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Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every

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Speaker 1: day we bring you insight and analysis into the most

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Speaker 1: important legal news of the day. You can find more

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Speaker 1: episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud

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Speaker 1: and on Bloomberg dot com slash podcasts. A startling legal

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Speaker 1: maneuver by CBS rivals the finales of its many successful

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Speaker 1: shows from c I S to Survivor. CBS is suing

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Speaker 1: its controlling shareholder, National Amusements, as CBS chairman and CEO

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Speaker 1: Les Moonvez tries to get control of the broadcaster from

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Speaker 1: the red Stone family and prevent a merger arias Sherry

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Speaker 1: Redstone has been trying to combine Viacom with CBS in

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Speaker 1: order to give her companies greater weight in a changing market.

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Speaker 1: Joining is Matthew shuttle Helm, media litigation analyst for Bloomberg Intelligence. Matt,

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Speaker 1: this battle for control has been going on in some

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Speaker 1: form or another for a long time. Well, you explain

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Speaker 1: the relationships between the parties and the controlling interests here, sure, June, yes, so.

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Speaker 1: So this is all driven by the fact that CBS

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Speaker 1: is controlling shareholder is a company called National Amusements, which

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Speaker 1: Sumner Redstone is the CEO of and now his daughter,

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Speaker 1: UH Sherry Redstone effectively operates it. And so as the

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Speaker 1: controlling shareholder UH National Amusements and and Sherry Redstone um

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Speaker 1: exercises considerable clout with respect to the future of CBS

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Speaker 1: and and uh miss Redstone and National Amusements, as you said,

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Speaker 1: has been pushing the idea of this merger with Viacom

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Speaker 1: and CBS, and that's sort of what what led to

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Speaker 1: the actions the lawsuit that was filed on Monday. So

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Speaker 1: is Moonves trying to get control away from the Redstone

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Speaker 1: family that put him in power in the first place.

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Speaker 1: I think essentially yes. So so you know, there's a

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Speaker 1: big discussion of whether this this merger is in the

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Speaker 1: the interest of the company or not. But even if

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Speaker 1: if Less Moonves is okay with it going forward, there's

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Speaker 1: a real concern about how should it go forward and

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Speaker 1: should should National Amusements and and and Sherry Redstone continue

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Speaker 1: to control the makeup of the board or should it

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Speaker 1: should it be uh independently structured so that so that

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Speaker 1: less Moonvez has more power going forward. So what you saw,

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Speaker 1: uh with the the filing of this lawsuit was was

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Speaker 1: really a push by CBS and less Moonvez to limit

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Speaker 1: Sherry Redstone and National Amusements control uh, potentially in a

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Speaker 1: pretty dramatic way. They're talking about a a board vote

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Speaker 1: uh this Thursday, which would would literally change um uh

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Speaker 1: the National Amusements voting control from eight percent of the company,

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Speaker 1: alluding that down to about So I think there's a

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Speaker 1: real possibility that that what we're seeing right now is

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Speaker 1: just the very beginning of of an extended legal feud. Uh.

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Speaker 1: And this thing is could quickly get overtaken by events.

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Speaker 1: But you're exactly right. This is all about a battle

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Speaker 1: for control, both at CBS now and maybe at the

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Speaker 1: future of CBS. So, Matt, how likely is it that

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Speaker 1: a court will allow um the voting shares of Redstone

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Speaker 1: Company to be deluded from seven from excuse me to

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Speaker 1: So that's that's a great question. And and and the

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Speaker 1: interesting thing is it's not even really teed up in

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Speaker 1: the court case yet. So right now all the parties

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Speaker 1: are fighting about is sort of a temporary restraining order.

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Speaker 1: CBS is asking the court to hit pause and don't

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Speaker 1: let don't let National Amusements come in and fire the

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Speaker 1: whole board. Uh, And and and change things. Lurking in

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Speaker 1: the background is that issue you raise that can can

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Speaker 1: CBS change the control that National Amusements can can exercise?

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Speaker 1: We're not there yet. That's going that's a you know,

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Speaker 1: CBS says that there's a clause in the charter that

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Speaker 1: allows them to make this change that I think would

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Speaker 1: need to be litigated. It's it's it's fairly unusual for

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Speaker 1: something like that to be in there, and I you know,

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Speaker 1: it's it's it's really too early to say where whether

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Speaker 1: whether a court would would rule either way on that.

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Speaker 1: I do think the court at this stage is sort

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Speaker 1: of going to be reluctant and a hearing that's set

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Speaker 1: for tomorrow to really get too involved. At this point,

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Speaker 1: this seems like, uh, the parties sort of the kind

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Speaker 1: of situation where a court is likely to stare down

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Speaker 1: the parties and say, you know, work this out, you

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Speaker 1: don't need me getting involved. I think we'll see that first,

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Speaker 1: but longer term, you have the potential for for an

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Speaker 1: extended fight on exactly that issue. Can they really dilute

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Speaker 1: National amusements control here? Sherry Redstone sits on the boards

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Speaker 1: of both CBS and Viacom. Doesn't she have enough power

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Speaker 1: in on CBS's board to to change the way this

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Speaker 1: is going. Yeah, I mean so you would you would

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Speaker 1: think so. But but but she she actually doesn't because

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Speaker 1: that she they've developed a special committee to to to

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Speaker 1: decide what are the next steps, and and so in theory,

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Speaker 1: she could come along and if the court doesn't UH

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Speaker 1: bar her from firing the board, uh, she she could

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Speaker 1: she could go ahead and do that if the court

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Speaker 1: doesn't step in about a minute, is this a gamble

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Speaker 1: by Moonvest? Could it lead to his being ousted from

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Speaker 1: the company? It definitely is a possibility. I think I

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Speaker 1: think this is a sign that you know, this is

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Speaker 1: sort of one of the last cards you want to

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Speaker 1: play to to elevate this to such a level, to

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Speaker 1: to make take the fight so public. But I think

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Speaker 1: I suspect that that Moonvest had had reached the conclusion

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Speaker 1: that that there weren't many other options, and and so

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Speaker 1: the best course now would be to to elevate this

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Speaker 1: and to uh to propose this vote on Thursday, this

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Speaker 1: very dramatic vote to limit national amusements control and and

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Speaker 1: to to make this sort of preemptive court filing to

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Speaker 1: try to UH dissuade Redstone National Amusements from from stopping it.

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Speaker 1: It is a fascinating They should actually be a show

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Speaker 1: on TV, actually of made for TV movie. Thanks so much, Matt.

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Speaker 1: That's Matthew Shettenhelm, media analyst, media litigation analyst for Bloomberg

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Speaker 1: Intelligence and you can get more of his analysis at

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Speaker 1: b I go on the Bloomberg terminal. In a landmark

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Speaker 1: decision on Monday, the Supreme Court struck down the federal

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Speaker 1: law that banned sports gambling, ruling it was unconstitutional that

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Speaker 1: free states to legalize betting on sports and starts a

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Speaker 1: race to attract billions of dollars in bets. It also

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Speaker 1: begins a new era for sports leagues. Steve pel Yucca

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Speaker 1: is co owner of the Boston Celtics and co chairman

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Speaker 1: of Bain Capital. My understanding is the ruling is actually

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Speaker 1: focused on states rights more than anything else, So we'll

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Speaker 1: see how that plays out. Um, they have gambling all

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Speaker 1: over the rest of the nations, and as you know,

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Speaker 1: in the UK, soccer gambling, so I think it will

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Speaker 1: play out as a state's rights ruling. For nearly twenties

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Speaker 1: six years, Nevada has been the only state with legal

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Speaker 1: sports betting. Now, it's expected the number of states to

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Speaker 1: allow legal gambling might reach double digits by the end

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Speaker 1: of this year. Joining me is Nicholas Castiello, chair of

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Speaker 1: the Gaming Practice group at Fox Rothschild. Nick. New Jersey

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Speaker 1: fought to overturn this law for seven years, and that

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Speaker 1: state is ready. More than a dozen other states have

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Speaker 1: introduced sports gambling bills. What's the likely scenario? How the

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Speaker 1: play out? Well, let's start with New Jersey for example.

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Speaker 1: M New Jersey is in a very unusual position because

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Speaker 1: when it first alenge the past but the the statute

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Speaker 1: prohibiting sports betting, UM, it did so directly head on.

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Speaker 1: It enacted legislation authorizing sports betting. New Jersey lost before

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Speaker 1: the district Court, lost before the Court of Appeals. Supreme

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Speaker 1: Court denied sirt. Then New Jersey took a different approach. UM.

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Speaker 1: It eliminated all regulation of sports betting with respect to

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Speaker 1: casinos and race tracks and argued to the Supreme Court

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Speaker 1: that therefore they were not violating past. But and that's

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Speaker 1: the case that the court just decided. So New Jersey

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Speaker 1: right now does not regulate sports betting for casinos and

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Speaker 1: race tracks. UM. That, of course, is going to have

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Speaker 1: to change is likely to change because um, New Jersey

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Speaker 1: does not want it unregulated, and if it's unregulated, it's

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Speaker 1: not taxed. So other states will have to pass laws.

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Speaker 1: Is that right? Yes, depends upon the states. Some states

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Speaker 1: will have to also amend their constitutions. So some states

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Speaker 1: have constitutions that only permit forms of gambling that have

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Speaker 1: been authorized by a referendum. So for example, well, actually

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Speaker 1: New Jersey falls into that category. Um, New Jersey's constitution

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Speaker 1: prohibits gambling unless it has been authorized by a public referendum.

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Speaker 1: Now unfolds into that category in Maryland, Um, it takes

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Speaker 1: a three fifth vote of both houses of the legislature

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Speaker 1: and then a public referendum. Then there are states where

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Speaker 1: the constitution does not generally prohibit gambling. Those states can

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Speaker 1: simply in that legislation. Those states will be able to

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Speaker 1: act a little bit quicker than those states that require

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Speaker 1: constitutional amendments, which can take two or three years. The

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Speaker 1: four major professional leagues in the US and the n

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Speaker 1: c double A spent years fighting with New Jersey fighting

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Speaker 1: against New Jersey's challenge to the federal band, but recently

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Speaker 1: the NBA and the MLB have been lobbying states to

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Speaker 1: get a percentage of the amount wagered. Are they likely

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Speaker 1: to get that? Again, it's going to depend on the state.

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Speaker 1: I think New Jersey's position is clear um in that

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Speaker 1: while a bill was introduced on May seventh in New

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Speaker 1: Jersey that would regulate sports betting at casinos and racetracks UM,

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Speaker 1: and it includes what is called in gritty fee that

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Speaker 1: would be paid to the league's supposedly to help the

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Speaker 1: league's um enforce rules to prevent um, you know, any

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Speaker 1: untoward activities by players or gamblers. But some of the

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Speaker 1: leaders of the legislature have already come out and said,

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Speaker 1: we just spent it and a half million dollars fighting

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Speaker 1: the league's in cores for years. We're not going to

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Speaker 1: pay them an integrity faith. Other states have agreed in

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Speaker 1: legislation to an integrity fe UM. The NFL said Monday

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Speaker 1: that it wants Congress to enact legislation on legalized sports betting,

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Speaker 1: and there is a bill that's going to be introduced already.

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Speaker 1: Is that likely to happen? I think there's well, that's debatable.

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Speaker 1: I think it's it is unlikely to happen. UM. The

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Speaker 1: federal government does not generally regulate gambling of any sort. Um.

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Speaker 1: Most of the federal statutes that make gambling a crime

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Speaker 1: require that there be an underlying violation of state law.

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Speaker 1: So traditionally gambling has been left up to the states. UM.

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Speaker 1: I can understand where the leagues are coming from and

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Speaker 1: that they want to see that there is some sort

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Speaker 1: of uniformity among the states, especially with respect to the

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Speaker 1: standards for licensing of operators and vendors to again protect

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Speaker 1: the integrity um uh. When internet gaming first became popular, um,

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Speaker 1: some of the casino operators and other supported toural legislation

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Speaker 1: that would essentially establish a federal system of regulation with

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Speaker 1: certain integrity standards. The statute actually said that, you know,

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Speaker 1: the federal government would regulate it, but it could approve

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Speaker 1: regulation by different states so that you could avoid going

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Speaker 1: through the federal process. That went nowhere. It was tried

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Speaker 1: several times and it went nowhere. Um. That may be

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Speaker 1: the outcome here as well. But this is a very

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Speaker 1: sensitive issue I think in this country. UM. Sports betting,

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Speaker 1: you know, there's a there's a long history here. UM. Well,

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Speaker 1: the American Gaming Association estimates that Americans illegally wager about

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Speaker 1: a hundred fifty billion on sports each year. So is

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Speaker 1: there really going to be any real impact on the

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Speaker 1: public or on the sport. Well, um, uh act on

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Speaker 1: the public and the sport um hopefully UM by regulating it,

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Speaker 1: legalizing and regulating it. Of course, the states will be

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Speaker 1: able to generate tax revenues from it. Um. Will legalization

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Speaker 1: stop illegal gambling? I don't think so. It will likely

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Speaker 1: put a dent in it. UM, But I think you

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Speaker 1: also have to keep in mind that then we've got

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Speaker 1: to stop you there, UM, come to the end of

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Speaker 1: our time. That's Nicholas Castello of Fox Rothschild. Thanks for

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Speaker 1: listening to the Bloomberg Law Podcast. You can subscribe and

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Speaker 1: listen to the show on Apple Podcasts, SoundCloud, and on

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Speaker 1: bloomberg dot com slash podcast. I'm June Rosso. This is

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Speaker 1: Bloomberg