1: trading related to government informations done done by federal employees, officers,
Speaker 1: members of the armed forces, and so forth. They generally
Speaker 1: predict that anyone or they generally prohibit anyone who has
Speaker 1: a financial information or relevant information about some upcoming international
Speaker 1: event from entering into a swap contract to favor their
Speaker 1: situation or to skew the odds of the contract paying off.
Speaker 4: His lawyers say, the alleged bets aren't a crime, how
Speaker 4: so what's their argument.
Speaker 1: The first argument that they're going to make is that
Speaker 1: these contracts just aren't swaps, that they are ordinary gambling
Speaker 1: contracts under state law that shouldn't even be regulated by
Speaker 1: federal law. Now, if they can convince the court that
Speaker 1: that is the case, then a bunch of these statutes
Speaker 1: that prohibit insider trading, specifically with respect.
Speaker 9: To swaps, they're going to fall away.
Speaker 1: The defense isn't completely out of the woods, but it
Speaker 1: would eliminate what seems like the most direct form of
Speaker 1: liability through these informed trading prohibitions related to swaps. The
Speaker 1: problem is that just this past April, there was another
Speaker 1: federal court in the Third Circuit that basically held in
Speaker 1: a case that involved Calshi Polymarkets, big competitor that sports
Speaker 1: event contracts they look a lot like betting, but they
Speaker 1: also qualify as swaps because their payoffs are associated with economic, financial,
Speaker 1: commercial consequences, and so forth. And so the court in
Speaker 1: that case basically said, we're going to have a pretty
Speaker 1: open ended and pretty forgiving definition of what constitutes a swap,
Speaker 1: and so mister van Dyke's going to have to somehow
Speaker 1: convince the court to distinctuish that case or to disagree
Speaker 1: with it. It is only a sister jurisdiction, so there's
Speaker 1: a chance that he could do it, and if he
Speaker 1: does end up doing it, then his road is going
Speaker 1: to be much cleaner. Not completely out of the woods,
Speaker 1: but much cleaner. And you know, even if these contracts
Speaker 1: do constitute swaps and therefore these prohibitions absolutely applied, mister
Speaker 1: Vandyke may be able to make a couple of other arguments,
Speaker 1: many of them having to do with the newness of
Speaker 1: prediction markets and event driven contracts. Is a general matter,
Speaker 1: there's a kind of an interpretive approach to criminal prohibitions
Speaker 1: that says, let's not be overly expansive and determining or
Speaker 1: defining what constitutes a crime, particularly if an ordinary person
Speaker 1: wouldn't have reasonably thought that, you know, some offshore prediction
Speaker 1: market wager was actually a federally regulated swap. And so
Speaker 1: there are cases where COURTZ has said, look, formally, this
Speaker 1: looks like it's a violation, but there just wasn't enough
Speaker 1: notice to people in mister Van Dyke's position to know
Speaker 1: that this was we're going to give him leniency, even
Speaker 1: though someone that comes next in a year or two
Speaker 1: isn't going to get the same type of leniency. Now,
Speaker 1: there is another kind of route that the government has
Speaker 1: if they lose on this question of whether these events
Speaker 1: driven contracts are quote unquote swaps, and that's that there's
Speaker 1: a very well known kind of secret tool that a
Speaker 1: lot of prosecutors use, called the mail and wirefraud statutes
Speaker 1: that basically say, if you do something naughty, even if
Speaker 1: it's not, you know, like a serious, serious felony, but
Speaker 1: if you do something that you know clearly is a
Speaker 1: violation of.
Speaker 9: Law, and you use a cell phone or the telephone or.
Speaker 1: Email to do it, you can be convicted of wirefraud,
Speaker 1: which has fairly significant criminal consequences.
Speaker 9: Associated with it.
Speaker 1: Now, in that situation, the US might be able to say, look,
Speaker 1: even if these weren't swaps, what mister Van Dyke was
Speaker 1: doing was engaging in some form of common law fraud.
Speaker 1: He was misusing the information that the government entrusted with
Speaker 1: him and trusted him to keep confidential, and he blew
Speaker 1: that confidential out of a way used email or a
Speaker 1: cell phone to do it and therefore committed wirefraud. And
Speaker 1: that is an alternative approach that the government has tried
Speaker 1: out in its indictment. That one is going to be
Speaker 1: a steeper hill for the government to climb, in large
Speaker 1: part because of the United States Supreme Court, which just
Speaker 1: a couple of years ago really narrowed what.
Speaker 9: It meant to misuse government information.
Speaker 1: There was a case that involved regulatory information at the
Speaker 1: FDA and the Department of Health and whether various types
Speaker 1: of benefits were going to be liberalized or changed and
Speaker 1: that would have a big effect on companies, and the
Speaker 1: Supreme Court basically held that regulatory.
Speaker 9: Information about what the government is.
Speaker 1: Going to do, that's not really property that the government
Speaker 1: can entrust you with. And that case, mister Van Dyke
Speaker 1: may be able to use as well, to say, hey,
Speaker 1: information about a potential raid into Venezuela kind of fits
Speaker 1: that same definition. This particular type of information, you know,
Speaker 1: this is a much more important and sensitive type of
Speaker 1: information involving.
Speaker 9: A military action.
Speaker 1: So the government probably has a little bit better of
Speaker 1: a chance to say, yeah, that regulatory case at the
Speaker 1: Supreme Court that's different than this particular situation, because you know,
Speaker 1: here we're really dealing with things that are of the
Speaker 1: utmost importance for the safety and welfare of our armed forces.
Speaker 4: Eric, this you know it's a swap? Is it sort
Speaker 4: of a legal fiction? Because most people who are betting
Speaker 4: on calci or polymarket think they're gambling, don't they.
Speaker 1: One of the things that I like to ask my
Speaker 1: students when I teach this topic June, is what is
Speaker 1: the difference between securities and derivatives, trading, insurance and gambling?
Speaker 1: And when you start thinking about the very structure of
Speaker 1: this type of a contract, every single one of these
Speaker 1: contracts involve one person having to basically you pay money
Speaker 1: or transfer value to another if certain facts happen, if certain.
Speaker 9: Events come about.
Speaker 1: And so the distinction between those three things is, in
Speaker 1: many ways only a regulatory distinction. Where did the various
Speaker 1: markers or guardrails hold out? And it isn't even necessarily
Speaker 1: the case that these three or more categories can't overlap
Speaker 1: with one another. It's perfectly possible for something to be
Speaker 1: considered gambling and a swap at the same time. And clearly,
Speaker 1: mister Vandyke in this case is going to say, well,
Speaker 1: I knew this was gambling, but I had no idea
Speaker 1: it was a swap.
Speaker 9: And that is actually a.
Speaker 1: Legal determination that we're only now discovering in real time time.
Speaker 1: You shouldn't hold me accountable to a criminal prohibition that
Speaker 1: has remained unclear and is only going to get clarified
Speaker 1: by this case. And so this idea that this was
Speaker 1: only gambling, and it looks a lot more like a
Speaker 1: you know, a football bent on the San Francisco forty
Speaker 1: nine ers than it does a conventional Wall Street type
Speaker 1: of swap as an argument, I'm certain mister.
Speaker 9: Van Dyke's lawyers are going to try to impress upon
Speaker 9: the court, and you know, they at least.
Speaker 1: Stand a chance of convincing a court to be leaning
Speaker 1: in this case, even as they send a message to
Speaker 1: future traders on polymarket and Calci that you better watch
Speaker 1: out that what you're doing could also involve the purchase
Speaker 1: and sale of swap contracts.
Speaker 4: So, I mean, do you think that the CFTC is
Speaker 4: going to win this fight about you know, we're the
Speaker 4: ones that are going to regulate these markets, or you know,
Speaker 4: the states that want to regulate.
Speaker 9: This is the big battle that's happening.
Speaker 1: You know barely off stage with this case, right that
Speaker 1: proponents of event driven contracts Calshi, Polymarket, others, Robinhood, they
Speaker 1: very much want the designation of swaps for these types
Speaker 1: of contracts because what that means that they can then
Speaker 1: be traded on national exchanges and international exchanges. It also
Speaker 1: means that federal law may, at least to some extent,
Speaker 1: preempt what state gambling commissioners and governors and legislatures can
Speaker 1: do if something is a you know, essentially a federally
Speaker 1: recognized contract that can be traded on markets. That having
Speaker 1: been said, there still may be some interesting battles to
Speaker 1: fight about a whether these things ultimately are going to.
Speaker 9: Be deemed to be swaps. Certainly, if we.
Speaker 1: Got a conflicting opinion out of the Second Circuit in
Speaker 1: this case, then that's setting itself up for a.
Speaker 9: Supreme Court review of the question.
Speaker 1: But in addition, there is still an open question about
Speaker 1: whether if the you know, federal authorities say we think
Speaker 1: of this as a swap and we're going.
Speaker 9: To allow it, does that preclude state.
Speaker 1: Regulators from saying, well, it may be a swap, but
Speaker 1: we also think it is gambling, and therefore our jurisdiction
Speaker 1: over gambling contracts gets applied as well, and we can
Speaker 1: prohibit certain types of contracts regardless of whether there're swaps
Speaker 1: or not.
Speaker 9: That's going to be an interesting question as well.
Speaker 1: The states have taken the position that they have fairly
Speaker 1: broad abilities to enforce their gambling prohibitions regardless of what
Speaker 1: the CFTC or the federal government thinks they can do
Speaker 1: on securities markets or derivative markets fronts. So this is
Speaker 1: a battle that in some ways probably should have happened
Speaker 1: before this criminal indictment got litigated. But the criminal indictment
Speaker 1: is in some ways, you know, driving the bus, or
Speaker 1: at least a portion of the route that the bus
Speaker 1: is taking. In determining exactly how event driven contracts are
Speaker 1: going to be regulated for years to come.
Speaker 4: I would bet. I would bet that there are a
Speaker 4: lot of people who have used classified information to make
Speaker 4: bets on Calshi, particularly in this administration. But why this
Speaker 4: focus on this one guy? Was there a reason why
Speaker 4: his came up?
Speaker 1: It's an interesting observation. You know, the Trump administration has
Speaker 1: recently said it's going to you know, offer for sale
Speaker 1: early access to mister Trump's truth social posts.
Speaker 9: Presumably so people who.
Speaker 1: Have bought that early access can pay up and then
Speaker 1: can try to make money trading on markets. So there's
Speaker 1: there's almost a sense in which that, you know, entire
Speaker 1: enterprise is sort of a winking invitation to trade on
Speaker 1: the basis of information that has not been broadly disseminated. Now,
Speaker 1: you know, there's a question of whether you can even
Speaker 1: do that, even if you're the president, whether you're allowed
Speaker 1: to do that, and that's a legal question that's.
Speaker 9: Going to have to be answered.
Speaker 1: But it does sort of create a question about, well, why,
Speaker 1: you know, why is it the case that the administration
Speaker 1: can sort of say, hey, we're going to just buy
Speaker 1: and sell this information at top levels, but our foot
Speaker 1: soldiers aren't allowed to.
Speaker 9: Trade on the information.
Speaker 7: You know.
Speaker 9: I guess the part of.
Speaker 1: The rationale is that, on some level, I guess it
Speaker 1: is up to the federal government on how classified they
Speaker 1: want to treat various pieces of information, and foot soldiers
Speaker 1: probably aren't in a position where they're going to be
Speaker 1: able to make those determinations.
Speaker 9: You know.
Speaker 1: Another one, I think probably is much more about the
Speaker 1: real politic of it. As much as President Trump would
Speaker 1: love to monetize access to his own tweets. He is
Speaker 1: also continually rankled about various types of leaks in his administration,
Speaker 1: in which someone inside the room called someone and the
Speaker 1: information got out. The possibility of leaks finding their way
Speaker 1: into prediction market prices much more quickly than you know,
Speaker 1: a chain of phone calls, I think maybe another thing
Speaker 1: that is worrying both the Truck administration and federal prosecutors.
Speaker 1: You know, there is generally, you know, kind of a
Speaker 1: sense that around, particularly the Venezuela operation, mister van Dyke
Speaker 1: was not the only person trading in prediction market securities.
Speaker 1: He seems to be the poster child, but there are
Speaker 1: other potential prosecutions coming as well. I've generally been supportive
Speaker 1: of the idea of prediction markets because they do allow
Speaker 1: people to price out various types of contingencies that are
Speaker 1: really helpful for purposes of writing insurance contracts, for understanding
Speaker 1: whether they should be hedging risks, or understanding what their
Speaker 1: risks are, and so forth. The nature of you know
Speaker 1: where a lot of these prediction markets are going, however,
Speaker 1: can both help that market but can also undermine that market.
Speaker 1: If you know something about an event that's coming up
Speaker 1: solely because you were lucky enough to overhear it in
Speaker 1: a room that the conversation was expected to be private,
Speaker 1: or even more so, if you're one of the actors
Speaker 1: that can either cause this event to about or not
Speaker 1: cause this event to come about, even at the margins,
Speaker 1: and you are allowed openly to trade on that information,
Speaker 1: that not only is not going to help the market
Speaker 1: to kind of kind of reflect real risks that are
Speaker 1: going on, it can undermine the very activity of the market.
Speaker 1: Who wants to play a game that everyone knows is rigged,
Speaker 1: and if you are playing that game with insiders who
Speaker 1: are going to beat you at every turn, you were
Speaker 1: destined to lose money. So there really is you know,
Speaker 1: for the purposes of these markets. I think there is
Speaker 1: a very strong social and private incentive of these markets
Speaker 1: to try to make sure that informed trading isn't running
Speaker 1: rampant around these markets or no one's going to want
Speaker 1: to play.
Speaker 4: I can see these legal fights playing out for years
Speaker 4: to come. Thanks so much, Eric. That's Columbia Law School
Speaker 4: professor Eric Tally, And that's it for this edition of
Speaker 4: The Bloomberg Law Show. Remember you can always get the
Speaker 4: latest legal news on our Bloomberg Law Podcast. You can
Speaker 4: find them on Apple Podcasts, Spotify, and at www dot
Speaker 4: bloomberg dot com slash podcast, slash Law, and remember to
Speaker 4: tune into The Bloomberg Law Show every weeknight at ten
Speaker 4: pm Wall Street Time. I'm June Grosso and you're listening
Speaker 4: to Bloomberg