# Kalshi Win & DOJ Tries to Shield Its Lawyers

An episode of [Bloomberg Law](https://invisiblenetwork.ai/podcast/277975394), 8 Apr 2026, 32 min.

Audio: https://podtrac.com/pts/redirect.mp3/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/7c892d84-801f-4c0b-b0e9-ae2b0012ff5f/e68ef89a-c669-43ec-a5b6-b4260030b19c/audio.mp3?utm_source=Podcast&in_playlist=91224201-26a6-429d-ac3c-ae2b0012ff6d

Elliott Stein, Bloomberg Intelligence senior litigation analyst, discusses Kalshi winning the first appellate decision in the fight over who will regulate the predictions markets. Former federal judge Jeremy Fogel, who served on the US District Court for the Northern District of California, discusses the objections to the Justice Department’s proposed rule that would shield its attorneys from investigations by state disciplinary boards. June Grasso hosts. See omnystudio.com/listener for privacy information.

## Transcript

[0:02] Speaker 1: This is Bloomberg Law with June Grosseo from Bloomberg Radio.
[0:08] Speaker 2: Calshi won the first appellate court victory in the battle
[0:12] Speaker 2: over who gets to oversee the fast growing prediction markets,
[0:16] Speaker 2: the States or the Commodity Futures Exchange Commission. In a
[0:21] Speaker 2: two to one decision, the Third Circuit Court of Appeals
[0:24] Speaker 2: told New Jersey state officials that the CFTC regulates the platform.
[0:30] Speaker 2: Calshy has had mixed results in lower courts arguing that
[0:34] Speaker 2: it should be overseen by the CFTC rather than state officials.
[0:39] Speaker 2: But this is just the first appellate court decision on
[0:42] Speaker 2: an issue that's likely to reach the Supreme Court. Joining
[0:46] Speaker 2: me is Elliott Stein, senior litigation analyst at Bloomberg Intelligence.
[0:50] Speaker 2: Elliott tell us about the legal battle that's been going
[0:53] Speaker 2: on between the prediction markets and the states.
[0:57] Speaker 1: Yeah, this litigation has been going on for over eight
[1:00] Speaker 1: year now, and we have cases all over the country
[1:04] Speaker 1: in multiple state courts, multiple federal courts. And essentially it
[1:08] Speaker 1: started when states started sending season desist letters. Some states
[1:13] Speaker 1: started sending season desist letters to the prediction markets like
[1:17] Speaker 1: Calshie Speaking to stop them from operating in those states.
[1:21] Speaker 1: Because the States viewed those products is gambling, and the
[1:24] Speaker 1: prediction markets, in particular Calci at that point sued the
[1:29] Speaker 1: States sort of preemptively to stop the States from filing
[1:34] Speaker 1: an enforcement action against them, and the prediction markets argument
[1:39] Speaker 1: is that these are derivatives that should be regulated by
[1:42] Speaker 1: the CFTC, and under the Commodity Exchange Act, states are
[1:47] Speaker 1: preempted from regulating them as gambling. And the States of
[1:50] Speaker 1: course take the position that these products are really gambling
[1:53] Speaker 1: in effect and they should be regulated as such.
[1:57] Speaker 2: How are they not gambling? I mean you're placing a
[2:00] Speaker 2: wager on an outcome.
[2:02] Speaker 1: I mean there are some differences. And the event contracts
[2:05] Speaker 1: that the prediction markets offer, you really have two sides
[2:08] Speaker 1: to the contract. You you know, parties on both sides,
[2:11] Speaker 1: as opposed to your traditional gambling and betting apps where
[2:17] Speaker 1: consumer is really betting against the house. And event contracts,
[2:22] Speaker 1: like other derivatives, are you know, contracts that you can
[2:25] Speaker 1: get in and out of and sell, which is also
[2:28] Speaker 1: a difference, you know, But really it comes down to
[2:31] Speaker 1: the statutory language and the Commodity Exchange Act and whether
[2:34] Speaker 1: these event contracts fall into the definition of swaps, which
[2:38] Speaker 1: is very broad in the Commodity Exchange Act, and then
[2:42] Speaker 1: related to that is whether Congress intended to preempt states
[2:47] Speaker 1: from regulating these products.
[2:49] Speaker 2: There are different decisions in courts around the country. I mean,
[2:53] Speaker 2: which side is winning more of those lower court arguments.
[2:57] Speaker 1: Like you said, we have multiple decisions now at the
[3:00] Speaker 1: trial court level. It's funny. The first decisions came almost
[3:04] Speaker 1: exactly a year ago in April of twenty twenty five
[3:07] Speaker 1: with respect to these sports event contracts, and Calci won those.
[3:11] Speaker 1: They want a preliminary injunction in Nevada, they want a
[3:14] Speaker 1: preliminary injunction in New Jersey, and so you know, they
[3:19] Speaker 1: sort of came out of the gate winning. Then shortly thereafter,
[3:23] Speaker 1: in August, I believe a federal court in Maryland ruled
[3:27] Speaker 1: against Calci and ruled in the states favor. And since
[3:30] Speaker 1: then we've had probably more trial court rulings going in
[3:33] Speaker 1: favor of the states, because you've had decisions in Ohio
[3:38] Speaker 1: and in Michigan. I believe in favor of the states.
[3:41] Speaker 1: You had a state court in Massachusetts issue of preliminary
[3:45] Speaker 1: in junction in favor of the state against Calshi as well.
[3:48] Speaker 1: So I would say, you know, up until yesterday's decision
[3:51] Speaker 1: by the Third Circuit Court of Appeals, you sort of
[3:53] Speaker 1: had more federal courts ruling in favor of the states,
[3:56] Speaker 1: but you did have some like I mentioned New Jersey
[3:58] Speaker 1: and also Tennessee ruined favor of Calci. Then a bad
[4:01] Speaker 1: decision I mentioned earlier was interesting because the judge there,
[4:04] Speaker 1: even though a year ago he ruled in favor of Calci,
[4:06] Speaker 1: more recently in October, he sort of changed his mind
[4:10] Speaker 1: and ruled in favor of Nevada, and that set off
[4:14] Speaker 1: sort of a cascading series of events in Nevada litigation,
[4:17] Speaker 1: which is all going to be tied up in the
[4:18] Speaker 1: Ninth Circuit next week.
[4:20] Speaker 2: Tell us what the Third Circuit decided in a two
[4:23] Speaker 2: to one.
[4:24] Speaker 1: Decision, So, like you said, this is a split decision,
[4:26] Speaker 1: but the majority ruled that the definition of swaps under
[4:30] Speaker 1: the Commodity Exchange Act is very broad and is broad
[4:32] Speaker 1: enough to encompass event contracts like those that are offered
[4:36] Speaker 1: by the likes of Calci and other designated contract markets dcms,
[4:40] Speaker 1: and that under the Commodity Exchange Act, the CFTC has
[4:44] Speaker 1: exclusive jurisdiction over swaps that are traded on designated contract markets.
[4:51] Speaker 1: And as a result, states are preempted from regulating them
[4:54] Speaker 1: as gambling. Those are like sort of the two main issues,
[4:57] Speaker 1: and those are the same issues that we see decided
[5:00] Speaker 1: in the trial court. But yesterday's decision by the Third
[5:03] Speaker 1: Circuit is the first time that we have very federal
[5:05] Speaker 1: appeals court rule on these issues in any sort of substance.
[5:10] Speaker 2: The dissenting judge, Jane Richards Roth wrote that Calsh's actions
[5:14] Speaker 2: are a performative slight meant to obscure the reality that
[5:18] Speaker 2: Calshe's products are sports gambling, and she said that their
[5:23] Speaker 2: offerings were virtually indistinguishable from the betting products available on
[5:28] Speaker 2: online sports books like DraftKings and FanDuel.
[5:32] Speaker 1: Is she right, Well, it depends how you asked. Right,
[5:36] Speaker 1: Obviously the states that are trying to regulate these products
[5:40] Speaker 1: as game when thinks she's right. Obviously the prediction markets
[5:42] Speaker 1: thinks she's wrong. The majority of the judges on that
[5:45] Speaker 1: panel yesterday disagreed with her. But you know, she also
[5:48] Speaker 1: cited a presumption against preemption for things that states usually regulate,
[5:53] Speaker 1: like gambling. But you know, I tend to think the
[5:56] Speaker 1: prediction markets actually have the better statutory argument here. I
[5:59] Speaker 1: think the mood of the Exchange Act is pretty clear
[6:02] Speaker 1: that the CFCC has exclusive jurisdiction over swaps that are
[6:08] Speaker 1: traded on designated contact markets. You know, that doesn't mean
[6:11] Speaker 1: that states can't regulate your more traditional forms of gambling
[6:15] Speaker 1: because the Commodity Exchange Act doesn't stop them from doing that.
[6:19] Speaker 2: The Third Circuit covers Delaware, New Jersey, and Pennsylvania. Other
[6:24] Speaker 2: jurisdictions don't have to follow this ruling. So how important
[6:29] Speaker 2: is it.
[6:30] Speaker 1: It's important because it's the first federal appeals court to
[6:32] Speaker 1: weigh in on these issues, but it's not going to
[6:35] Speaker 1: be the last, right I mean, I mentioned earlier that
[6:38] Speaker 1: next week the Ninth Circuit is going to hold argument
[6:41] Speaker 1: in cases in Nevada concerning Calcey, robin Hood and poly Market.
[6:47] Speaker 1: The Maryland case that I mentioned earlier is going to
[6:51] Speaker 1: be argued in the Fourth Circuit next month in May.
[6:54] Speaker 1: The Massachusetts preliminary in junction that I mentioned earlier is
[6:57] Speaker 1: going to be argued in the Massachusetts Supreme Court also
[7:00] Speaker 1: next month in May. And then in the Sixth Circuit,
[7:04] Speaker 1: we have conflicting ruins from federal trial courts in Ohio
[7:08] Speaker 1: and Tennessee that is going to be argued sometime probably,
[7:11] Speaker 1: you know, in the second half of the year. So
[7:13] Speaker 1: we're going to have multiple decisions from multiple federal circuit courts,
[7:18] Speaker 1: and inevitably these cases are destined for the Supreme Court
[7:22] Speaker 1: because you're probably going to get conflicting rulings from some
[7:25] Speaker 1: of the circuit courts. And we're talking about issues of
[7:28] Speaker 1: federal preemption, which is a really important issue that the
[7:32] Speaker 1: Supreme Court likes to weigh in on.
[7:34] Speaker 2: In twenty eighteen, the Supreme Court freed the states to
[7:39] Speaker 2: legalize gambling on individual sporting events and struck down a
[7:43] Speaker 2: federal law that had barred single game gambling in most
[7:47] Speaker 2: of the country, saying it unconstitutionally forced states to maintain
[7:52] Speaker 2: their prohibitions. I mean, do you think that is an
[7:56] Speaker 2: indication of where the Supreme Court might stand on the
[8:00] Speaker 2: state's traditional role in regulating gambling.
[8:04] Speaker 1: I don't think so, because I think the issues here
[8:08] Speaker 1: are slightly different and have to do with what the
[8:11] Speaker 1: Commodity Exchange Act provides for and what Congress intended with
[8:15] Speaker 1: the Commodity Exchange Act going back multiple decades. And then
[8:19] Speaker 1: in nineteen seventy four, Congress basically gave the CFTC exclusive
[8:23] Speaker 1: jurisdiction over derivatives that trade on federally regulated exchanges. They
[8:30] Speaker 1: removed language that would have given states concurrent jurisdiction over
[8:34] Speaker 1: those products. And then in twenty ten you get the
[8:36] Speaker 1: Dodd Frank Act, which adds swaps to that language and
[8:42] Speaker 1: very clearly includes event contracts in the definition of swaps
[8:47] Speaker 1: and also gives the CFTC authority and discretion to ban
[8:55] Speaker 1: or reject event contacts that might be against the public interests.
[8:59] Speaker 1: So I think that's really what the focus is going
[9:01] Speaker 1: to be at the Supreme Court when these cases reached there,
[9:03] Speaker 1: just like it's been in the lower court.
[9:05] Speaker 2: So has the CFTC been regulating any of these prediction markets?
[9:10] Speaker 2: Have they done anything?
[9:12] Speaker 1: So the CFTC under the Biden administration actually they proposed
[9:16] Speaker 1: a rule that would have essentially banned contracts related to
[9:21] Speaker 1: elections and sports. When Kelsey first started offering election contracts
[9:29] Speaker 1: leading up to the twenty twenty four presidential election, the
[9:32] Speaker 1: Biden administration's CFTC tried to stop those. That was litigated
[9:37] Speaker 1: CALC won in the trial court and never really got
[9:41] Speaker 1: litigated fully in the Peals Court because then you had
[9:43] Speaker 1: the Trump administration come in and so the case sort
[9:46] Speaker 1: of went away, and it was around that time that
[9:48] Speaker 1: CALCI also started getting into sports event contracts, and the
[9:52] Speaker 1: CFTC at that point was a little bit in flux
[9:56] Speaker 1: as leadership was changing. It didn't do much until really
[9:59] Speaker 1: very recently in the last couple of months, where it
[10:03] Speaker 1: first revoked the Biden administration's proposed rule and then started
[10:08] Speaker 1: going down a path where it would read to its
[10:11] Speaker 1: own rule making. It issued staff advisory talking about, you know,
[10:16] Speaker 1: contacts that might be susceptible to manipulation and how the
[10:19] Speaker 1: exchanges have to be careful not to offer those and
[10:22] Speaker 1: should really consult maybe with the CFTC before listing those,
[10:25] Speaker 1: and it also issued an advanced Notice of proposed rule making,
[10:28] Speaker 1: which is the first step towards further rule making. So
[10:30] Speaker 1: the CFTC has started to get involved in this. It
[10:33] Speaker 1: has taken the side of the prediction markets and the
[10:35] Speaker 1: litigation in the Ninth Circuit it's filed. It's in the
[10:38] Speaker 1: amicus brief in support of the prediction markets because the
[10:42] Speaker 1: CFTC takes a position that these event contracts should be
[10:45] Speaker 1: regulated by the CFTC, not by the States. The CFTC
[10:48] Speaker 1: just last week sued three states to stop them from
[10:51] Speaker 1: trying to regulate these products as gambling. And so, you know,
[10:56] Speaker 1: we should see more developments in the area of rule
[10:59] Speaker 1: making as well in the coming months.
[11:00] Speaker 2: I would say, So, I mean, why is the CFTC
[11:04] Speaker 2: suing the States? Why isn't it leaving it up to
[11:07] Speaker 2: the prediction markets to sue.
[11:08] Speaker 1: Yeah, it's a little bit of a pile on. I
[11:10] Speaker 1: would say, I'm not sure that their lawsuits add much,
[11:16] Speaker 1: you know, beyond what the prediction markets lawsuits already are
[11:21] Speaker 1: trying to do. But you know, it's just a further
[11:23] Speaker 1: thumb on the scale, I think. But I'm not sure
[11:25] Speaker 1: it's going to change the outcome of the cases all
[11:28] Speaker 1: that much.
[11:29] Speaker 2: Thanks for joining me, Elliott. That's Bloomberg Intelligence seed litigation
[11:33] Speaker 2: analyst Elliott Stein coming up next on the Bloomberg Law Show.
[11:38] Speaker 2: The Department of Justice wants to put its attorneys above
[11:41] Speaker 2: state law. You're listening to Bloomberg With a new move,
[11:47] Speaker 2: the Justice Department appears to be attempting to get around
[11:50] Speaker 2: the scrutiny of their attorneys in disciplinary proceedings by state
[11:54] Speaker 2: bar associations. Under a proposed rule, the Attorney General could
[11:59] Speaker 2: pause or block state bar investigations into current and former
[12:03] Speaker 2: DOJ lawyers and former federal judges are warning that the
[12:08] Speaker 2: proposal violates the Constitution and would put Justice Department lawyers
[12:13] Speaker 2: above the ethical rules that govern every other attorney in
[12:17] Speaker 2: the country. Joining me is former federal judge Jeremy Fogel.
[12:21] Speaker 2: He was a District Court judge of the US District
[12:23] Speaker 2: Court for the Northern District of California. Judge Fogel, licensing
[12:28] Speaker 2: and regulation of lawyers has been the responsibility of the states.
[12:33] Speaker 2: Will you explain the legal basis for that and why
[12:37] Speaker 2: you think it's important.
[12:38] Speaker 3: It actually goes back to the constitutions. It's in the
[12:41] Speaker 3: tenth Amendment, and the tenth Amendment is one of the
[12:43] Speaker 3: amendments doesn't often get as much attention as some of
[12:46] Speaker 3: the others, but it's actually very important. And what it says,
[12:51] Speaker 3: in pretty plain language is that if the Constitution doesn't
[12:55] Speaker 3: give the federal government power to do something, then as
[12:59] Speaker 3: the power belong to the states, or it belongs to
[13:01] Speaker 3: the people. And there's lots of examples of that. You know,
[13:04] Speaker 3: Congress has the power to tax, Congress has the power
[13:07] Speaker 3: to regulate commerce. Congress has the power to wage war.
[13:10] Speaker 3: I mean, there's all these different things that Congress is
[13:13] Speaker 3: empowered to do in the Constitution. But if it's not
[13:16] Speaker 3: enumerated in there, or if it's not closely related to
[13:19] Speaker 3: one of the enumerated powers, then the Tenth Amendment says
[13:23] Speaker 3: that that is a power that belongs to the states.
[13:25] Speaker 3: The regulation of professions, including the legal profession, is not
[13:29] Speaker 3: mentioned anywhere in the Constitution. It's not a power that's
[13:32] Speaker 3: given to Congress. It's not a power that's given to
[13:35] Speaker 3: the president. So it is by constitutional order. It's a
[13:39] Speaker 3: power that belongs to the states. And historically it is
[13:43] Speaker 3: something that the states have always done. The states licensed lawyers,
[13:47] Speaker 3: the state's licensed doctors, the state's licensed teachers. You know,
[13:51] Speaker 3: any profession you can think of that requires licensing. The
[13:54] Speaker 3: licensing is done by the states, not by the federal government.
[13:58] Speaker 3: So that's the point. And it's not it's not in
[14:03] Speaker 3: a statute or anything like that. It's actually in the Constitution.
[14:06] Speaker 3: It's the way the Constitution divides the different powers of
[14:10] Speaker 3: the government.
[14:11] Speaker 2: What is the Justice Department proposing to do about ethical
[14:16] Speaker 2: violations by its attorneys.
[14:19] Speaker 3: Well, what they're proposing is that before a state can
[14:25] Speaker 3: conduct a disciplinary proceeding with regard to a DOJ lawyer,
[14:29] Speaker 3: to a federal lawyer, that they the Department of Justice
[14:34] Speaker 3: has the right to vet that complaint, to decide for
[14:39] Speaker 3: itself what the merits of the complaint are and whether
[14:43] Speaker 3: the complaint is justified or not. And while that's going on,
[14:47] Speaker 3: while they're doing that, the state is not empowered to
[14:51] Speaker 3: proceed against the lawyer. So it's kind of a pre
[14:55] Speaker 3: evaluation of what would be going on in the States,
[14:58] Speaker 3: and it can constitute interference depending on how long it takes.
[15:02] Speaker 3: So you know, they could look at it and say, well,
[15:04] Speaker 3: we're going to turn this around forty eight hours and
[15:06] Speaker 3: say we got some concerns. But what the regulation would
[15:10] Speaker 3: do is it simply says that it's up to the
[15:12] Speaker 3: Justice Department to conduct a review, doesn't provide how long
[15:15] Speaker 3: that review would take, even what kind of review would be.
[15:18] Speaker 3: And while that review is taking place, the states, the
[15:23] Speaker 3: other disciplinary authorities can't proceed to do anything with regard
[15:27] Speaker 3: to the lawyers that is unprecedented with regard to any
[15:31] Speaker 3: other kind of lawyer. So, you know, let's say it's
[15:33] Speaker 3: the law firm said, well, we don't want any of
[15:36] Speaker 3: our law firm members any of our partners or any
[15:39] Speaker 3: of our associates being disciplined by a state disciplinary body
[15:43] Speaker 3: until we've had a chance to do an internal investigation.
[15:45] Speaker 3: I don't think that would get very far. I mean,
[15:47] Speaker 3: I don't think there's any precedent for that. There's no
[15:51] Speaker 3: precedent that I'm aware of that gives a client, which
[15:54] Speaker 3: in this case is the federal government, gives the client
[15:57] Speaker 3: a right to conduct its own determination as to whether
[16:01] Speaker 3: there's been any ethical wrongdoing by one of its lawyers.
[16:04] Speaker 3: Every lawyer who works for the Department of Justice, to
[16:06] Speaker 3: my knowledge, is licensed by somebody, and they can't be
[16:10] Speaker 3: in are not licensed by the federal government. They're licensed
[16:12] Speaker 3: by a stay entity. For instance, in d C, which
[16:15] Speaker 3: is I think where a lot of this controversy is focused.
[16:18] Speaker 3: The lawyers who work for the federal government in DC
[16:23] Speaker 3: are licensed by the District of Columbia, and they have
[16:26] Speaker 3: their own bar association, and they have their own disciplinary authority.
[16:29] Speaker 3: And that's true in all of the other states. So
[16:32] Speaker 3: the idea that a client in this case, the federal
[16:36] Speaker 3: agencies that are represented by the Department of Justice and
[16:38] Speaker 3: the Department of Justice itself would have some right to
[16:42] Speaker 3: delay indefinitely the review of the actions of its own lawyers.
[16:48] Speaker 3: There is no precedent for that. And I think the concern,
[16:51] Speaker 3: certainly that our group, our Judges coalition has, and I
[16:54] Speaker 3: think that many judges have and many lawyers groups have,
[16:58] Speaker 3: is that that is simply an appropriate intrusion into the
[17:01] Speaker 3: power of states to regulate the lawyers who practiced there.
[17:06] Speaker 3: I think that's the that's the problem.
[17:08] Speaker 2: We've come to a time where recently there have been
[17:12] Speaker 2: actually hundreds of instances of Justice Department lawyers being scolded
[17:17] Speaker 2: by judges for making false, misleading or incomplete representations and
[17:23] Speaker 2: defense of some of the government's policies, you know, unprofessional conduct,
[17:29] Speaker 2: even failing to comply with court orders. Do you think
[17:32] Speaker 2: that this rule from the Justice Department, or the proposed
[17:36] Speaker 2: rule has anything to do with what's been happening in
[17:40] Speaker 2: federal courts.
[17:41] Speaker 1: I do.
[17:42] Speaker 3: And the reason I think that is that this move
[17:46] Speaker 3: to establish this regulation arose in the context of the
[17:51] Speaker 3: kinds of complaints that you're talking about. In other words,
[17:54] Speaker 3: that there were actions taken by federal judges, by federal
[17:58] Speaker 3: courts to raise the issue of non compliance with court
[18:02] Speaker 3: orders or unprofessional conduct or other things that DOJ lawyers
[18:06] Speaker 3: are alleged to have done, and it was in the
[18:08] Speaker 3: context of those kinds of complaints that this proposal emerged.
[18:14] Speaker 3: I don't know what was in the minds of the
[18:17] Speaker 3: Justice Department people who propose it. I'm not a mind reader,
[18:19] Speaker 3: but there certainly is a proximity in time to the
[18:23] Speaker 3: complaints and the emergence of this proposal. And one of
[18:27] Speaker 3: the things that happened was that the disciplinary entity in
[18:29] Speaker 3: the district of Columbia, where a lot of these lawyers
[18:32] Speaker 3: are licensed, began acting on some of these complaints. And
[18:36] Speaker 3: the response from the Justice Department was, Oh, this is
[18:39] Speaker 3: a political witch hunt. This is weaponization of the dissiplinary process.
[18:43] Speaker 3: They just don't like the way we're representing the president.
[18:46] Speaker 3: They don't like the way we're representing the Department of
[18:48] Speaker 3: Justice or the federal government, and so they're using disciplinary
[18:51] Speaker 3: proceedings as a tool, as a weapon to keep us
[18:56] Speaker 3: from doing the kind of work we want to do
[18:58] Speaker 3: for our clients. I think that's the rhetoric that has
[19:01] Speaker 3: accompanied the proposal, at least from some quarters, and I
[19:04] Speaker 3: can't read the minds of the regulatory authorities either. All
[19:07] Speaker 3: I can say is that the way the Constitution devised
[19:11] Speaker 3: these responsibilities. It's not the responsibility of the Department of
[19:15] Speaker 3: Justice to decide and make its own independent determination about
[19:19] Speaker 3: whether a complaint is justified and have that complaint be
[19:23] Speaker 3: a barrier to any discipline taking place. It's incumbent on
[19:26] Speaker 3: the disciplinary authorities to act responsibly and professionally in accordance
[19:31] Speaker 3: with the rules. And if there is some violation of
[19:33] Speaker 3: the rights of the lawyers, the lawyers have remedies. They
[19:36] Speaker 3: can go to court and say that they were denied
[19:38] Speaker 3: a fair hearing, they were denied due process, there wasn't evidence.
[19:42] Speaker 3: I mean my background as a legal ethics person that
[19:45] Speaker 3: goes back a long way. You know, certainly there have
[19:48] Speaker 3: been opportunities when lawyers feel that the discipline imposed on
[19:51] Speaker 3: them was excessive or unfair or not based on evidence.
[19:56] Speaker 3: They have remedies and sometimes they can get relief from
[19:59] Speaker 3: the court that oversee judicial discipline. So it's not that
[20:03] Speaker 3: they're without a remedy. But the idea is like, where
[20:05] Speaker 3: do you start and the history for two hundred and
[20:09] Speaker 3: fifty Well, we've been a country for a little less
[20:11] Speaker 3: two hundred and fifty years, but I mean throughout our
[20:13] Speaker 3: existence as a country that the regulation of lawyers is
[20:15] Speaker 3: done by state disciplinary bodies. If there's been some showing
[20:20] Speaker 3: that a lawyer's rights are violated, they have remedies, they
[20:23] Speaker 3: have appellate remedies in the disciplinary process, they have remedies
[20:27] Speaker 3: in court. So I think they're just turning it around
[20:29] Speaker 3: and they're saying, well, because we're right and the discilinary
[20:32] Speaker 3: authorities don't like what we're doing, we have the right
[20:35] Speaker 3: to stop them from acting. And I just I think
[20:37] Speaker 3: that's very problematic.
[20:39] Speaker 2: It would put Justice Department lawyers on a different level
[20:43] Speaker 2: than you know, every other lawyer appearing in court. So
[20:46] Speaker 2: would that be a violation of the McDaid Amendment.
[20:49] Speaker 3: Yes, that's why the McDade Amendment. That's that was its origins.
[20:53] Speaker 3: You know, it's a real privilege and an honor to
[20:55] Speaker 3: represent the United States government too. I mean, the DJ
[20:58] Speaker 3: has always enjoyed a very, very reputation. When I was
[21:01] Speaker 3: a federal judge, I was always very aware of that.
[21:04] Speaker 3: But that doesn't mean that you put any lawyer, whether
[21:07] Speaker 3: they work for DJ or whether they work for the
[21:10] Speaker 3: law firm of Smith and Jones, you don't put them
[21:12] Speaker 3: on a pedestal by virtue of who they represent, or
[21:16] Speaker 3: the kinds of cases they have, or the kinds of
[21:18] Speaker 3: positions they take. There are ethical responsibilities that lawyers have.
[21:23] Speaker 3: They apply equally to all lawyers in a particular jurisdiction.
[21:26] Speaker 3: And the whole point of McDade, and the whole point
[21:29] Speaker 3: of the history of this conversation is that the lawyers
[21:33] Speaker 3: of the DJ at the very least have the same
[21:36] Speaker 3: ethical responsibilities as every other lawyer. And I think culturally,
[21:40] Speaker 3: in terms of what the aspirations of DJ have been historically,
[21:44] Speaker 3: they try to be better. They try to really be
[21:46] Speaker 3: the model, the positive model for other lawyers. And I
[21:51] Speaker 3: have to say, and I've said this before, I always
[21:53] Speaker 3: have had a very high opinion of the DOJ lawyers
[21:57] Speaker 3: and the work that they do, and I know a
[21:59] Speaker 3: lot of other federal judg just do as well. I
[22:01] Speaker 3: think we've been very privileged to have that kind of
[22:04] Speaker 3: representation in our courts, and I think this particular controversy
[22:09] Speaker 3: really does not reflect well on DJ. There have been
[22:12] Speaker 3: instances of judges, even very conservative judges. I have to say,
[22:16] Speaker 3: this is not political. Some of the most withering criticisms
[22:19] Speaker 3: of DJ lawyers have come from very conservative judges, and
[22:22] Speaker 3: so the idea that they would have greater protection, or
[22:25] Speaker 3: that they would enjoy not a free pass, but at
[22:28] Speaker 3: least something that would allow them to prevent or slow
[22:31] Speaker 3: down a disciplinary process. I think that's very much anathetical
[22:35] Speaker 3: to the way DOJ has been regarded over the decades.
[22:39] Speaker 2: I wonder how this, if it would affect what happens
[22:43] Speaker 2: in the courtroom, because individual judges can still find Justice
[22:48] Speaker 2: Department lawyers in contempt, right, So would this kind of
[22:52] Speaker 2: a rule have any effect, you know, at the ground
[22:55] Speaker 2: level what happens in the courtroom.
[22:58] Speaker 3: Well, that's a really good question, and I think think
[23:00] Speaker 3: to be fair that the judges do retain their contempt powers.
[23:04] Speaker 3: There's nothing in this proposal that would take that away
[23:07] Speaker 3: from the courts. I have to say that the contempt
[23:09] Speaker 3: power is a very very significant power that judges have.
[23:13] Speaker 3: It's very rarely exercised if you look at the cases
[23:16] Speaker 3: where it's been threatened even I mean some of the
[23:18] Speaker 3: cases I can think of, and you probably can think
[23:20] Speaker 3: of too, where people were supposed to be brought to
[23:23] Speaker 3: court and the government said well, I'm sorry, they're in
[23:25] Speaker 3: El Salvador, they're in unto rest or something like that.
[23:28] Speaker 3: They were taken out of the country without the court's
[23:30] Speaker 3: knowledge or permission. Those are very tricky situations. Even in
[23:34] Speaker 3: those cases, the judges have used their contempt power in
[23:38] Speaker 3: a way to try to get a compliance. But as
[23:40] Speaker 3: far as I know, no government lawyer to my knowledge,
[23:43] Speaker 3: has actually been held in contempt. It's a very technical procedure.
[23:47] Speaker 3: It is used very rarely. It's not that it couldn't
[23:50] Speaker 3: be used, But I think one of the values of
[23:53] Speaker 3: the state disciplinary proceedings is that it isn't a question
[23:57] Speaker 3: of well, did you commit a contempt? Are you going
[23:59] Speaker 3: to be put in jail or or are you going to
[24:00] Speaker 3: be fine? There are other things that the state disciplinary
[24:04] Speaker 3: authorities can do to improve performance. They're really not meant
[24:07] Speaker 3: to be futative. I mean, if somebody does a really
[24:11] Speaker 3: bad thing and you know, they steal from clients or
[24:13] Speaker 3: they you know, they do things like that that are
[24:16] Speaker 3: completely inappropriate, there's no defense for it. They can be disbarred,
[24:19] Speaker 3: they can be prived of their right to practice law,
[24:21] Speaker 3: they can be suspended. But a lot of what state
[24:24] Speaker 3: disciplinary bodies do is they try to figure out what's
[24:26] Speaker 3: going on with the lawyer, Why do they do this,
[24:28] Speaker 3: what kind of remedial procedures can be put in place.
[24:31] Speaker 3: They have a much wider range of options in the
[24:34] Speaker 3: disciplinary process then there is in a formal contemp proceeding.
[24:37] Speaker 3: So the premise of your question is right. The courts
[24:40] Speaker 3: still have the power to impose direct discipline. The problem
[24:43] Speaker 3: is that not every case is one where you want
[24:44] Speaker 3: to hold a lawyer in contempt. Sometimes it's just a
[24:46] Speaker 3: matter of saying, you know, when you make reponitisment presentations
[24:50] Speaker 3: to the court, when you cite cases that don't exist,
[24:53] Speaker 3: when you claim ignorance of something that you actually know about,
[24:58] Speaker 3: you know, things like that needs to be some way
[25:01] Speaker 3: to get accountability for that. And that's traditionally what the
[25:05] Speaker 3: role of state disciplinary authorities has been.
[25:10] Speaker 2: Twenty state attorneys general submitted a letter to the Justice
[25:14] Speaker 2: Department on Monday laying out their opposition to a new
[25:17] Speaker 2: proposed rule by the department. Under the proposed rule, the
[25:21] Speaker 2: attorney general could pause or block state bar investigations into
[25:26] Speaker 2: current and former DOJ lawyers. The state attorneys general said
[25:30] Speaker 2: that would allow the DOJ to insulate employees accused of
[25:34] Speaker 2: professional misconduct and would infringe on the state's power to
[25:39] Speaker 2: discipline attorneys licensed in their jurisdictions. I've been talking to
[25:43] Speaker 2: former federal judge Jeremy Fogel, so, I mean, what's next
[25:48] Speaker 2: for this rule. Can the DOJ just you know, implement
[25:52] Speaker 2: it on its own and then I don't know, lawsuits.
[25:56] Speaker 3: Yeah, no, I think that's right. They've asked for comment.
[25:59] Speaker 3: They have to the federal law requires notice in comment period.
[26:03] Speaker 3: They've received thousands of comments, tens of thousands of comments.
[26:07] Speaker 3: They have been overwhelmingly negative, and they have made many
[26:12] Speaker 3: of the same points that I've tried to make with
[26:14] Speaker 3: you now and then some I think there's a sense
[26:17] Speaker 3: that this simply is not going to do. There have
[26:20] Speaker 3: been bar associations from around the country that have issued
[26:24] Speaker 3: statements saying how inappropriate this is. There have been disciplinary
[26:28] Speaker 3: bodies that have made the constitutional point that I tried
[26:32] Speaker 3: to make earlier. There's a sense that this simply is
[26:35] Speaker 3: not what the constitutional order requires in terms of the
[26:38] Speaker 3: regulation of lawyers. I have no knowledge as to whether
[26:41] Speaker 3: there are any favorable comments, but I mean there's certainly
[26:44] Speaker 3: an overwhelmingly negative reaction to the proposal that said DALJ
[26:49] Speaker 3: can implement it. They've asked for comments. They can decide
[26:52] Speaker 3: to ignore the comments or they can write the comments
[26:54] Speaker 3: off in some way and say that the result of
[26:57] Speaker 3: an organized political campaign or something like that. They can
[27:00] Speaker 3: implement it, and then I think somebody will litigate it
[27:04] Speaker 3: because it raises a constitutional issue, and I think, you know,
[27:08] Speaker 3: then we would see what happens with that. I'm pretty
[27:11] Speaker 3: comfortable with the tenth Amendment analysis they gave you before,
[27:14] Speaker 3: but I mean that would be up for an actual court.
[27:16] Speaker 3: I mean, I'm retired judge, I'm not a sitting judge.
[27:18] Speaker 3: It would be up to a sitting judge and appellate
[27:20] Speaker 3: courts if necessary, to review that issue. But I think
[27:23] Speaker 3: that is what would happen if they adopt the regulation.
[27:26] Speaker 2: We see instances of the Justice Department not obeying court orders.
[27:31] Speaker 2: You have judges giving specific orders nowadays. For example, a
[27:35] Speaker 2: person released from ice, you can't just release him outside
[27:39] Speaker 2: the facility he orsue. Has to be taken back to
[27:42] Speaker 2: their state and they have to be released with their belongings,
[27:45] Speaker 2: and you know, judges making these really specific orders in
[27:49] Speaker 2: order to ensure compliance. But still there seems to be
[27:53] Speaker 2: a lot of non compliance with judges orders. And you know,
[27:57] Speaker 2: as we talked about, there are either intentional or unintentional
[28:01] Speaker 2: misrepresentations made to judges. Have you ever seen a situation
[28:05] Speaker 2: like this before where it seems so pervasive through the system.
[28:10] Speaker 3: No, I have not, and I want to say two
[28:12] Speaker 3: things about that. First of all, we're talking in the
[28:16] Speaker 3: context of a particular view of what's happening. I think
[28:18] Speaker 3: people who would defend what the Justice Department is doing
[28:22] Speaker 3: would say that they're simply trying to do the right
[28:24] Speaker 3: thing with regard to immigration. And most of these things
[28:27] Speaker 3: have arisen in the context of immigration, not all of them,
[28:30] Speaker 3: but they're trying to do the right thing and the
[28:32] Speaker 3: courts are interfering. That's the way they're characterizing the situation
[28:37] Speaker 3: that we're in. They're just trying to get all the
[28:39] Speaker 3: people who don't have a right to be here out
[28:40] Speaker 3: of the country. And if there are some missed connections
[28:44] Speaker 3: or some information that doesn't get relayd I mean, it's
[28:47] Speaker 3: all in the context of the policy that they're trying
[28:50] Speaker 3: to enforce, and the courts are walking the policy that
[28:53] Speaker 3: the government wants to enforce and the president wants to report.
[28:55] Speaker 3: So there are people who see it that way, and
[28:58] Speaker 3: it's not like they're sitting around and saying, well, you know,
[29:00] Speaker 3: let's just ignore this court. Let's go out and violate
[29:03] Speaker 3: a court order. You know, they really think that what
[29:04] Speaker 3: they're doing is the right thing. I think you put
[29:08] Speaker 3: that up against the experience that judges have, which is
[29:12] Speaker 3: it kind of doesn't matter what your motivations are. You know,
[29:15] Speaker 3: when you are given a particular obligation to comply with,
[29:19] Speaker 3: you may not deport this person or you have to
[29:22] Speaker 3: produce this person in court within X number of hours
[29:25] Speaker 3: or days. And there's very specific and there's orders that
[29:28] Speaker 3: people can comply with. I think judges are not used
[29:31] Speaker 3: to having that not happen. And I think what you're
[29:35] Speaker 3: seeing is and again I want to stress this is
[29:39] Speaker 3: not just the Democrat appointed judges. I mean there are
[29:42] Speaker 3: some very conservative Republican appointed judges who have expressed exactly
[29:46] Speaker 3: these same frustrations. This is a sort of an across
[29:49] Speaker 3: the board concern. And you know, and I'll just make
[29:53] Speaker 3: this somewhat personal. I mean, I was a federal judge
[29:55] Speaker 3: for twenty years. As I said earlier, I trusted the
[29:58] Speaker 3: DJI had respected lawyers. It was hard to become an
[30:02] Speaker 3: assistant US attorney was a very competitive job, and they
[30:05] Speaker 3: got they got the best lawyers and most capable lawyers,
[30:08] Speaker 3: and I really trust them. And I think what I'm
[30:10] Speaker 3: what I'm hearing from so many former colleagues is I
[30:13] Speaker 3: don't trust them if they're telling me that defendant X
[30:17] Speaker 3: is going to be produced, the court wants defend and
[30:19] Speaker 3: X produced in court tomorrow, and then they come in
[30:22] Speaker 3: tomorrow and they say, oh, sorry, we can't find him,
[30:25] Speaker 3: or you know, we just found out that he's in
[30:27] Speaker 3: Al salbat, or we have no idea how that happened,
[30:29] Speaker 3: you know. And when that gets said, I think judges
[30:33] Speaker 3: are having a very very hard time believing that. And
[30:36] Speaker 3: so you can get I'm not going to mention judges
[30:39] Speaker 3: by namebody, you can get people across the spectrum philosophically
[30:44] Speaker 3: who say I made a really specific order, I made
[30:46] Speaker 3: a really specific request, and you came into court and
[30:49] Speaker 3: you didn't tell me the truth. You know that that
[30:51] Speaker 3: is a serious concern within the judiciary. And that's the
[30:56] Speaker 3: other side of the context. I mean, you have the
[30:57] Speaker 3: people saying, you know, why are these federal judges blocking
[31:01] Speaker 3: the president's agenda, And then you have the federal judges saying, hey,
[31:03] Speaker 3: wait a minute. You know we've got a court to
[31:05] Speaker 3: round here. We've got rules. We have ethical responsibilities that
[31:08] Speaker 3: lawyers have, and when they don't meet them, that's a
[31:12] Speaker 3: fundamental challenge to the system. So I think that's sort
[31:16] Speaker 3: of the context in which this is happening and thinks
[31:20] Speaker 3: why it matters so much.
[31:21] Speaker 2: Thanks so much, Judge Fogel. I appreciate your taking the
[31:23] Speaker 2: time to talk to me. That's former federal judge Jeremy Fogel,
[31:27] Speaker 2: and that's it for this edition of The Bloomberg Law Show.
[31:30] Speaker 2: Remember you can always get the latest legal news on
[31:32] Speaker 2: our Bloomberg Law Podcast. You can find them on Apple Podcasts, Spotify,
[31:37] Speaker 2: and at www dot Bloomberg dot com, slash podcast Slash Law,
[31:42] Speaker 2: and remember to tune into The Bloomberg Law Show every
[31:45] Speaker 2: weeknight at ten pm Wall Street Time. I'm June Grosso,
[31:49] Speaker 2: and you're listening to Bloomberg

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