1 00:00:02,759 --> 00:00:07,000 Speaker 1: This is Bloomberg Law with June Grossel from Bloomberg Radio. 2 00:00:08,760 --> 00:00:11,520 Speaker 2: We've won. Let me tell it. We've won. You know, 3 00:00:11,600 --> 00:00:13,880 Speaker 2: you'd never like to say too early. You won. We won. 4 00:00:14,040 --> 00:00:16,239 Speaker 2: We won the best in the first hour, it was over. 5 00:00:16,640 --> 00:00:23,439 Speaker 3: They are absolutely being destroyed. Iran is being absolutely decimated. 6 00:00:24,120 --> 00:00:28,040 Speaker 3: The situation with Iran is moving along very rapidly. 7 00:00:28,760 --> 00:00:33,239 Speaker 2: It's doing very well. Our military is unsurpassed, has never 8 00:00:33,280 --> 00:00:35,720 Speaker 2: been anything like it. Nobody's ever seen anything like it. 9 00:00:36,120 --> 00:00:40,479 Speaker 4: President Trump declared victory over Iran on Wednesday, as the 10 00:00:40,479 --> 00:00:44,320 Speaker 4: war that's in Gulf, the Middle East and upended energy 11 00:00:44,400 --> 00:00:47,879 Speaker 4: flows and global markets hits the two week mark with 12 00:00:48,040 --> 00:00:52,400 Speaker 4: no end in sight, and several Democratic lawmakers like Senator 13 00:00:52,479 --> 00:00:56,040 Speaker 4: Tammy Baldwin, have labeled it an illegal war. 14 00:00:56,640 --> 00:01:00,240 Speaker 5: We were not under attack, We were not even under 15 00:01:00,400 --> 00:01:03,760 Speaker 5: imminent threat of attack, which means this is a war 16 00:01:04,000 --> 00:01:08,840 Speaker 5: of choice, and it means that the President has violated 17 00:01:08,880 --> 00:01:12,760 Speaker 5: both the Constitution and law to go to war. 18 00:01:13,280 --> 00:01:15,679 Speaker 4: Joining me to discuss whether the Iran war is a 19 00:01:15,800 --> 00:01:20,720 Speaker 4: violation of US law or international law. Is cal Rostiella, 20 00:01:20,920 --> 00:01:24,280 Speaker 4: a professor at UCLA Law School and an expert in 21 00:01:24,280 --> 00:01:29,800 Speaker 4: international law. So Cal under the Constitution, the President commands 22 00:01:29,840 --> 00:01:34,720 Speaker 4: the armed forces and directs foreign relations, but only Congress 23 00:01:34,760 --> 00:01:38,440 Speaker 4: has the power to declare war. So is the Iran 24 00:01:38,560 --> 00:01:41,040 Speaker 4: war illegal under US law? 25 00:01:41,560 --> 00:01:44,959 Speaker 6: I would say that yes, it's correct that Congress is 26 00:01:45,040 --> 00:01:48,000 Speaker 6: empowered to declare war under the Constitution. But Congress has 27 00:01:48,040 --> 00:01:51,640 Speaker 6: only done so five times in American history, and we've 28 00:01:51,720 --> 00:01:54,680 Speaker 6: used force over two hundred times. So it's pretty well 29 00:01:54,800 --> 00:01:57,800 Speaker 6: established that there's lots of uses of force that the 30 00:01:57,840 --> 00:02:01,120 Speaker 6: president can engage in without a declaration of war. And 31 00:02:01,120 --> 00:02:04,560 Speaker 6: in fact, in the post un Charter world, a declaration 32 00:02:04,640 --> 00:02:07,120 Speaker 6: of war doesn't even really make sense. The system is 33 00:02:07,160 --> 00:02:10,320 Speaker 6: predicated on the idea of self defense as the main 34 00:02:10,560 --> 00:02:12,760 Speaker 6: rationale for the use of force. But in any event, 35 00:02:12,760 --> 00:02:14,760 Speaker 6: the main thing is what's the role of Congress in this? 36 00:02:14,960 --> 00:02:18,680 Speaker 6: And I think in many other instances we see Congress 37 00:02:18,720 --> 00:02:22,080 Speaker 6: doing something short of a declaration, like an authorization of 38 00:02:22,120 --> 00:02:24,400 Speaker 6: some kind. You go back to the Gulf of Tonkin 39 00:02:24,480 --> 00:02:27,360 Speaker 6: resolution during the Vietnam War, or the authorization to use 40 00:02:27,400 --> 00:02:30,919 Speaker 6: military force before the Iraq War two thousand and one 41 00:02:30,960 --> 00:02:34,000 Speaker 6: in Afghanistan. And so it is often the case that 42 00:02:34,080 --> 00:02:38,280 Speaker 6: Congress plays some supportive role short of a declaration. We 43 00:02:38,320 --> 00:02:41,320 Speaker 6: obviously don't have that here, and so then would. 44 00:02:41,120 --> 00:02:46,160 Speaker 4: You say that this is not legal under US law? 45 00:02:46,480 --> 00:02:47,880 Speaker 1: I wouldn't say it's not legal. 46 00:02:47,919 --> 00:02:51,720 Speaker 6: It's difficult to answer that because the parameters of Congress's 47 00:02:51,760 --> 00:02:53,079 Speaker 6: powers and the president's. 48 00:02:52,720 --> 00:02:55,640 Speaker 1: Powers have sort of evolved over time. 49 00:02:55,720 --> 00:02:58,040 Speaker 6: I mean, even the Framing generation understood the idea that 50 00:02:58,040 --> 00:03:01,160 Speaker 6: the president had the authority to hell sudden attacks. 51 00:03:01,440 --> 00:03:03,160 Speaker 1: What exactly that means. 52 00:03:02,880 --> 00:03:05,480 Speaker 6: And what role Congress should play has been sort of 53 00:03:05,520 --> 00:03:07,160 Speaker 6: a you know, a bit of a struggle, a bit 54 00:03:07,200 --> 00:03:10,200 Speaker 6: of a dance between the two branches. All of that said, 55 00:03:10,280 --> 00:03:12,520 Speaker 6: I think, you know, it is certainly a kind of 56 00:03:12,560 --> 00:03:17,560 Speaker 6: customary practice generally to seek some degree of Congressional approval. 57 00:03:18,040 --> 00:03:19,760 Speaker 6: But it's also the case that the executive branch has 58 00:03:19,760 --> 00:03:21,640 Speaker 6: always resisted the idea that they have to do it. 59 00:03:21,880 --> 00:03:25,440 Speaker 6: And so the War Power's Act was a nineteen seventies era, 60 00:03:25,639 --> 00:03:28,880 Speaker 6: maybe a high point of Congress's attempt to claw back 61 00:03:28,960 --> 00:03:31,400 Speaker 6: some of its control and the wake of President Nixon 62 00:03:31,480 --> 00:03:33,600 Speaker 6: and the kind of idea that the presidency was. 63 00:03:33,560 --> 00:03:35,960 Speaker 1: A bit wayward, But the executive branch has always been. 64 00:03:35,880 --> 00:03:38,320 Speaker 6: Resistant to it and always kind of argued either that 65 00:03:38,400 --> 00:03:40,680 Speaker 6: it doesn't apply or it isn't fully legal, or they're 66 00:03:40,680 --> 00:03:43,280 Speaker 6: providing information but they don't have to. They've given different 67 00:03:43,360 --> 00:03:45,880 Speaker 6: articulations over time, but they don't like it, and they 68 00:03:45,880 --> 00:03:48,480 Speaker 6: don't feel that they're really, you know, forced. 69 00:03:48,120 --> 00:03:49,960 Speaker 1: To do a lot of things that congressponts to do. 70 00:03:50,080 --> 00:03:53,440 Speaker 6: So it's really hard to say whether this is fully 71 00:03:53,480 --> 00:03:57,480 Speaker 6: a violation without Congress actually asserting itself in some way. 72 00:03:57,840 --> 00:04:00,880 Speaker 6: It's more of an invitation to struggle between these two 73 00:04:00,960 --> 00:04:03,520 Speaker 6: branches rather than clear, brightline rules. 74 00:04:03,800 --> 00:04:07,120 Speaker 4: What about international law, does the Iran war violate the 75 00:04:07,240 --> 00:04:07,960 Speaker 4: UN Charter? 76 00:04:08,560 --> 00:04:09,680 Speaker 1: Also a difficult question. 77 00:04:09,720 --> 00:04:13,000 Speaker 6: I would say most international lawyers outside the US government, 78 00:04:13,080 --> 00:04:16,520 Speaker 6: and maybe outside state departments and foreign ministries generally would 79 00:04:16,560 --> 00:04:19,560 Speaker 6: say yes. The framework that's laid out in the UN 80 00:04:19,640 --> 00:04:22,960 Speaker 6: Charter is essentially that you can use force if an 81 00:04:23,040 --> 00:04:25,480 Speaker 6: armed attack occurs, and then there's a kind of secondary 82 00:04:25,560 --> 00:04:28,080 Speaker 6: question about what if it's about to occur, about the 83 00:04:28,080 --> 00:04:30,559 Speaker 6: imminence to mention of that, or you can use force 84 00:04:30,640 --> 00:04:33,240 Speaker 6: if the Security Council authorizes it, And those are the 85 00:04:33,279 --> 00:04:38,080 Speaker 6: only two instances, and neither of those are true here 86 00:04:38,200 --> 00:04:40,600 Speaker 6: in the view of I think the majority of international 87 00:04:40,680 --> 00:04:44,719 Speaker 6: lawyers around the world, again, outside governments, outside the US government, 88 00:04:44,760 --> 00:04:46,640 Speaker 6: the Israeli government, maybe some other governments. So one of 89 00:04:46,680 --> 00:04:50,080 Speaker 6: the interesting features about this particular conflict is a bit 90 00:04:50,160 --> 00:04:54,120 Speaker 6: like the Maduro raid earlier this year, there's not an 91 00:04:54,279 --> 00:04:58,719 Speaker 6: enormous amount of approbrium headed in the direction of the US. 92 00:04:58,760 --> 00:05:01,640 Speaker 6: So there is some, of course, but there's more approval 93 00:05:01,720 --> 00:05:04,400 Speaker 6: or acquiescence than you might have expected. And I think 94 00:05:04,400 --> 00:05:07,560 Speaker 6: that partly reflects the fact that in both of those cases, 95 00:05:07,640 --> 00:05:11,000 Speaker 6: Venezuela and Iran, these are states that are not widely liked, 96 00:05:11,240 --> 00:05:13,920 Speaker 6: that are generally viewed as bad actors, and so politically 97 00:05:14,000 --> 00:05:15,000 Speaker 6: it's more difficult. 98 00:05:15,440 --> 00:05:16,240 Speaker 1: But it's also the. 99 00:05:16,200 --> 00:05:18,880 Speaker 6: Case that there's an argument that the US, certainly I 100 00:05:18,920 --> 00:05:21,680 Speaker 6: think is making and will make. The administration is not 101 00:05:21,720 --> 00:05:24,080 Speaker 6: great at making its case. In fact, they really have 102 00:05:24,240 --> 00:05:26,000 Speaker 6: not made much of an effort at all to do that. 103 00:05:26,080 --> 00:05:28,200 Speaker 6: But to degree they have, it's sort of sounding in 104 00:05:28,240 --> 00:05:30,800 Speaker 6: some kind of self defense rationale, and you can make 105 00:05:30,839 --> 00:05:33,160 Speaker 6: the argument, I don't know if it's really persuasive, but 106 00:05:33,200 --> 00:05:34,680 Speaker 6: you can make the argument that we are in a 107 00:05:34,800 --> 00:05:39,359 Speaker 6: long term conflict with eromic dates back decades, and that 108 00:05:39,760 --> 00:05:42,680 Speaker 6: in a sense is the continuation of an ongoing conflict 109 00:05:42,760 --> 00:05:45,239 Speaker 6: rather than a new conflict. If you accept that idea, 110 00:05:45,560 --> 00:05:47,960 Speaker 6: then it can be seen as lawful. I think it's 111 00:05:48,000 --> 00:05:51,400 Speaker 6: a stretch, but there isn't really clear rules about that 112 00:05:51,720 --> 00:05:55,159 Speaker 6: about how much time passes before a conflict is over. 113 00:05:55,400 --> 00:05:59,440 Speaker 4: Aren't there strict legal requirements for whether it's considered self 114 00:05:59,480 --> 00:06:03,520 Speaker 4: defense under Article fifty one of the un Charter? You know, 115 00:06:03,560 --> 00:06:07,200 Speaker 4: whether you actually need an armed attack, not just a 116 00:06:07,240 --> 00:06:08,279 Speaker 4: potential threat. 117 00:06:08,680 --> 00:06:10,839 Speaker 6: Yes, I mean, the black Letter law is pretty clear 118 00:06:10,960 --> 00:06:15,120 Speaker 6: that if an armed attack occurs, you have a customer 119 00:06:15,200 --> 00:06:18,240 Speaker 6: international law and a treaty based un Charter based right 120 00:06:18,320 --> 00:06:19,160 Speaker 6: of self defense. 121 00:06:19,360 --> 00:06:20,840 Speaker 1: And that could be collective or individual. 122 00:06:20,839 --> 00:06:22,599 Speaker 6: In other words, you know, you could protect an ally 123 00:06:22,839 --> 00:06:25,400 Speaker 6: and vice versa, which obviously has relevance for Israel in 124 00:06:25,400 --> 00:06:28,960 Speaker 6: the United States. But if an armed attack occurs, that 125 00:06:29,120 --> 00:06:31,720 Speaker 6: language in the un Charter makes it sound as if 126 00:06:31,720 --> 00:06:34,000 Speaker 6: you have to wait for the attack, But it's long 127 00:06:34,040 --> 00:06:36,440 Speaker 6: that understood, dating back to the nineteenth century, that that's 128 00:06:36,480 --> 00:06:40,640 Speaker 6: not the case, and that an imminent attack is sufficient 129 00:06:40,720 --> 00:06:43,560 Speaker 6: grounds for engaging in self defense. Now, the question of 130 00:06:43,600 --> 00:06:47,080 Speaker 6: how imminent has been a difficult one. Obviously, you know, 131 00:06:47,240 --> 00:06:49,360 Speaker 6: just conceptually it's not really clear what does that mean. 132 00:06:49,480 --> 00:06:51,159 Speaker 6: Does the missiles have to be in the air or 133 00:06:51,160 --> 00:06:54,800 Speaker 6: something like that over time, especially in the last let's 134 00:06:54,800 --> 00:06:56,600 Speaker 6: say a couple of decades. This was relevant for the 135 00:06:56,640 --> 00:07:00,000 Speaker 6: Iraq War. The position the US has taken has been 136 00:07:00,080 --> 00:07:04,279 Speaker 6: to extend the time period of imminence such that it's 137 00:07:04,360 --> 00:07:07,520 Speaker 6: more in the role of preemptive war or even preventative war, 138 00:07:08,000 --> 00:07:11,080 Speaker 6: and that isn't widely accepted, but I think it's fair 139 00:07:11,120 --> 00:07:13,960 Speaker 6: to say that a lot of states do sort of 140 00:07:14,000 --> 00:07:16,600 Speaker 6: agree that you can't in a time of let's say, 141 00:07:16,680 --> 00:07:20,440 Speaker 6: high technology with warfare, weapons of mass destruction, etc. You 142 00:07:20,440 --> 00:07:24,640 Speaker 6: can't really wait till the attack is ongoing or even 143 00:07:24,680 --> 00:07:26,360 Speaker 6: about to be launched. You may need to act a 144 00:07:26,400 --> 00:07:29,240 Speaker 6: bit beforehand. But you know, that's a very slippery slope, 145 00:07:29,280 --> 00:07:32,080 Speaker 6: and many international lawyers find that concerning. And of course 146 00:07:32,160 --> 00:07:34,680 Speaker 6: most countries in the world are going to find a 147 00:07:34,920 --> 00:07:37,600 Speaker 6: rule like that concerning because they are much more likely 148 00:07:37,640 --> 00:07:40,280 Speaker 6: to be attacked than to be attacking, so they worry 149 00:07:40,320 --> 00:07:40,720 Speaker 6: about that. 150 00:07:41,120 --> 00:07:45,800 Speaker 4: Broading this out, there's been a string of unilateral military 151 00:07:45,920 --> 00:07:51,000 Speaker 4: actions taken by the Trump administration since December. The US 152 00:07:51,160 --> 00:07:55,600 Speaker 4: bombed Nigeria, killed alleged drug smugglers in more than forty 153 00:07:55,640 --> 00:07:59,520 Speaker 4: strikes in the Caribbean and the Pacific, attacked Venezuela and 154 00:07:59,640 --> 00:08:03,760 Speaker 4: kidnap app It's president and now attacked Auran. Would those 155 00:08:03,800 --> 00:08:08,480 Speaker 4: other strikes be considered a violation of international law? 156 00:08:08,840 --> 00:08:12,600 Speaker 6: Yeah, I mean, it's an amazing string of events, disturbing string. 157 00:08:13,000 --> 00:08:17,560 Speaker 6: Some of them are really blatant violations of international law. So, 158 00:08:17,560 --> 00:08:20,440 Speaker 6: for example, the boat strikes would maybe be the most 159 00:08:20,480 --> 00:08:23,560 Speaker 6: blatant in the sense that really they haven't even offered 160 00:08:23,600 --> 00:08:27,440 Speaker 6: a very coherent argument about it. But taking out those 161 00:08:27,440 --> 00:08:30,480 Speaker 6: are civilians by almost all accounts, we're not actually in 162 00:08:30,560 --> 00:08:33,400 Speaker 6: a conflict with cartels, so that may be the most 163 00:08:33,400 --> 00:08:36,320 Speaker 6: extreme kind of clear case. And then maybe Iran might 164 00:08:36,360 --> 00:08:38,000 Speaker 6: be at the other end, if you buy the argument 165 00:08:38,000 --> 00:08:40,280 Speaker 6: that we're in some kind of long standing conflict that's 166 00:08:40,280 --> 00:08:43,160 Speaker 6: continuing on. But when you put them all together, stepping 167 00:08:43,200 --> 00:08:45,240 Speaker 6: out of the law for a second, obviously the political 168 00:08:45,280 --> 00:08:48,880 Speaker 6: pattern is really striking and disturbing for a number of reasons. 169 00:08:48,920 --> 00:08:53,600 Speaker 6: One because the United States is increasingly using force abroad 170 00:08:53,679 --> 00:08:57,320 Speaker 6: in ways that are I think upsetting to many states 171 00:08:57,720 --> 00:09:01,040 Speaker 6: violating many rules of international law. Let just many norms 172 00:09:01,240 --> 00:09:04,080 Speaker 6: of behavior, whether they're legal or not. A good example 173 00:09:04,080 --> 00:09:06,679 Speaker 6: would be threatening Greenland, even if that was not a 174 00:09:06,760 --> 00:09:09,319 Speaker 6: serious threat, sort of an offhand threat or something like that. 175 00:09:09,480 --> 00:09:11,400 Speaker 6: First of all, you're not allowed to threaten to use 176 00:09:11,440 --> 00:09:14,040 Speaker 6: force under the UN Charter. That's also a violation. But 177 00:09:14,120 --> 00:09:16,520 Speaker 6: regardless of whether the threat was really a serious one 178 00:09:16,600 --> 00:09:19,680 Speaker 6: or not, just the very idea that a NATO ally 179 00:09:19,960 --> 00:09:23,079 Speaker 6: would be subjected to some kind of threat is really 180 00:09:23,120 --> 00:09:25,160 Speaker 6: shocking and was shocking to many of. 181 00:09:25,080 --> 00:09:27,280 Speaker 1: Our closest allies. So when you put all. 182 00:09:27,120 --> 00:09:30,840 Speaker 6: Of these things together, it does seem sort of incredible. 183 00:09:30,960 --> 00:09:33,319 Speaker 6: The amount of intervention that's taking place, the amount of 184 00:09:33,360 --> 00:09:37,440 Speaker 6: military force. Why is it happening? I cannot answer that question. 185 00:09:37,559 --> 00:09:40,160 Speaker 6: I think no one really knows. There are so many 186 00:09:40,160 --> 00:09:43,440 Speaker 6: different theories of various conspiratorial levels about whether there's a 187 00:09:43,480 --> 00:09:46,680 Speaker 6: pattern here. It does seem like the Trump administration often 188 00:09:46,760 --> 00:09:50,480 Speaker 6: acts without any of the elaborate process that would go 189 00:09:50,600 --> 00:09:53,800 Speaker 6: on normally in an administration, and maybe even occurred in 190 00:09:53,800 --> 00:09:56,400 Speaker 6: the first Trump administration with regard to the use of force, 191 00:09:56,440 --> 00:09:59,840 Speaker 6: meaning lots of process through the National Security Council, through 192 00:09:59,880 --> 00:10:03,320 Speaker 6: the State Department, through DoD, et cetera. Thinking these things through, 193 00:10:03,400 --> 00:10:06,840 Speaker 6: elaborating a strategy, examining risks, that all seems to be 194 00:10:06,880 --> 00:10:09,520 Speaker 6: short circuited in a lot of these cases, and so 195 00:10:09,880 --> 00:10:11,880 Speaker 6: it's not clear that there is a strategy. 196 00:10:12,240 --> 00:10:13,400 Speaker 1: In fact, I sort of doubt it. 197 00:10:13,960 --> 00:10:19,240 Speaker 4: So there are reports that Iran maybe planning to retaliate 198 00:10:19,440 --> 00:10:23,679 Speaker 4: against the US with drone strikes in California. How would 199 00:10:23,679 --> 00:10:25,280 Speaker 4: international law view that. 200 00:10:25,640 --> 00:10:27,200 Speaker 6: I have to say, it seems, you know, maybe a 201 00:10:27,200 --> 00:10:29,559 Speaker 6: bit far fetched. But Iran has shown that it has 202 00:10:29,640 --> 00:10:32,240 Speaker 6: power to take actions, either through itself or its proxies 203 00:10:32,280 --> 00:10:32,960 Speaker 6: in other places. 204 00:10:32,960 --> 00:10:35,560 Speaker 1: So it's not to be dismissed completely under the laws 205 00:10:35,600 --> 00:10:35,960 Speaker 1: of war. 206 00:10:36,360 --> 00:10:38,800 Speaker 6: If we are in fact in a conflict, then Iran 207 00:10:38,840 --> 00:10:41,680 Speaker 6: can attack us as we are attacking them. But you 208 00:10:41,720 --> 00:10:45,680 Speaker 6: can't attack civilians. You can't deliberately target civilians, and so 209 00:10:46,400 --> 00:10:50,720 Speaker 6: those same rules would apply on either side. Deliberate targeting 210 00:10:50,720 --> 00:10:53,480 Speaker 6: of civilians is not permitted. You know, there's a bunch 211 00:10:53,480 --> 00:10:56,640 Speaker 6: of rules about proportionality and distinction and so forth. Complicated 212 00:10:56,679 --> 00:10:59,760 Speaker 6: set of rules that sometimes can seem academic when you 213 00:10:59,800 --> 00:11:02,480 Speaker 6: actual apply the munch real cases. But either way, drone 214 00:11:02,480 --> 00:11:05,400 Speaker 6: strikes against a school or a hospital or something like 215 00:11:05,480 --> 00:11:08,720 Speaker 6: that randomly in California, no, that would be a violation. 216 00:11:09,040 --> 00:11:11,320 Speaker 6: But against a military target. If we are in fact 217 00:11:11,320 --> 00:11:14,040 Speaker 6: in an armed conflict, then that's part of war. For example, 218 00:11:14,080 --> 00:11:16,880 Speaker 6: the ship that was targeted by the United States thousands 219 00:11:16,920 --> 00:11:19,760 Speaker 6: of miles from Iran and sung would be an example 220 00:11:19,800 --> 00:11:20,640 Speaker 6: of an attack like that. 221 00:11:20,880 --> 00:11:22,720 Speaker 1: Wasn't a drone, but it's the same idea. 222 00:11:22,800 --> 00:11:27,120 Speaker 4: And talking about strikes against a school, Defense Secretary Pete 223 00:11:27,160 --> 00:11:30,679 Speaker 4: Hegseth says the airstrike that killed more than one hundred 224 00:11:30,679 --> 00:11:34,480 Speaker 4: and eighty people, mostly children at a girls' school in 225 00:11:34,520 --> 00:11:38,600 Speaker 4: Iran is being investigated. Thanks for joining me, cal that's 226 00:11:38,600 --> 00:11:42,839 Speaker 4: Professor kl Rostiella of UCLA Law School. Coming up next 227 00:11:43,080 --> 00:11:46,480 Speaker 4: is Live Nation Off the Hook. I'm June Grosso and 228 00:11:46,520 --> 00:11:47,920 Speaker 4: you're listening to Bloomberg. 229 00:11:49,520 --> 00:11:52,760 Speaker 7: It's a pretty bad deal. So the core issue here 230 00:11:52,960 --> 00:11:55,199 Speaker 7: was that Live Nation and a ticketmaster. When they merged 231 00:11:55,200 --> 00:11:57,880 Speaker 7: a few years back, they became so powerful that they 232 00:11:57,880 --> 00:12:00,000 Speaker 7: were able to raise ticket prices. 233 00:12:00,160 --> 00:12:03,720 Speaker 4: Mark anti trust trial against Live Nation was supposed to 234 00:12:03,840 --> 00:12:07,480 Speaker 4: fix the exorbitant fees that have made concert tickets a 235 00:12:07,600 --> 00:12:11,320 Speaker 4: luxury item, not to mention the technology that makes them 236 00:12:11,440 --> 00:12:15,400 Speaker 4: a headache to purchase. But then on Monday, only four 237 00:12:15,480 --> 00:12:19,160 Speaker 4: days into the trial, it came crashing to a stop 238 00:12:19,280 --> 00:12:23,280 Speaker 4: with an unexpected settlement between the Justice Department and the 239 00:12:23,280 --> 00:12:27,000 Speaker 4: world's largest live events ticket seller. It even took the 240 00:12:27,080 --> 00:12:31,559 Speaker 4: trial judge by surprise. But the trial isn't over yet. 241 00:12:31,920 --> 00:12:35,880 Speaker 4: A bipartisan group of more than thirty states has refused 242 00:12:35,880 --> 00:12:39,439 Speaker 4: to settle and will resume the anti trust trial on Monday, 243 00:12:39,679 --> 00:12:43,079 Speaker 4: taking over the lead from the Justice Department. Like North 244 00:12:43,120 --> 00:12:48,120 Speaker 4: Carolina's Attorney General Jeff Jackson, the state ags say it's 245 00:12:48,160 --> 00:12:52,280 Speaker 4: a bad deal for consumers that keeps Live Nations monopoly 246 00:12:52,600 --> 00:12:53,199 Speaker 4: in place. 247 00:12:54,120 --> 00:12:56,720 Speaker 7: The vast majority of the ages who started on this 248 00:12:56,800 --> 00:12:59,840 Speaker 7: lawsuit are going to stay on this lawsuit. That's Republicans 249 00:12:59,880 --> 00:13:03,400 Speaker 7: and Democrats, a couple dozen of us from across the country. 250 00:13:03,600 --> 00:13:06,120 Speaker 7: We're working out the timeline, but we've told Life Nation 251 00:13:06,200 --> 00:13:08,560 Speaker 7: they can expect to see us back in court very. 252 00:13:08,440 --> 00:13:12,479 Speaker 4: Soon, in fact, as soon as Monday at eight thirty am. 253 00:13:12,880 --> 00:13:15,960 Speaker 4: My guest is Anti Truss law expert Harry First, a 254 00:13:16,040 --> 00:13:19,640 Speaker 4: professor at NYU Law School. Harry, let's start with the 255 00:13:19,720 --> 00:13:24,240 Speaker 4: trial judge's reaction to this surprise settlement. Judge of Runs 256 00:13:24,240 --> 00:13:28,319 Speaker 4: Subramani scolded the parties that are hearing on Tuesday. He 257 00:13:28,400 --> 00:13:32,920 Speaker 4: said the DOJ's lack of transparency about its settlement negotiations 258 00:13:33,160 --> 00:13:37,520 Speaker 4: was mind boggling, and the party's actions strain the boundaries 259 00:13:37,559 --> 00:13:41,400 Speaker 4: of acceptable conduct. I mean, four days into the trial, 260 00:13:41,640 --> 00:13:43,920 Speaker 4: the secrecy, what's up here? 261 00:13:44,160 --> 00:13:48,040 Speaker 8: Well, these are great questions. You know, we can speculate. 262 00:13:48,160 --> 00:13:50,640 Speaker 8: I'm glad to speculate, but we don't know for sure. 263 00:13:50,960 --> 00:13:54,720 Speaker 8: Here's my guess. My guess is the trial staff. They 264 00:13:54,720 --> 00:13:58,160 Speaker 8: have really top people trying this case. My guess is 265 00:13:58,160 --> 00:14:03,560 Speaker 8: they were blindsided. Is that they were not involved in 266 00:14:03,600 --> 00:14:08,360 Speaker 8: this settlement. These are real, long serving professionals, both in 267 00:14:08,400 --> 00:14:11,560 Speaker 8: and out of the Justice Department. I think that this 268 00:14:11,760 --> 00:14:15,960 Speaker 8: was done above them, That's a guess. And the termsheet 269 00:14:16,080 --> 00:14:19,000 Speaker 8: I've never seen. This is the crazy term sheet. What 270 00:14:19,080 --> 00:14:22,600 Speaker 8: is this a deal? The term sheet is signed by 271 00:14:22,640 --> 00:14:25,800 Speaker 8: the acting Assistant Attorney General, not by anyone on the 272 00:14:25,880 --> 00:14:30,200 Speaker 8: trial staff. And for this to become a what's called 273 00:14:30,200 --> 00:14:33,760 Speaker 8: a consent to cree that the judge enters, it's got 274 00:14:33,800 --> 00:14:36,760 Speaker 8: to look a little more formal than this. So whether 275 00:14:36,760 --> 00:14:38,600 Speaker 8: they'll sign it or not, I think would be a 276 00:14:38,640 --> 00:14:41,480 Speaker 8: good question. And I don't know. I think that's to 277 00:14:41,560 --> 00:14:45,160 Speaker 8: look forward to. And I would be close to certain 278 00:14:45,160 --> 00:14:47,520 Speaker 8: that the states were completely out of the loop on this. 279 00:14:48,120 --> 00:14:51,200 Speaker 8: I think everyone was concerned that this case was going 280 00:14:51,240 --> 00:14:54,160 Speaker 8: to be sold out, and I mean sold out in 281 00:14:54,200 --> 00:14:59,800 Speaker 8: the literal sense that this was a political deal. And 282 00:15:00,000 --> 00:15:03,240 Speaker 8: and you know, whether it's actual money changing hands or 283 00:15:03,320 --> 00:15:07,640 Speaker 8: just straight lobbying that this is another example of, you know, 284 00:15:07,720 --> 00:15:10,920 Speaker 8: something happening like that, and you know, people were watching 285 00:15:10,920 --> 00:15:12,440 Speaker 8: this case to see if was ever going to go 286 00:15:12,520 --> 00:15:15,400 Speaker 8: to trial, you know, whether it would be settled out 287 00:15:15,520 --> 00:15:18,760 Speaker 8: before with exactly the thing that we see, which is 288 00:15:18,760 --> 00:15:21,320 Speaker 8: that Live Nation doesn't have to give up Ticketmaster. 289 00:15:21,920 --> 00:15:25,960 Speaker 4: You're right that Live Nation CEO Michael Rapino was apparently 290 00:15:26,160 --> 00:15:29,520 Speaker 4: in DC signing the last minute deal with the acting 291 00:15:29,600 --> 00:15:33,640 Speaker 4: head of the Antitrust Division. Under the terms, Live Nation 292 00:15:33,840 --> 00:15:38,720 Speaker 4: will open up concert venues it owns to rival ticketing services, 293 00:15:38,800 --> 00:15:41,280 Speaker 4: and it will allow rival concert promoters to put on 294 00:15:41,360 --> 00:15:44,960 Speaker 4: shows at its venues and cap fees at fifteen percent. 295 00:15:45,280 --> 00:15:47,800 Speaker 4: That doesn't address the main relief sought in the case, 296 00:15:47,880 --> 00:15:51,920 Speaker 4: which is Live Nations selling Ticketmaster. So what does the 297 00:15:51,960 --> 00:15:53,920 Speaker 4: public get from this settlement? 298 00:15:55,520 --> 00:15:57,920 Speaker 8: A little bit older and deeper in debt. Wasn't that 299 00:15:58,000 --> 00:16:01,440 Speaker 8: the song? I don't think the public interest is served 300 00:16:01,520 --> 00:16:04,520 Speaker 8: and the public gets very much. There may be some money. 301 00:16:04,640 --> 00:16:07,440 Speaker 8: Who knows how much the states have to agree to it. 302 00:16:07,600 --> 00:16:11,320 Speaker 8: There's some pullback. They were negotiating the terms you know, 303 00:16:11,480 --> 00:16:15,520 Speaker 8: Sunday night before this term sheet was released, so it 304 00:16:15,600 --> 00:16:18,600 Speaker 8: really isn't clear and if they have to, you know, 305 00:16:18,720 --> 00:16:22,160 Speaker 8: go back on some of the contracts, the exclusivity. The 306 00:16:22,240 --> 00:16:25,560 Speaker 8: problem is not in the formal contracts. The problem is 307 00:16:25,600 --> 00:16:29,120 Speaker 8: in the economics of this business and tying the ticket 308 00:16:29,400 --> 00:16:32,560 Speaker 8: sellers to the talent. I mean, that's what it is. 309 00:16:33,000 --> 00:16:35,560 Speaker 8: And you're not going to solve it by saying, excuse me, 310 00:16:35,720 --> 00:16:38,680 Speaker 8: don't insist on a contract. That's where they started out 311 00:16:38,720 --> 00:16:42,680 Speaker 8: in twenty ten. It never worked, it never will work. 312 00:16:42,840 --> 00:16:47,040 Speaker 8: So it's just really not something to advance the public interest. 313 00:16:47,080 --> 00:16:51,320 Speaker 8: The second part is some access to ticket Master's API 314 00:16:51,520 --> 00:16:56,320 Speaker 8: so some other ticketing company can do something. They actually 315 00:16:56,320 --> 00:16:59,640 Speaker 8: tried this before, that was part of the twenty ten settlement, 316 00:17:00,000 --> 00:17:02,040 Speaker 8: and one of the things that happened is the company 317 00:17:02,040 --> 00:17:04,160 Speaker 8: that was supposed to be given access to it didn't 318 00:17:04,160 --> 00:17:07,200 Speaker 8: want it. I mean, it's just it's filed, failed, failed, 319 00:17:07,440 --> 00:17:11,960 Speaker 8: and it fails because venues will not want to offend 320 00:17:12,080 --> 00:17:15,800 Speaker 8: Live Nation by using a different ticketing company. And Live 321 00:17:15,920 --> 00:17:18,919 Speaker 8: Nation has said they said in testimony, they said, you know, 322 00:17:19,040 --> 00:17:20,760 Speaker 8: we're going to make the choice that makes us the 323 00:17:20,760 --> 00:17:25,440 Speaker 8: most money. Guess what. So it's sad, but overlaying it 324 00:17:25,480 --> 00:17:29,440 Speaker 8: is this question of political influence, which has been the 325 00:17:30,000 --> 00:17:33,840 Speaker 8: song of anti trust from the beginning, and here we 326 00:17:33,880 --> 00:17:34,320 Speaker 8: are again. 327 00:17:34,400 --> 00:17:37,040 Speaker 4: I think the states had asked for a mistrial and 328 00:17:37,119 --> 00:17:40,000 Speaker 4: for sixty days so that their attorneys could get up 329 00:17:40,040 --> 00:17:43,760 Speaker 4: to speed, because the Justice Department had been leading the litigation, 330 00:17:44,359 --> 00:17:47,720 Speaker 4: but the judge ordered them to negotiate this week and 331 00:17:47,960 --> 00:17:52,280 Speaker 4: six Republican led states did settle with Live Nation. But 332 00:17:52,359 --> 00:17:56,000 Speaker 4: thirty four states are going to resume the trial on Monday. 333 00:17:56,359 --> 00:17:59,159 Speaker 4: Won't the state's attorneys be at a disadvantage? 334 00:17:59,600 --> 00:18:02,840 Speaker 8: The state are now in a tough spot. They were 335 00:18:02,840 --> 00:18:05,480 Speaker 8: sitting there watching the trial. They knew that this could 336 00:18:05,520 --> 00:18:08,439 Speaker 8: blow up at any point. I don't think they're surprised 337 00:18:08,520 --> 00:18:11,160 Speaker 8: in that sense. But of course there's a difference between 338 00:18:11,240 --> 00:18:15,160 Speaker 8: sitting there watching the trial and stepping up there and 339 00:18:15,200 --> 00:18:18,440 Speaker 8: trying the case before jury. I don't know how it goes. 340 00:18:18,560 --> 00:18:20,440 Speaker 8: You know, you can see why they'd want to mistrial, 341 00:18:20,760 --> 00:18:23,200 Speaker 8: not want to have to come before the jury without 342 00:18:23,240 --> 00:18:27,160 Speaker 8: the Justice Department there and say hi, we're your new friends. 343 00:18:27,960 --> 00:18:31,200 Speaker 8: You remember those those other folks. Do you explain thission? 344 00:18:31,200 --> 00:18:33,199 Speaker 8: I don't know how exactly that would work. This is 345 00:18:33,320 --> 00:18:37,760 Speaker 8: really weird. There have been cases, well, one case in 346 00:18:37,800 --> 00:18:41,000 Speaker 8: which I'm familiar is the Microsoft case where states and 347 00:18:41,080 --> 00:18:44,200 Speaker 8: the federal government tried the case together and then the 348 00:18:44,280 --> 00:18:48,520 Speaker 8: Justice Department settled with Microsoft, but not all the states did, 349 00:18:48,680 --> 00:18:52,440 Speaker 8: and they continued to litigate the remedy but not you know, 350 00:18:52,480 --> 00:18:55,359 Speaker 8: whether there's a liability, so it's still a little different. 351 00:18:55,600 --> 00:18:58,840 Speaker 8: Didn't go so well for them, so it's hard. They're 352 00:18:58,840 --> 00:19:02,000 Speaker 8: in a hard position. There are two reasons to do it. 353 00:19:02,200 --> 00:19:04,480 Speaker 8: One is to get good law made, is to get 354 00:19:04,720 --> 00:19:09,800 Speaker 8: a verdict against Live Nation, and Ticketmaster will help in 355 00:19:09,840 --> 00:19:13,040 Speaker 8: some other private litigation, maybe not so much help, but 356 00:19:13,080 --> 00:19:16,520 Speaker 8: a little. And the second is that relief to get 357 00:19:16,560 --> 00:19:20,000 Speaker 8: to vestiture and you know, maybe they can make the 358 00:19:20,040 --> 00:19:22,600 Speaker 8: case if they've got the right experts and that this 359 00:19:22,760 --> 00:19:24,840 Speaker 8: is the only way to solve this problem. Meant to 360 00:19:24,880 --> 00:19:28,760 Speaker 8: have competition in ticketing is to change the incentives of 361 00:19:28,800 --> 00:19:30,160 Speaker 8: the parties in this industry. 362 00:19:30,640 --> 00:19:35,040 Speaker 4: Ensuing Live Nation is also popular with the public because 363 00:19:35,280 --> 00:19:39,520 Speaker 4: buying concert tickets has become a luxury item. Every time 364 00:19:39,600 --> 00:19:42,439 Speaker 4: you go to buy tickets on Ticketmaster. It seems like 365 00:19:42,960 --> 00:19:46,240 Speaker 4: the prices have climbed yet again. So what do the 366 00:19:46,280 --> 00:19:49,199 Speaker 4: states have to lose by going forward with the trial. 367 00:19:49,600 --> 00:19:52,000 Speaker 8: Well, part of the answer is that the remedy of 368 00:19:52,040 --> 00:19:55,480 Speaker 8: splitting them apart will not, you know, the day after, 369 00:19:55,640 --> 00:19:59,280 Speaker 8: produce lower ticket prices. It's a market process, and you 370 00:19:59,400 --> 00:20:03,560 Speaker 8: hope that new companies will enter the ticketing business particularly 371 00:20:03,920 --> 00:20:07,720 Speaker 8: and bring some competition there. But you know, Taylor Swift 372 00:20:07,760 --> 00:20:11,160 Speaker 8: concerts are still going to be really expensive and there'll 373 00:20:11,200 --> 00:20:15,399 Speaker 8: still be resale markets, so it's a slow fix. So yes, 374 00:20:15,560 --> 00:20:18,159 Speaker 8: it looks attractive from the point of view of the 375 00:20:18,200 --> 00:20:21,600 Speaker 8: states that you know, pushing on and being the public interest, 376 00:20:21,760 --> 00:20:24,720 Speaker 8: but it is a longer term public interest. So maybe 377 00:20:24,720 --> 00:20:27,560 Speaker 8: there's some quick fix or something. Everybody who bought a 378 00:20:27,600 --> 00:20:32,080 Speaker 8: Taylor Swift ticket gets free out, I don't know, you know, 379 00:20:32,240 --> 00:20:35,159 Speaker 8: get some money, so maybe they'll increase the money in 380 00:20:35,200 --> 00:20:37,320 Speaker 8: the pot. There's a lot of money here. 381 00:20:37,680 --> 00:20:40,719 Speaker 4: So when the judge rejected the request and said that 382 00:20:40,760 --> 00:20:43,120 Speaker 4: if the parties truly want to settle, a deal could 383 00:20:43,119 --> 00:20:46,000 Speaker 4: be made within the week, and the Innaus attorney for 384 00:20:46,080 --> 00:20:49,200 Speaker 4: Live Nations. Dan Wall said, I've done this for forty 385 00:20:49,200 --> 00:20:51,760 Speaker 4: five years and there's zero chance we get this done 386 00:20:51,840 --> 00:20:55,240 Speaker 4: by Friday. And the judge said, not with that attitude. 387 00:20:56,000 --> 00:20:56,600 Speaker 2: I love that. 388 00:20:56,600 --> 00:20:59,639 Speaker 8: That was great. Yeah, Dan Wall is very sure of himself. 389 00:21:00,480 --> 00:21:03,320 Speaker 8: But the States have now apparently hired a very very 390 00:21:03,320 --> 00:21:07,440 Speaker 8: successful anti trust trial lawyer, Jeffrey Kessler. It's a smart, 391 00:21:07,640 --> 00:21:11,840 Speaker 8: sharp move, but they are up against a difficult tactical 392 00:21:12,080 --> 00:21:15,240 Speaker 8: position here, and they have to be sure that they 393 00:21:15,680 --> 00:21:18,960 Speaker 8: really want to go ahead and push for divestiture. It's 394 00:21:19,000 --> 00:21:23,000 Speaker 8: not impossible, but the States don't generally do so well 395 00:21:23,480 --> 00:21:26,560 Speaker 8: once they've been deserted by the Justice Department. There are 396 00:21:26,760 --> 00:21:30,439 Speaker 8: past cases, not always, but it's hard now. You know, 397 00:21:30,480 --> 00:21:34,399 Speaker 8: they need the experts, the economists, industry experts. They need 398 00:21:34,560 --> 00:21:37,240 Speaker 8: a top lawyer. I guess they have good lawyers in 399 00:21:37,240 --> 00:21:39,760 Speaker 8: the house, but they've hired a guy who could go 400 00:21:39,840 --> 00:21:40,920 Speaker 8: up against Dan Wall. 401 00:21:41,480 --> 00:21:44,480 Speaker 4: I don't envy the State's lawyers walking in on Monday 402 00:21:44,520 --> 00:21:48,280 Speaker 4: and just picking up where the Justice Department left off. 403 00:21:48,520 --> 00:21:52,160 Speaker 8: Yeah, I don't know how actively involved they've been in 404 00:21:52,600 --> 00:21:56,359 Speaker 8: trial prep. Is always an underlying tension between the States 405 00:21:56,359 --> 00:22:00,159 Speaker 8: and the Fed, even when they're trying cases together. You know, 406 00:22:00,480 --> 00:22:03,720 Speaker 8: playing with your friends doesn't always go smoothly, even if 407 00:22:03,760 --> 00:22:07,520 Speaker 8: you're good friends. But my guess also is that the 408 00:22:07,560 --> 00:22:12,159 Speaker 8: professionals on the staff, the trial staff, will not be 409 00:22:12,520 --> 00:22:16,240 Speaker 8: the roadblocks, but the front office. Who knows what they'll 410 00:22:16,320 --> 00:22:18,960 Speaker 8: do with the witnesses they've got and the information they've 411 00:22:18,960 --> 00:22:21,720 Speaker 8: got and how hard they'll make it for the states, 412 00:22:21,920 --> 00:22:22,480 Speaker 8: I don't know. 413 00:22:22,880 --> 00:22:25,880 Speaker 4: And also the judge can always reject the settlement. 414 00:22:26,000 --> 00:22:29,840 Speaker 8: Right, So there's a legal process for the settlement itself. 415 00:22:30,040 --> 00:22:32,960 Speaker 8: They have to file what's called a competitive impact statement, 416 00:22:33,240 --> 00:22:36,119 Speaker 8: they have to let it open for public comment for 417 00:22:36,200 --> 00:22:40,040 Speaker 8: a period of time. Then there's a hearing before the judge. 418 00:22:40,119 --> 00:22:43,240 Speaker 8: It's called a Tonny Act, and the judge has to 419 00:22:43,280 --> 00:22:47,520 Speaker 8: approve the settlement as in the public interest. Now that, 420 00:22:47,800 --> 00:22:52,320 Speaker 8: as it's been interpreted over time, does not give the judge, 421 00:22:52,480 --> 00:22:54,840 Speaker 8: you know, the broadest power to say this is a 422 00:22:54,960 --> 00:22:58,240 Speaker 8: crappy settlement, forget it, I want you to try this case. 423 00:22:58,480 --> 00:23:02,040 Speaker 8: But the judge does have some power and this will 424 00:23:02,080 --> 00:23:06,439 Speaker 8: certainly provoke a lot of public comment, and that's a 425 00:23:06,480 --> 00:23:10,520 Speaker 8: process that will go forward while the case is being tried. Apparently, 426 00:23:10,520 --> 00:23:14,680 Speaker 8: I mean, this has to be put into a formal decree, yes, 427 00:23:14,720 --> 00:23:18,280 Speaker 8: and the judge has to eventually review it and approve it, 428 00:23:18,640 --> 00:23:21,159 Speaker 8: and then it can be appealed. Actually, so we're not 429 00:23:21,200 --> 00:23:22,879 Speaker 8: at the end of this process. 430 00:23:23,359 --> 00:23:26,320 Speaker 4: Also, under this agreement, the government could sue them again. 431 00:23:27,119 --> 00:23:31,720 Speaker 8: So as it's written, this is not we're forever done. 432 00:23:32,240 --> 00:23:33,960 Speaker 8: It's hard to know what to make of that. I mean, 433 00:23:34,320 --> 00:23:38,560 Speaker 8: the government did sue in twenty ten when Ticketmaster acquired 434 00:23:38,640 --> 00:23:42,480 Speaker 8: Live Nation and entered into a consent decree. They re 435 00:23:42,680 --> 00:23:46,040 Speaker 8: up the consent decree in twenty nineteen where they threatened 436 00:23:46,080 --> 00:23:49,000 Speaker 8: to sue again. And then this is a suit with 437 00:23:49,080 --> 00:23:52,760 Speaker 8: a different legal theory that they filed in twenty twenty four. 438 00:23:53,200 --> 00:23:57,119 Speaker 8: So the standard rule is the government is not stopped 439 00:23:57,160 --> 00:24:00,760 Speaker 8: from unless they've signed a piece of paper, from bringing 440 00:24:00,840 --> 00:24:03,960 Speaker 8: a new suit. So the answer to that is, yes, 441 00:24:04,080 --> 00:24:06,640 Speaker 8: they could bring another suit. I mean, in a way, 442 00:24:06,680 --> 00:24:09,760 Speaker 8: it's cold comfort. We've now had from twenty ten to 443 00:24:10,000 --> 00:24:14,200 Speaker 8: twenty twenty six this monopoly. You know, they've made a 444 00:24:14,240 --> 00:24:16,360 Speaker 8: lot of money off of this, Thank you very much. 445 00:24:16,400 --> 00:24:19,360 Speaker 8: We could eventually sue them at some point when Yeah. 446 00:24:19,160 --> 00:24:21,840 Speaker 4: It seems like a lot of litigation that's gone nowhere. 447 00:24:22,160 --> 00:24:26,080 Speaker 4: Thanks so much. Harry. That's Professor Harry First of NYU 448 00:24:26,200 --> 00:24:30,560 Speaker 4: Law School. Coming up next was insider trading involved in 449 00:24:30,680 --> 00:24:33,840 Speaker 4: betting on the Iran war. I'm June Grosso. When you're 450 00:24:33,920 --> 00:24:38,879 Speaker 4: listening to Bloomberg as US and Israeli bombs fell on 451 00:24:39,000 --> 00:24:42,720 Speaker 4: Iran on February twenty eighth, better is on poly Market? 452 00:24:42,880 --> 00:24:47,359 Speaker 4: We're cashing in. Cryptoanalytics firm bubble Maps pointed to six 453 00:24:47,400 --> 00:24:50,639 Speaker 4: accounts that had all been funded within the previous twenty 454 00:24:50,680 --> 00:24:53,920 Speaker 4: four hours and made about a million dollars in profit 455 00:24:54,320 --> 00:24:57,600 Speaker 4: by betting that the US would strike around by the 456 00:24:57,680 --> 00:25:02,480 Speaker 4: twenty eighth, raising suspicions advanced knowledge of the attacks. The 457 00:25:02,520 --> 00:25:07,479 Speaker 4: Commodity's Future Trading Commission, which regulates prediction markets in the US, 458 00:25:07,960 --> 00:25:13,080 Speaker 4: bars contracts tied to assassination, terrorism, or war themes. Poly 459 00:25:13,280 --> 00:25:17,440 Speaker 4: Market as an offshore venue continues to list. This week, 460 00:25:17,480 --> 00:25:22,480 Speaker 4: the CFTC gave its first official response to the controversies 461 00:25:22,480 --> 00:25:27,000 Speaker 4: that have surrounded prediction markets by issuing new guidance. But 462 00:25:27,160 --> 00:25:29,000 Speaker 4: will it help joining me? Is business? 463 00:25:29,040 --> 00:25:29,200 Speaker 2: Law? 464 00:25:29,240 --> 00:25:33,239 Speaker 4: Professor Eric Talley of Columbia Law School Eric tell us 465 00:25:33,240 --> 00:25:36,760 Speaker 4: about the bets on polymarket that are causing concern. 466 00:25:37,200 --> 00:25:44,000 Speaker 3: Polymarket is one of two major event driven contract websites 467 00:25:44,080 --> 00:25:46,760 Speaker 3: that people use that are basically prediction market you know, 468 00:25:46,800 --> 00:25:51,840 Speaker 3: sort of platforms, and both Polymarket and calse had various 469 00:25:51,840 --> 00:25:55,320 Speaker 3: types of events, including events that might occur in Iran, 470 00:25:55,480 --> 00:25:59,880 Speaker 3: and many of those pertained to the continued in tech 471 00:26:00,600 --> 00:26:05,359 Speaker 3: of the Ayatola Kamenes and whether it would still be 472 00:26:05,760 --> 00:26:08,080 Speaker 3: you know, in power, say by the end of February 473 00:26:08,160 --> 00:26:09,760 Speaker 3: or by the end of the first week of March. 474 00:26:10,640 --> 00:26:13,959 Speaker 3: And these were essentially binary bets, you know, they call 475 00:26:14,040 --> 00:26:17,040 Speaker 3: them contracts, but they're essentially bets where you can bet 476 00:26:17,080 --> 00:26:20,800 Speaker 3: on yes or bet on no. And it became pretty 477 00:26:20,880 --> 00:26:25,359 Speaker 3: apparent in the hours before the Israelian US strike on 478 00:26:25,440 --> 00:26:29,359 Speaker 3: Iran that ended up killing both Iotola Khamene and many 479 00:26:29,400 --> 00:26:33,520 Speaker 3: other senior members of the Iranian government that was essentially 480 00:26:33,560 --> 00:26:39,640 Speaker 3: betting against the continuing viability of the Hominy government passed. 481 00:26:39,359 --> 00:26:40,280 Speaker 2: Some future date. 482 00:26:40,680 --> 00:26:43,400 Speaker 3: The interesting part about this June is that while there 483 00:26:43,400 --> 00:26:45,199 Speaker 3: were a lot of bets that were being placed on 484 00:26:45,240 --> 00:26:47,760 Speaker 3: this most were small scale and. 485 00:26:47,800 --> 00:26:49,840 Speaker 2: Kind of went on both sides of the transaction. 486 00:26:50,160 --> 00:26:52,800 Speaker 3: But there were some really big ones that got placed 487 00:26:53,040 --> 00:26:56,720 Speaker 3: literally within hours of the bombing that were all betting 488 00:26:56,760 --> 00:27:00,320 Speaker 3: against the Iotola's fate, and all of them at least 489 00:27:00,359 --> 00:27:05,159 Speaker 3: purportedly paid out. That gave rise, unsurprisingly to a pretty 490 00:27:05,200 --> 00:27:09,080 Speaker 3: significant kerfuffle about who created these brand new accounts, Why 491 00:27:09,119 --> 00:27:12,120 Speaker 3: were they placing hundreds of thousands, even millions of dollars 492 00:27:12,119 --> 00:27:16,040 Speaker 3: in betting on this particular event when these accounts hadn't 493 00:27:16,040 --> 00:27:17,159 Speaker 3: made any bets before. 494 00:27:17,560 --> 00:27:21,639 Speaker 4: And Bubble Maps, which is a company that tracks data 495 00:27:21,720 --> 00:27:27,200 Speaker 4: on crypto transactions, identified what it called six suspected insiders 496 00:27:27,440 --> 00:27:30,840 Speaker 4: who made one point two million dollars in wagers that 497 00:27:30,960 --> 00:27:34,679 Speaker 4: the US would strike Iran Senator Chris Murphy was one 498 00:27:34,680 --> 00:27:37,080 Speaker 4: of the people who said, you know, it's insane that 499 00:27:37,160 --> 00:27:41,919 Speaker 4: this is legal, and that the unusual betting suggested that 500 00:27:42,240 --> 00:27:46,920 Speaker 4: even decision makers might have had a stake in the outcome, 501 00:27:47,400 --> 00:27:51,480 Speaker 4: which the White House denied. But insider trading look. 502 00:27:51,359 --> 00:27:53,800 Speaker 3: So a couple of points to pick apart in that statement. 503 00:27:53,880 --> 00:27:56,960 Speaker 3: The first has to do with is this in fact 504 00:27:57,119 --> 00:27:58,520 Speaker 3: legal or not legal? 505 00:27:58,600 --> 00:27:58,840 Speaker 2: Now? 506 00:27:59,000 --> 00:28:01,560 Speaker 3: You know, because predict markets are new in the US, 507 00:28:01,600 --> 00:28:05,920 Speaker 3: there's still a battle raging about how exactly these contracts 508 00:28:06,000 --> 00:28:09,600 Speaker 3: get classified. I think most people think that they are 509 00:28:09,680 --> 00:28:13,080 Speaker 3: a type of derivative contract that's kind of my belief 510 00:28:13,119 --> 00:28:15,520 Speaker 3: as well. They tend to have a lot of the 511 00:28:15,520 --> 00:28:17,840 Speaker 3: look and feel of a lot of other call options, 512 00:28:17,880 --> 00:28:21,520 Speaker 3: put options, various exotic options that you can buy and 513 00:28:21,640 --> 00:28:26,040 Speaker 3: sell on the Chicago mercantele Exchange. And so those are 514 00:28:26,240 --> 00:28:28,840 Speaker 3: in fact, to the extent that they are derivative contracts. 515 00:28:29,119 --> 00:28:33,080 Speaker 3: They are in fact regulated by the Commodities Future Trading 516 00:28:33,080 --> 00:28:37,920 Speaker 3: Commission or CFTC, and that commission has a pretty robust 517 00:28:38,040 --> 00:28:42,160 Speaker 3: insider trading prohibition. But I think that the Senator, all 518 00:28:42,240 --> 00:28:45,280 Speaker 3: due respect, might be leaping to conclusions to say that 519 00:28:45,360 --> 00:28:49,160 Speaker 3: this wasn't prohibited by law. In addition, there are a 520 00:28:49,160 --> 00:28:52,040 Speaker 3: lot of state laws that might also sweep in to 521 00:28:52,120 --> 00:28:56,320 Speaker 3: prohibit this type of inside trading that can also. 522 00:28:56,120 --> 00:28:57,560 Speaker 2: Have criminal implications. 523 00:28:57,840 --> 00:29:02,320 Speaker 3: So, irrespective of you know, bills pending in Congress, this 524 00:29:02,600 --> 00:29:07,320 Speaker 3: is definitely something that I would expect that CFTC lawyers 525 00:29:07,600 --> 00:29:10,520 Speaker 3: might be kicking the tires of As to who did it, 526 00:29:10,560 --> 00:29:11,160 Speaker 3: we still. 527 00:29:10,920 --> 00:29:12,960 Speaker 2: Don't really know. We don't know who the owners of 528 00:29:13,000 --> 00:29:13,880 Speaker 2: these accounts were. 529 00:29:14,360 --> 00:29:16,280 Speaker 3: And you know, the fact of the matter is this 530 00:29:16,320 --> 00:29:20,360 Speaker 3: could range from anyone from senior decision makers in the 531 00:29:20,400 --> 00:29:24,840 Speaker 3: process in the room of making these decisions to potentially 532 00:29:24,880 --> 00:29:27,920 Speaker 3: mid level staffers or even White House interns who are 533 00:29:27,960 --> 00:29:30,280 Speaker 3: asked to run papers back and forth. 534 00:29:30,560 --> 00:29:30,720 Speaker 5: Plum. 535 00:29:30,760 --> 00:29:33,120 Speaker 3: Thing is kind of interesting, June, is that you know, 536 00:29:33,160 --> 00:29:36,280 Speaker 3: I don't know whether you have a polymarket or Calci account. 537 00:29:36,400 --> 00:29:37,200 Speaker 1: Absolutely not. 538 00:29:37,840 --> 00:29:40,760 Speaker 3: Yeah, I'm just gonna say that there is a definite 539 00:29:40,880 --> 00:29:44,080 Speaker 3: generational skew on who has these accounts. 540 00:29:44,400 --> 00:29:45,160 Speaker 2: I have them. 541 00:29:45,200 --> 00:29:47,720 Speaker 3: But the only reason that I have these accounts is 542 00:29:47,720 --> 00:29:50,360 Speaker 3: that I teach finance to twenty four year olds and 543 00:29:50,400 --> 00:29:52,400 Speaker 3: they all have them, and so I have to kind 544 00:29:52,400 --> 00:29:54,440 Speaker 3: of get inside their head to figure out, you know, 545 00:29:54,480 --> 00:29:57,520 Speaker 3: how I'm going to present the material. So I would say, yeah, 546 00:29:57,600 --> 00:30:01,320 Speaker 3: it's certainly possible that senior leadership in that Trump administration 547 00:30:01,480 --> 00:30:04,160 Speaker 3: White House was engaged in some of this trading. But 548 00:30:04,160 --> 00:30:07,000 Speaker 3: I wouldn't be surprised if a twenty four year old 549 00:30:07,000 --> 00:30:11,080 Speaker 3: intern wasn't also asked to shuffle some papers back and forth, 550 00:30:11,120 --> 00:30:13,560 Speaker 3: put two and two together and then got on Calshi 551 00:30:13,640 --> 00:30:16,000 Speaker 3: and you borrowed a bunch of money to make a 552 00:30:16,080 --> 00:30:17,240 Speaker 3: one directional bet. 553 00:30:17,400 --> 00:30:21,760 Speaker 4: The CFTC has the authority to investigate this, but doesn't 554 00:30:21,760 --> 00:30:25,800 Speaker 4: seem to be doing that now. Last month, Israeli authorities 555 00:30:25,880 --> 00:30:29,560 Speaker 4: arrested several people and charged to a civilian and a 556 00:30:29,600 --> 00:30:35,280 Speaker 4: military reservist with using classified information to place bets on polymarket. 557 00:30:35,760 --> 00:30:39,800 Speaker 4: Anyone in the US who used classified information to place 558 00:30:39,840 --> 00:30:43,920 Speaker 4: a bet, I mean it would be subject to criminal prosecution. 559 00:30:44,160 --> 00:30:47,400 Speaker 4: Right Is anybody looking into that? Is there an agency 560 00:30:47,440 --> 00:30:49,000 Speaker 4: besides the CFTC. 561 00:30:49,840 --> 00:30:52,800 Speaker 3: I'm pretty positive there are some state attorneys general that 562 00:30:52,880 --> 00:30:55,080 Speaker 3: are looking at this as well. One of the things 563 00:30:55,120 --> 00:30:57,200 Speaker 3: that's kind of interesting about this tune is that it 564 00:30:57,240 --> 00:31:00,000 Speaker 3: gets a little bit into the details of how inside 565 00:31:00,320 --> 00:31:03,160 Speaker 3: trading law works, and there are a couple of theories 566 00:31:03,160 --> 00:31:05,400 Speaker 3: behind it, but the one that would most likely apply 567 00:31:05,880 --> 00:31:10,320 Speaker 3: to this situation is something that lawyers call the misappropriation theory, 568 00:31:10,640 --> 00:31:14,719 Speaker 3: and what it basically means is if my employer or 569 00:31:14,880 --> 00:31:17,480 Speaker 3: someone with whom I have some kind of a relationship 570 00:31:17,520 --> 00:31:22,760 Speaker 3: of trust and confidence reveals inside information to me that 571 00:31:22,960 --> 00:31:26,440 Speaker 3: is going to happen with either the stated or implied 572 00:31:26,920 --> 00:31:29,120 Speaker 3: restriction that I have to keep that confidential. So if 573 00:31:29,160 --> 00:31:31,800 Speaker 3: I go out and trade on it, then I have 574 00:31:31,960 --> 00:31:36,360 Speaker 3: breached that confidentiality and that is effectively what triggers a 575 00:31:36,400 --> 00:31:39,800 Speaker 3: lot of criminal and civil liability for inside of trading, 576 00:31:39,840 --> 00:31:44,120 Speaker 3: the fact that I've misappropriated I've violated this order or 577 00:31:44,200 --> 00:31:47,480 Speaker 3: this command of confidentiality that came from the source. Maybe 578 00:31:47,520 --> 00:31:50,000 Speaker 3: it's my employer or someone else. But the thing it's 579 00:31:50,000 --> 00:31:52,880 Speaker 3: always been weird about this theory, and that applies also 580 00:31:52,960 --> 00:31:56,960 Speaker 3: in the derivatives context, is that it hinges very very 581 00:31:57,000 --> 00:32:02,880 Speaker 3: critically on what does your employer permit and not permit, right, 582 00:32:02,960 --> 00:32:06,080 Speaker 3: And so you could, in principle, have an employer who 583 00:32:06,120 --> 00:32:09,640 Speaker 3: develops a lot of confidential information, and their inside employee 584 00:32:09,680 --> 00:32:13,320 Speaker 3: policies say, you know what, rather than paying you salaries, 585 00:32:13,360 --> 00:32:15,520 Speaker 3: We're just going to let you trade rampantly on this 586 00:32:15,600 --> 00:32:18,440 Speaker 3: inside information. And the third party is the third party 587 00:32:18,520 --> 00:32:19,400 Speaker 3: suckers who trade with. 588 00:32:19,400 --> 00:32:20,200 Speaker 2: These informed folks. 589 00:32:20,240 --> 00:32:22,080 Speaker 3: They have no idea even who they're trading with or 590 00:32:22,080 --> 00:32:25,120 Speaker 3: what the inside policy is of the employer. But that's 591 00:32:25,160 --> 00:32:27,520 Speaker 3: going to have a huge effect on whether there will 592 00:32:27,520 --> 00:32:31,240 Speaker 3: be civil or criminal liability, whether there was such a prohibition. 593 00:32:31,480 --> 00:32:35,160 Speaker 3: So you transport this over to the administration, in which 594 00:32:35,360 --> 00:32:39,200 Speaker 3: clearly for classified information there's both an implicit and an 595 00:32:39,200 --> 00:32:43,680 Speaker 3: explicit prohibition on, you know, trying to make money off 596 00:32:43,720 --> 00:32:47,400 Speaker 3: of your own private knowledge of classified information. On the 597 00:32:47,440 --> 00:32:51,720 Speaker 3: other hand, as we learned from the first Trump administration's 598 00:32:52,120 --> 00:32:55,640 Speaker 3: you know, classified Documents Gate. There's a big question about, well, 599 00:32:55,720 --> 00:32:59,360 Speaker 3: what constitutes classified and not classified and who gets to 600 00:32:59,400 --> 00:33:03,320 Speaker 3: determine when something is suddenly classified or declassified and went, 601 00:33:03,880 --> 00:33:07,200 Speaker 3: and President Trump basically made the claim on behalf of 602 00:33:07,240 --> 00:33:10,200 Speaker 3: himself that as he spirited these documents out of the 603 00:33:10,200 --> 00:33:12,920 Speaker 3: White House at the end of his first administration, he 604 00:33:13,200 --> 00:33:17,800 Speaker 3: basically declared, possibly to himself or possibly in passing, that 605 00:33:17,800 --> 00:33:22,360 Speaker 3: they're all declassified now and therefore he doesn't have any liability. 606 00:33:22,560 --> 00:33:26,160 Speaker 3: So query whether I don't know some staffer or employee 607 00:33:26,280 --> 00:33:29,680 Speaker 3: or person higher up in the administration was placing some 608 00:33:29,800 --> 00:33:33,160 Speaker 3: of these bets. The way that it would trigger, you know, 609 00:33:33,480 --> 00:33:37,880 Speaker 3: most directly inside of trading prohibitions is because they were classified. 610 00:33:37,920 --> 00:33:40,400 Speaker 3: If you know, President Trump said, oh no, I declassified 611 00:33:40,400 --> 00:33:42,560 Speaker 3: that in a meeting. I did it orally, But it's 612 00:33:42,600 --> 00:33:45,080 Speaker 3: totally fine. Who knows what's going to happen there now. 613 00:33:45,240 --> 00:33:47,960 Speaker 3: Having said that, that doesn't necessarily take these folks off 614 00:33:48,040 --> 00:33:50,240 Speaker 3: the hook for state level offenses, and there are some 615 00:33:50,320 --> 00:33:53,560 Speaker 3: state level offenses that easily could be applied here. California 616 00:33:53,560 --> 00:33:57,640 Speaker 3: and New York have pretty rigorous prohibitions on inside trading transactions. 617 00:33:57,800 --> 00:34:01,240 Speaker 3: There are also various other types of provisions out there, 618 00:34:01,280 --> 00:34:04,120 Speaker 3: the wire fraud acts, the computer fraud and abuse acts 619 00:34:04,480 --> 00:34:08,520 Speaker 3: that might also kind of play a peripheral role in 620 00:34:08,560 --> 00:34:11,759 Speaker 3: this context. You know, at the federal level, that's only 621 00:34:11,800 --> 00:34:13,759 Speaker 3: going to be as strong as the stomach of the 622 00:34:13,800 --> 00:34:17,160 Speaker 3: federal prosecutors who are going to bring these cases, and 623 00:34:17,200 --> 00:34:19,560 Speaker 3: if they've gotten a command from on high that they 624 00:34:19,600 --> 00:34:22,280 Speaker 3: shouldn't bring any of them, that I think is largely 625 00:34:22,280 --> 00:34:24,640 Speaker 3: going to be left up to state attorneys general? 626 00:34:25,080 --> 00:34:29,600 Speaker 4: Are they difficult to investigate? Because the main prediction platform 627 00:34:29,760 --> 00:34:34,319 Speaker 4: operates offshore, the bets are placed on the blockchain, the 628 00:34:34,360 --> 00:34:38,120 Speaker 4: identities of the accounts making the trades are anonymous. So 629 00:34:38,239 --> 00:34:42,400 Speaker 4: let's say state attorneys general investigating, would it be difficult 630 00:34:42,480 --> 00:34:44,520 Speaker 4: for them to get through all those layers? 631 00:34:44,800 --> 00:34:47,840 Speaker 3: This has always been a difficult thing in investigating trades 632 00:34:47,880 --> 00:34:50,440 Speaker 3: made on the blockchain. Compared to ten years ago, it's 633 00:34:50,520 --> 00:34:53,120 Speaker 3: much easier to trace the identity of who was making 634 00:34:53,120 --> 00:34:56,160 Speaker 3: these trades. You know, where was this wallet created, Who 635 00:34:56,200 --> 00:34:58,759 Speaker 3: did the creation of this wallet? It's possible to get 636 00:34:58,760 --> 00:35:02,120 Speaker 3: that information. LIVA would rest on subpoena power that might 637 00:35:02,200 --> 00:35:05,560 Speaker 3: have to be applied extra territorially because ice companies are 638 00:35:05,560 --> 00:35:07,919 Speaker 3: based in Ireland or England and so forth. So that 639 00:35:08,040 --> 00:35:12,920 Speaker 3: creates a stumbling block, not one that is necessarily insurmountable. 640 00:35:13,000 --> 00:35:17,799 Speaker 3: I could certainly imagine various regulators inside the EU or 641 00:35:17,800 --> 00:35:21,800 Speaker 3: the UK being equally worried about the use of prediction 642 00:35:21,920 --> 00:35:26,000 Speaker 3: markets for insider trading and being perfectly willing to assist 643 00:35:26,040 --> 00:35:28,880 Speaker 3: a request from say the New York State Attorney General 644 00:35:29,000 --> 00:35:32,480 Speaker 3: or the California State Attorney General for some of that information, 645 00:35:32,640 --> 00:35:34,520 Speaker 3: or at least to say, yeah, we were willing to 646 00:35:34,640 --> 00:35:35,719 Speaker 3: serve your subpoena. 647 00:35:35,760 --> 00:35:36,400 Speaker 2: In Europe. 648 00:35:36,520 --> 00:35:40,840 Speaker 4: On Thursday, the CFTC issued new guidance for prediction markets. 649 00:35:41,239 --> 00:35:45,080 Speaker 4: Will that solve any of the problems we've been talking about, It. 650 00:35:44,960 --> 00:35:46,480 Speaker 2: Remains to be seen. This is going to be a 651 00:35:46,480 --> 00:35:47,200 Speaker 2: long road ahead. 652 00:35:47,320 --> 00:35:51,600 Speaker 3: The CFTC has put out a notice of proposed rule 653 00:35:51,640 --> 00:35:55,440 Speaker 3: making and guidance that basically tries to do two things. 654 00:35:55,640 --> 00:35:59,560 Speaker 3: First of all, it tries to convince everyone that CFTC 655 00:35:59,760 --> 00:36:04,160 Speaker 3: is the only regulator for these event driven contracts, and 656 00:36:04,160 --> 00:36:07,319 Speaker 3: that's in dispute, by the way. And then the second 657 00:36:07,640 --> 00:36:11,000 Speaker 3: is that it basically tries to remind people that because 658 00:36:11,080 --> 00:36:14,319 Speaker 3: the CFTC is the regulator of these contracts. They are 659 00:36:14,440 --> 00:36:19,000 Speaker 3: subject to CFTC rules, including rules on insider trading and 660 00:36:19,280 --> 00:36:22,960 Speaker 3: various types of fraudulent activities. But to back up a 661 00:36:23,000 --> 00:36:27,600 Speaker 3: little bit June, the question about whether these prediction market 662 00:36:27,640 --> 00:36:33,480 Speaker 3: contracts constitute derivatives or whether they constitute some form of 663 00:36:33,600 --> 00:36:37,080 Speaker 3: gambling or gaming is still very very much up in 664 00:36:37,120 --> 00:36:40,120 Speaker 3: the air. A lot of state attorneys general as well 665 00:36:40,160 --> 00:36:44,319 Speaker 3: as Native American tribes as well as organized groups of 666 00:36:44,520 --> 00:36:49,719 Speaker 3: gaming outfits have challenged the CFTC's ability to claim a 667 00:36:49,760 --> 00:36:52,600 Speaker 3: lot of the types of event driven contracts that would 668 00:36:52,600 --> 00:36:56,040 Speaker 3: have traditionally fit into the category of sports betting. 669 00:36:56,280 --> 00:36:58,760 Speaker 2: And the CFTC has in its own rules. 670 00:36:58,400 --> 00:37:02,600 Speaker 3: That it's there to basically regulate commodities and derivatives but 671 00:37:02,800 --> 00:37:05,080 Speaker 3: not gaming. And so there's going to be an interesting 672 00:37:05,160 --> 00:37:10,000 Speaker 3: question about whether the CFTC's jurisdiction extends across all of 673 00:37:10,040 --> 00:37:13,399 Speaker 3: the different types of prediction market contracts. 674 00:37:13,680 --> 00:37:16,919 Speaker 4: More questions than answers, it seems. Thanks so much, Eric. 675 00:37:17,360 --> 00:37:21,160 Speaker 4: That's Professor Eric Tally of Columbia Law School. And that's 676 00:37:21,200 --> 00:37:23,840 Speaker 4: it for this edition of the Bloomberg Law Show. Remember 677 00:37:23,880 --> 00:37:25,960 Speaker 4: you can always get the latest legal news on our 678 00:37:25,960 --> 00:37:30,120 Speaker 4: Bloomberg Law Podcast. You can find them on Apple Podcasts, Spotify, 679 00:37:30,320 --> 00:37:35,360 Speaker 4: and at www dot bloomberg dot com, slash podcast slash Law, 680 00:37:35,760 --> 00:37:38,360 Speaker 4: and remember to tune into The Bloomberg Law Show every 681 00:37:38,400 --> 00:37:42,280 Speaker 4: weeknight at ten pm Wall Street Time. I'm Jim Grosso 682 00:37:42,440 --> 00:37:44,040 Speaker 4: and you're listening to Bloomberg