# States Fight Live Nation Settlement & Who Is Betting on War?

An episode of [Bloomberg Law](https://invisiblenetwork.ai/podcast/277975394), 12 Mar 2026, 39 min.

Audio: https://podtrac.com/pts/redirect.mp3/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/7c892d84-801f-4c0b-b0e9-ae2b0012ff5f/98245bbe-4266-4b43-ba0a-b40b004e4675/audio.mp3?utm_source=Podcast&in_playlist=91224201-26a6-429d-ac3c-ae2b0012ff6d

Antitrust law professor Harry First of NYU Law School, discusses State Attorneys General objecting to the Justice Department’s stunning settlement of its landmark antitrust case against Live Nation. Then business law professor Eric Talley of Columbia Law School, co-host of the “Beyond Unprecedented” podcast, discusses the questions around winning bets on the start of US strikes against Iran on Polymarket, one of the world’s largest prediction markers. 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 1: It's a pretty bad deal. So the core issue here
[0:12] Speaker 1: was that Live Nation and a ticketmaster when they merged
[0:14] Speaker 1: a few years back, they became so powerful that they
[0:17] Speaker 1: were able to raise ticket prices.
[0:20] Speaker 2: Republican and Democratic attorneys general are among those who are
[0:24] Speaker 2: not happy with the Justice Department's sudden mid trial settlement
[0:29] Speaker 2: of its landmark anti trust case against Live Nation. North
[0:34] Speaker 2: Carolina Attorney General Jeff Jackson says it's a bad deal
[0:38] Speaker 2: that keeps Live Nations monopoly in place.
[0:42] Speaker 1: The vast majority of the ages who started on this
[0:45] Speaker 1: lawsuit are going to stay on this lawsuit. That's Republicans
[0:48] Speaker 1: and Democrats, a couple dozen of us from across the country.
[0:52] Speaker 1: We're working out the timeline, but we've told Life Nation
[0:54] Speaker 1: they can expect to see us back in court very soon.
[0:57] Speaker 2: Perhaps as soon as Monday, if settlement talks ordered by
[1:01] Speaker 2: the federal trial judge go nowhere. Joining me is anti
[1:05] Speaker 2: trust law expert Harry First, a professor at NYU Law School. Harry,
[1:11] Speaker 2: let's start with the trial judge's reaction to this surprise
[1:14] Speaker 2: settlement of the Justice Department with Live Nation. The judge
[1:21] Speaker 2: scolded everyone at a hearing on Tuesday. He said the
[1:25] Speaker 2: DOJ's lack of transparency about its settlement negotiations was mind
[1:30] Speaker 2: boggling and that the party's conduct here strains the bounds
[1:34] Speaker 2: of acceptable conduct. I mean, four days into the trial,
[1:39] Speaker 2: the secrecy, what's up?
[1:42] Speaker 3: Well, these are great questions. You know, we can speculate.
[1:46] Speaker 3: I'm glad to speculate, but we don't know for sure.
[1:49] Speaker 3: Here's my guess. My guess is the trial staff. They
[1:52] Speaker 3: have really top people trying this case. My guess is
[1:56] Speaker 3: they were blindsided. My guess is that they were not
[2:00] Speaker 3: involved in this settlement.
[2:04] Speaker 4: Just to guess.
[2:05] Speaker 3: These are real long serving professionals, both in and out
[2:09] Speaker 3: of the Justice Department. I think that this was done
[2:12] Speaker 3: above them. That's a guess. And the term sheet I've
[2:17] Speaker 3: never seen. This is the crazy term sheet. What is
[2:20] Speaker 3: this a deal? The term sheet is signed by the
[2:23] Speaker 3: acting Assistant Attorney General, not by anyone on the trial staff.
[2:28] Speaker 3: And for this to become a what's called a consent
[2:31] Speaker 3: decree that the judge enters, it's got to look a
[2:35] Speaker 3: little more formal than this. So whether they'll sign it
[2:38] Speaker 3: or not, I think would be a good question, and
[2:41] Speaker 3: I don't know. I think that's to look forward to
[2:43] Speaker 3: and blaming the states, I would be close to certain
[2:47] Speaker 3: that the States were completely out of the loop on this.
[2:50] Speaker 3: I think everyone was concerned that this case was going
[2:53] Speaker 3: to be sold out, and I mean sold out in
[2:57] Speaker 3: the literal sense that this was a political deal. And
[3:03] Speaker 3: you know, whether it's actual money changing hands or just
[3:06] Speaker 3: straight lobbying that this is another example of you know,
[3:10] Speaker 3: something happening like that, and you know, people were watching
[3:14] Speaker 3: this case to see if was ever going to go
[3:16] Speaker 3: to trial, you know, whether it would be settled out
[3:19] Speaker 3: before with exactly the thing that we see, which is
[3:22] Speaker 3: that Live Nation doesn't have to give up Ticketmaster.
[3:26] Speaker 2: The settlement doesn't address the main relief sought in the case,
[3:30] Speaker 2: which is which is Live Nations selling its Ticketmaster subsidiary.
[3:36] Speaker 2: I mean that was that the center of the case.
[3:39] Speaker 2: So what does the public get from this settlement?
[3:44] Speaker 3: A little bit older and deeper in debt. Wasn't that
[3:47] Speaker 3: the song? I don't think the public interest is served
[3:50] Speaker 3: by I think public gets very much. There may be
[3:53] Speaker 3: some money, who knows how much the states have to
[3:56] Speaker 3: agree to it. There's some pullback it wasn't clear who
[4:00] Speaker 3: owns what in these arenas. I don't know exactly. They
[4:03] Speaker 3: were negotiating the terms, you know, Sunday night before this
[4:07] Speaker 3: term sheet was released, so it really isn't isn't clear,
[4:12] Speaker 3: and if they have to, you know, go back on
[4:14] Speaker 3: some of the contracts, the exclusivity. The problem is not
[4:18] Speaker 3: in the formal contracts. The problem is in the economics
[4:22] Speaker 3: of this business and tying the ticket sellers to the talent.
[4:27] Speaker 3: I mean, that's what it is. And you're not going
[4:29] Speaker 3: to solve it by saying, excuse me, don't insist on
[4:33] Speaker 3: a contract. That's where they started out in twenty ten.
[4:37] Speaker 3: It never worked, it never will work. So it's just
[4:40] Speaker 3: really not something to advance the public interest. The second
[4:44] Speaker 3: part is some access to ticket Master's API so some
[4:50] Speaker 3: other ticketing company can do something. They actually tried this before,
[4:55] Speaker 3: that was part of the twenty ten settlement and one
[4:58] Speaker 3: of the things that happened is the company supposed to
[5:00] Speaker 3: give it access to it didn't want it. I mean,
[5:02] Speaker 3: it's just it's failed. Failed, and it fails because venues
[5:08] Speaker 3: will not want to offend Live Nation by using a
[5:12] Speaker 3: different ticketing company. And Live Nation has said it they
[5:15] Speaker 3: said in testimony. They said, you know, we're going to
[5:18] Speaker 3: make the choice that makes us the most money. Guess
[5:21] Speaker 3: what you know. So it's sad, but overlaying it is
[5:25] Speaker 3: this question of political influence, which has been the song
[5:31] Speaker 3: of anti trust from the beginning, and here we are again.
[5:35] Speaker 2: I think thirty nine state attorneys general are also part
[5:39] Speaker 2: of the case, and twenty seven states in DC asks
[5:43] Speaker 2: for a mistrial and also for sixty days so that
[5:47] Speaker 2: their attorneys can try to get up to speed to
[5:50] Speaker 2: try the case. Because the Justice Department was the lead
[5:52] Speaker 2: on the case. So the judge didn't rule on the
[5:55] Speaker 2: mistrial motion, but he required the top officials to stay
[5:59] Speaker 2: in the court house for the rest of the week
[6:01] Speaker 2: and try to hammer out a deal. I mean, what
[6:04] Speaker 2: are the chances of a deal zero to.
[6:07] Speaker 1: What?
[6:09] Speaker 3: Well, you never knowing these things. I mean, the states
[6:12] Speaker 3: are now in a tough spot. They were sitting there
[6:16] Speaker 3: watching the trial. They knew that this could blow up
[6:19] Speaker 3: at any point. I don't think they're surprised in that sense.
[6:22] Speaker 3: But of course there's a difference between sitting there watching
[6:25] Speaker 3: the trial and stepping you know, up there and trying
[6:29] Speaker 3: the cases before a jury. I don't know how it goes.
[6:31] Speaker 3: When you know, you can see why they'd want to mistrial,
[6:34] Speaker 3: not want to have to come before the jury without
[6:37] Speaker 3: the Justice Department there and say Hi, we're your new friends.
[6:42] Speaker 3: You remember those those other folks.
[6:44] Speaker 4: Do you explain this?
[6:45] Speaker 3: I don't know how that exactly that would work. This
[6:47] Speaker 3: is really weird. There have been cases well, one case
[6:52] Speaker 3: in which I'm familiar is the Microsoft case where states
[6:55] Speaker 3: and the federal government tried the case together and then
[6:58] Speaker 3: the Justice Department settled with Microsoft, but not all the
[7:03] Speaker 3: states did, and they continued to litigate the remedy but
[7:07] Speaker 3: not you know, whether there's a liability, so it's still
[7:10] Speaker 3: a little different. Didn't go so well for them, so
[7:14] Speaker 3: it's hard. They're in a hard position.
[7:17] Speaker 1: You know.
[7:17] Speaker 3: Maybe they can eke out some more something from Live Nation,
[7:22] Speaker 3: although I bet they don't. And you know, they either
[7:28] Speaker 3: are going to have to join the settlement or go
[7:31] Speaker 3: it alone. I think the judge is not going to
[7:33] Speaker 3: be too happy about a mistrial and starting over again.
[7:38] Speaker 3: And the only reason to do it, well, there are
[7:42] Speaker 3: two reasons. One is to get good law made, is
[7:44] Speaker 3: to get a verdict against Live Nation, and Ticketmaster will
[7:50] Speaker 3: help in some other private litigation, maybe not so much help,
[7:53] Speaker 3: but a little. And the second is that relief to
[7:57] Speaker 3: get to vestiture and you know, maybe they can make
[8:01] Speaker 3: the case if they've got the right experts, and that
[8:04] Speaker 3: this is the only way to solve this problem than
[8:06] Speaker 3: to have competition in ticketing, is to change the incentives
[8:10] Speaker 3: of the parties in this industry if.
[8:13] Speaker 2: You talk about you know, politics and the politics of
[8:16] Speaker 2: the states. For example, New York Attorney General Letitia James
[8:19] Speaker 2: has said that at least twenty five states in DC
[8:22] Speaker 2: are going to continue with the trial. The idea of
[8:25] Speaker 2: this suit is also popular with the public because buying
[8:29] Speaker 2: concert tickets has become a luxury item. Every time you
[8:33] Speaker 2: go to buy tickets on ticket Master, it seems like
[8:36] Speaker 2: the prices have climbed yet again. So what do the
[8:40] Speaker 2: states have to lose by going forward with the trial.
[8:43] Speaker 3: Well, part of the answer is that the remedy of
[8:46] Speaker 3: splitting them apart will not, you know, the day after
[8:50] Speaker 3: produce lower ticket prices. It's a market process, and you
[8:54] Speaker 3: hope that new companies will enter the ticketing business particularly
[8:59] Speaker 3: and bring some competition there. But you know, Taylor Swift
[9:03] Speaker 3: concerts are still going to be really expensive and there'll
[9:06] Speaker 3: still be resale markets and so it's a slow fix.
[9:10] Speaker 3: So yes, it looks attractive from the point of view
[9:13] Speaker 3: of the States and you know, pushing on and being
[9:16] Speaker 3: the public interest, but it is a longer term public interest.
[9:20] Speaker 3: So maybe there's some quick fix or something. Everybody who
[9:23] Speaker 3: bought a Taylor Swift ticket gets free out, but I
[9:27] Speaker 3: don't know, you know, get some money, so maybe they'll
[9:31] Speaker 3: increase the money in the pot. There's a lot of
[9:33] Speaker 3: money here.
[9:35] Speaker 2: So when the judge rejected the request and said that
[9:38] Speaker 2: if the parties truly want to settle, a deal could
[9:40] Speaker 2: be made within the week, and the Innaus attorney for
[9:43] Speaker 2: Live Nations, Dan Wall, said, I've done this for forty
[9:46] Speaker 2: five years and there's zero chance we get this done
[9:49] Speaker 2: by Friday. And the judge said, not with that attitude.
[9:53] Speaker 4: I love that.
[9:54] Speaker 3: That was great. Yeah, Dan Wall is very sure of himself.
[9:57] Speaker 3: Let's say, but the States have now apparently hired a
[10:00] Speaker 3: very very successful anti trust trial lawyer, Jeffrey Kessler. It's
[10:05] Speaker 3: a smart, sharp move, so they're not looking to you know,
[10:10] Speaker 3: just vanish, but they are up against a difficult tactical
[10:14] Speaker 3: position here, and they have to be sure that they
[10:18] Speaker 3: really want to go ahead and push for divestiture. It's
[10:21] Speaker 3: not impossible, but the States don't generally do so well
[10:26] Speaker 3: once they've been deserted by the Justice Department. There are
[10:29] Speaker 3: past cases, not always, but it's hard now. You know,
[10:33] Speaker 3: they need the experts, the economists, industry experts, and the
[10:37] Speaker 3: you know, they need a top lawyer. I guess they
[10:41] Speaker 3: have good lawyers in the house, but they've hired, you know,
[10:45] Speaker 3: a guy who could go up against Dan wall if there's.
[10:48] Speaker 2: No settlement of the judge says the trial's going to
[10:50] Speaker 2: restart on Monday with the same jury. It seems very
[10:54] Speaker 2: difficult for the States to just pick up now if
[10:57] Speaker 2: the judge doesn't give them more time. Okay, on Monday,
[11:00] Speaker 2: we're in court when you know, we haven't been prepping
[11:03] Speaker 2: the witnesses. We haven't been doing this.
[11:05] Speaker 4: Yeah, I don't know.
[11:06] Speaker 3: I don't know how actively involved they've been in trial
[11:11] Speaker 3: prep or how much is it always an underlying tension
[11:14] Speaker 3: between the States and the Feds even when they're trying
[11:17] Speaker 3: cases together. You know, playing with your friends doesn't always
[11:21] Speaker 3: go smoothly, even if you're good friends. But my guess
[11:26] Speaker 3: also is that the professionals on the staff. The trial
[11:30] Speaker 3: staff will not be the roadblocks, but the front office.
[11:36] Speaker 3: Who knows what they'll do with the witnesses they've got
[11:39] Speaker 3: and the information they've got, and how hard they'll make
[11:41] Speaker 3: it for the states. I don't know. To add one
[11:45] Speaker 3: other thing in there. In February, the head of the
[11:47] Speaker 3: any Trust Division was fired.
[11:49] Speaker 2: I was going to ask you about that. You know
[11:51] Speaker 2: where the anti trust division is going in trump second administration.
[11:57] Speaker 3: Yeah, Well, the speculation was, my speculation was that she
[12:01] Speaker 3: was told that she was going to have to settle
[12:03] Speaker 3: this case and she refused. This really is speculation. I
[12:07] Speaker 3: haven't read any reporting about it. In the grand scheme
[12:11] Speaker 3: of things, this barely caused a ripple, you know, in
[12:15] Speaker 3: the world. So the reporting was that she was fired,
[12:18] Speaker 3: not that she quit, you know. So all of this
[12:21] Speaker 3: sort of fits together in light of some other things
[12:24] Speaker 3: that have happened in antitrust as well as of course
[12:28] Speaker 3: the broader world.
[12:30] Speaker 2: I mean, the judge can always reject the settlement, right, So.
[12:34] Speaker 3: There's a legal process for the settlement itself. They have
[12:37] Speaker 3: to file what's called a competitive impact statement. They have
[12:41] Speaker 3: to let it open for public comment for a period
[12:44] Speaker 3: of time. Then there's a hearing before the judge. It's
[12:49] Speaker 3: called a Tonny Act, and the judge has to approve
[12:53] Speaker 3: the settlement as in the public interest. Now that, as
[12:57] Speaker 3: it's been interpreted over to time, does not give the judge,
[13:02] Speaker 3: you know, the broadest power to say this is a
[13:04] Speaker 3: crappy settlement, forget it, I want you to try this case.
[13:08] Speaker 3: But the judge does have some power and this will
[13:12] Speaker 3: certainly provoke a lot of public comment, and that's a
[13:16] Speaker 3: process that will go forward while the case is being tried. Apparently,
[13:20] Speaker 3: I mean there, I forget the exact time, but it's
[13:23] Speaker 3: say thirty or sixty days for comment that this has
[13:27] Speaker 3: to be put into a formal decree, yes, and the
[13:30] Speaker 3: judge has to eventually review it and approve it, and
[13:34] Speaker 3: then it can be appealed. Actually, so we're not at
[13:37] Speaker 3: the end of this process.
[13:39] Speaker 2: What do you make of the judge telling the attorneys
[13:41] Speaker 2: for a live nation the government, you know, this is it.
[13:43] Speaker 2: You can't go back on this.
[13:44] Speaker 3: Now, well, because you know, the second step in this
[13:49] Speaker 3: could be that the Justice Department moves to dismiss its complaint,
[13:53] Speaker 3: doesn't even go through the formal process. You know, we've
[13:58] Speaker 3: seen that where the Justice Department just says bye, we
[14:02] Speaker 3: haven't seen it in any trust cases because the anti
[14:05] Speaker 3: trust professionals really don't want to see a case where
[14:10] Speaker 3: parties promise to do something but it's not backed up
[14:13] Speaker 3: with the court decree. This consent decree. So I don't
[14:16] Speaker 3: really predict it here unless she's I've been pretty bad
[14:20] Speaker 3: at predicting things, so don't help me to to this.
[14:23] Speaker 2: I don't know about that. I'll also look back at
[14:25] Speaker 2: your score. Also, under this agreement, the government could sue
[14:29] Speaker 2: them again.
[14:31] Speaker 3: So as it's written, you know, this is not you know,
[14:35] Speaker 3: we're forever done. It's hard to know what to make
[14:38] Speaker 3: of that. I mean, the government has actually they did
[14:42] Speaker 3: sue in twenty ten when Ticketmaster acquired Live Nation and
[14:48] Speaker 3: entered into a consent decree. They re up the consent
[14:52] Speaker 3: decree in twenty nineteen where they threatened to sue again.
[14:55] Speaker 3: And then this is a suit with a different legal
[14:58] Speaker 3: theory that they out in twenty twenty four. So the
[15:02] Speaker 3: standard rule is the government is not stopped from, you know,
[15:07] Speaker 3: unless they've signed a piece of paper, from bringing a
[15:10] Speaker 3: new suit. So the answer to that is, yes, they
[15:13] Speaker 3: could bring another suit. I mean, in a way, it's
[15:16] Speaker 3: cold comfort we've now had from twenty ten to you know,
[15:20] Speaker 3: twenty twenty six. This monopoly. It's you know, they've made
[15:25] Speaker 3: a lot of money off of this. Thank you very much.
[15:28] Speaker 3: We could eventually sue them at some point.
[15:30] Speaker 2: When this settlement is actually turning out to be more
[15:33] Speaker 2: interesting than the trial in some ways. Thanks so much,
[15:36] Speaker 2: Harry for your insights. That's Professor Harry First of NYU
[15:41] Speaker 2: Law School. Prediction market platforms have soared in popularity in
[15:46] Speaker 2: recent years, testing legal and regulatory norms like never before,
[15:52] Speaker 2: although most have drawn a line at one category, direct
[15:56] Speaker 2: wagers on war. In fact, betting on war is prohibit
[16:00] Speaker 2: in the United States, as is insider trading. Despite that,
[16:04] Speaker 2: it seems to be flourishing on Polymarket, one of the
[16:08] Speaker 2: world's largest prediction markets, whose main exchange operates offshore and
[16:13] Speaker 2: outside the oversight of US regulators and now blockchain analysts
[16:19] Speaker 2: have flagged suspicious activity and lawmakers are calling for a crackdown.
[16:25] Speaker 5: Why.
[16:26] Speaker 2: The day before the US and Israel launched an attack
[16:29] Speaker 2: on Iran, there was a surge in big bets on
[16:32] Speaker 2: poly Market that correctly predicted the strike would happen. The
[16:36] Speaker 2: next day, bubble Map's Paris based company that tracks data
[16:41] Speaker 2: on crypto transactions, identified what it called six suspected insiders
[16:48] Speaker 2: who made a one point two million dollar wager that
[16:51] Speaker 2: correctly predicted the US would strike Iran. Joining me is
[16:56] Speaker 2: business law professor Eric Tally of Columbia Law School. He's
[17:00] Speaker 2: the co host of the Beyond Unprecedented podcast. Eric tell
[17:04] Speaker 2: us about the bets on Polymarket that are causing concern.
[17:09] Speaker 4: Yeah.
[17:09] Speaker 5: So, Polymarket is one of two major event driven contract
[17:17] Speaker 5: websites that people use that are basically prediction market, you know,
[17:21] Speaker 5: sort of platforms. And both Polymarket and Calshi had various
[17:26] Speaker 5: types of events, including events that might occur in Iran,
[17:30] Speaker 5: and many of those pertained to the continued integrity of
[17:35] Speaker 5: the Ayatola Kamenese regime in Iran and whether it would
[17:41] Speaker 5: still be you know, in power, say by the end
[17:44] Speaker 5: of February or by the end of the first week
[17:45] Speaker 5: of March. And these are essentially binary bets, you know,
[17:49] Speaker 5: they call them contracts, but they're essentially bets where you
[17:52] Speaker 5: can bet on yes or bet on no. And it
[17:56] Speaker 5: became pretty apparent in the hours before the Israeli and
[18:00] Speaker 5: US strike on Iran that ended up killing both Iotola
[18:04] Speaker 5: Khameni and many other senior members of the Iranian government
[18:09] Speaker 5: that there had been a lot of activity that was
[18:12] Speaker 5: essentially betting against the continuing viability of the how many
[18:17] Speaker 5: government passed in some future date. The interesting part about
[18:22] Speaker 5: this June is that while there were a lot of
[18:24] Speaker 5: bets that were being placed on this most were small
[18:27] Speaker 5: scale and kind of went on both sides of the transaction.
[18:30] Speaker 5: But there were some really big ones that got placed
[18:33] Speaker 5: literally within hours of the bombing, that were all betting
[18:37] Speaker 5: against the Iyatola's fate, and all of them at least
[18:41] Speaker 5: purportedly paid out. That gave rise, unsurprisingly to a pretty
[18:46] Speaker 5: significant kerfuffle about who created these brand new accounts, why
[18:50] Speaker 5: were they placing hundreds of thousands, even millions of dollars
[18:53] Speaker 5: in betting on this particular event when these accounts hadn't
[18:57] Speaker 5: made any bets before.
[18:59] Speaker 2: And which is a company that tracks data on crypto transactions,
[19:05] Speaker 2: identified what it called six suspected insiders who made one
[19:10] Speaker 2: point two million dollars in wagers that the US would
[19:13] Speaker 2: strike Iran Senator Chris Murphy was one of the people
[19:17] Speaker 2: who said, you know, it's insane that this is legal,
[19:20] Speaker 2: and he said that the unusual betting suggested that even
[19:26] Speaker 2: decision makers might have had a stake in the outcome,
[19:30] Speaker 2: which the White House denied. But insider trading look.
[19:34] Speaker 5: So a couple of points to pick apart in that statement.
[19:37] Speaker 5: The first has to do with is this in fact
[19:40] Speaker 5: legal or not legal?
[19:41] Speaker 4: Now?
[19:42] Speaker 5: You know, because prediction markets are new in the US,
[19:44] Speaker 5: there's still a battle raging about how exactly these contracts
[19:49] Speaker 5: get classified. I think most people think that they are
[19:52] Speaker 5: a type of derivative contract.
[19:55] Speaker 4: That's kind of my belief as well.
[19:57] Speaker 5: They tend to have a lot of the look and
[19:59] Speaker 5: feel of a lot of other call options, put options,
[20:02] Speaker 5: various exotic options that you can buy and sell on
[20:06] Speaker 5: the Chicago Mercantile Exchange. And so those are in fact,
[20:10] Speaker 5: to the extent that they are derivative contracts. They are
[20:13] Speaker 5: in fact regulated by the Commodities Future Trading Commission or
[20:17] Speaker 5: a CFTC, and that commission has a pretty robust insider
[20:22] Speaker 5: trading prohibition that we can talk a little bit about.
[20:25] Speaker 4: The specifics of.
[20:26] Speaker 5: But I think that the Senator, all due respect, might
[20:29] Speaker 5: be leaping to conclusions to say that this wasn't prohibited
[20:33] Speaker 5: by law. In addition, there are a lot of state
[20:36] Speaker 5: laws that might also sweep in to prohibit this type
[20:39] Speaker 5: of inside trading that can also.
[20:42] Speaker 4: Have criminal implications.
[20:44] Speaker 5: So, irrespective of current bills pending in Congress, this is
[20:49] Speaker 5: definitely something that I would expect that CFTC lawyers might
[20:54] Speaker 5: be kicking the tires off as to who did it.
[20:57] Speaker 5: We still don't really know. We don't know who the
[20:59] Speaker 5: owners of these accounts were. And you know, the fact
[21:02] Speaker 5: of the matter is this could range from anyone from
[21:05] Speaker 5: senior decision makers in the process in the room of
[21:09] Speaker 5: making these decisions, to potentially mid level staffers or even
[21:13] Speaker 5: White House interns who were asked to run papers back
[21:16] Speaker 5: and forth. One thing is kind of interesting, June, is
[21:19] Speaker 5: that you know, I don't know whether you have a
[21:21] Speaker 5: polymarket or calshy account.
[21:23] Speaker 2: Absolutely not.
[21:24] Speaker 5: Yeah, I'm just gonna say that there is a definite
[21:28] Speaker 5: generational skew on who has these accounts.
[21:31] Speaker 4: I have them.
[21:32] Speaker 5: But the only reason that I have these accounts is
[21:35] Speaker 5: that I teach finance to twenty four year olds and
[21:37] Speaker 5: they all have them, and so I have to kind
[21:39] Speaker 5: of get inside their head to figure out, you know,
[21:42] Speaker 5: how I'm going to present the material. So I would say, yeah,
[21:45] Speaker 5: it's certainly possible that senior leadership in the Trump administration
[21:49] Speaker 5: White House was engaged in some of this trading, but
[21:51] Speaker 5: I wouldn't be surprised if a twenty four year old
[21:54] Speaker 5: intern wasn't. Also, you know, asked to shuffle some papers
[21:58] Speaker 5: back and forth, put two and two together, and then
[22:00] Speaker 5: got on Calshi and you know, borrowed a bunch of
[22:02] Speaker 5: money to make a one directional bet.
[22:04] Speaker 2: The CFTC has the authority to investigate this, but Michael Sellig,
[22:10] Speaker 2: the chair, came out in February saying that he sees
[22:14] Speaker 2: the platforms as a way for society to channel the
[22:17] Speaker 2: wisdom of crowds for useful information, offering a check on
[22:21] Speaker 2: news media and other gatekeepers. And earlier this year the
[22:25] Speaker 2: CFTC withdrew a Biden era effort to prevent Calshie from
[22:30] Speaker 2: accepting bets on the outcome of sports events and political elections. So, first,
[22:35] Speaker 2: does the CFTC have the authority here to look into this?
[22:39] Speaker 2: And second are they likely to?
[22:42] Speaker 5: Yeah, it's a fine point, and maybe backing up a
[22:45] Speaker 5: little bit, one of the things that I have to
[22:47] Speaker 5: you know, impress upon my law students is that formal
[22:51] Speaker 5: legal differences don't always add up into substantive differences. So,
[22:55] Speaker 5: you know, one thing that I asked my students is
[22:57] Speaker 5: what's the difference between gambling, insurance, and buying and trading securities?
[23:03] Speaker 5: And many valiantly attempts to distinguish them, but the fact
[23:08] Speaker 5: of the matter is, June, they are all kind of
[23:11] Speaker 5: the same type of a thing. They're regulated very differently,
[23:14] Speaker 5: and so the boundaries of where one ends and one
[23:17] Speaker 5: begins it's really important from a legal perspective, but you know,
[23:20] Speaker 5: really the biggest difference between you know, insurance, gambling and
[23:24] Speaker 5: securities trading is how exciting is the thing that you're
[23:27] Speaker 5: trading on, and gambling is probably more more exciting than
[23:30] Speaker 5: any of them. The other thing, though, that is important
[23:33] Speaker 5: to keep in mind is that while the CFTC you
[23:36] Speaker 5: know spokesperson certainly has a point to say that prediction
[23:40] Speaker 5: markets are an important tool for marshaling the wisdom of
[23:46] Speaker 5: the crowd, there are at least two important caveats to that.
[23:50] Speaker 5: The first caveat is that if one allowed pretty much
[23:55] Speaker 5: unbridled insider trading in these circumstances, then you and I,
[24:00] Speaker 5: as people who don't have access to that type of
[24:02] Speaker 5: inside information are going to get wise to it pretty soon,
[24:06] Speaker 5: and we're going to realize that any bet that we
[24:09] Speaker 5: make on Calshi or polymarket, there's a good chance we're
[24:12] Speaker 5: going to be on the losing side of it because
[24:14] Speaker 5: we don't have as much information as the person that
[24:16] Speaker 5: we are essentially trading with on that platform. And so
[24:20] Speaker 5: one of the big conundrums with inside information and trying
[24:24] Speaker 5: to see how quickly we can get it infused into
[24:27] Speaker 5: the market is that if you basically say we're just
[24:30] Speaker 5: taking the breaks off completely, that can have a feedback
[24:34] Speaker 5: effect of causing all the uninformed people to say, I'm
[24:37] Speaker 5: just going to sit this dance out. I don't trust
[24:39] Speaker 5: these markets, and I'm not going to provide liquidity and
[24:42] Speaker 5: depth to these markets. So that's one thing to worry
[24:46] Speaker 5: about that even if you believe this idea that the
[24:49] Speaker 5: wisdom of crowds is really really important for things like
[24:52] Speaker 5: price discovery, and I do believe that, that doesn't necessarily
[24:57] Speaker 5: imply that you should basically take all the break breaks
[25:00] Speaker 5: off of insider trading, because it can undermine that very
[25:03] Speaker 5: market itself. The second thing that is probably worth keeping
[25:06] Speaker 5: in mind is that there are bets and there are bets. Right,
[25:10] Speaker 5: So if you and I were to make a bet
[25:12] Speaker 5: about I don't know Friday's temperature at noon in Botswana,
[25:17] Speaker 5: that's something that you know, there will be a temperature reading,
[25:20] Speaker 5: it will probably be trustworthy, and there is nothing that
[25:23] Speaker 5: you or I could do to influence the nature of
[25:27] Speaker 5: that outcome. On the other hand, if we are betting
[25:30] Speaker 5: on whether you know, the Yankees pitcher is next going
[25:35] Speaker 5: to throw a ball or a strike, or a curveball
[25:38] Speaker 5: or a fastball, and that picture himself is in you know,
[25:42] Speaker 5: contact with folks who are making those sorts of bets,
[25:45] Speaker 5: that's a highly manipulable decision, and there the wisdom of
[25:50] Speaker 5: crowds is almost self defeating. As soon as the wisdom
[25:53] Speaker 5: of crowds points in one direction are hypothetical, Yankees pitcher
[25:57] Speaker 5: is going to have an incentive to pitch in the
[25:58] Speaker 5: other direction to make money off of it. So they're
[26:01] Speaker 5: in situations where the thing that is being bet upon,
[26:05] Speaker 5: you know, is basically under the control of someone who
[26:08] Speaker 5: is either participating in those markets or has connections to
[26:11] Speaker 5: people that are participating in that market. They're you know,
[26:15] Speaker 5: I think people lose trust in these markets almost immediately,
[26:18] Speaker 5: and they don't actually even serve this idea of aggregating
[26:22] Speaker 5: preferences and beliefs in a.
[26:23] Speaker 4: Very effective way.
[26:25] Speaker 5: And so you know, where do we put things like
[26:27] Speaker 5: bombing of Iran? You know, that's kind of kind of
[26:31] Speaker 5: in the middle. It's a big decision. You and I
[26:33] Speaker 5: probably don't have an awful lot of influence over it,
[26:37] Speaker 5: but there may be a lot of people who either
[26:39] Speaker 5: know about it and want to go out and make
[26:42] Speaker 5: approximately infinity dollars off of the markets here, or you know,
[26:46] Speaker 5: are the decision makers in this area, which which creates
[26:49] Speaker 5: a second problem, right, which is that as soon as
[26:51] Speaker 5: they see money to be made by a particular decision.
[26:54] Speaker 5: You know, if they're engaged in these markets, do they
[26:56] Speaker 5: have an incentive to change their decision so as to
[26:59] Speaker 5: be able to cash out.
[27:00] Speaker 2: Just straighten one thing out for me. The CFTC does
[27:04] Speaker 2: prohibit these prediction markets from listing markets related to war
[27:09] Speaker 2: right now.
[27:09] Speaker 5: There is a prohibition in US trading on various types
[27:16] Speaker 5: of extremely sort of political type of events. But it's
[27:21] Speaker 5: very hazy, and so sometimes you know, something on the periphery,
[27:24] Speaker 5: like you know, will this administration be around in four months?
[27:28] Speaker 5: That's going to be something that gets wrapped up in
[27:31] Speaker 5: war as well. And so, you know, I think that
[27:33] Speaker 5: we're in the middle of this kind of process where
[27:36] Speaker 5: these platforms are trying to figure out, you know, what
[27:39] Speaker 5: can we allow and what should we disallow on these
[27:42] Speaker 5: platforms in ways that make people both participate and trust
[27:46] Speaker 5: these platforms as not basically being a suckers.
[27:49] Speaker 4: Play for people that don't have inside information.
[27:52] Speaker 5: And that's going to be very much in Calshing's and
[27:54] Speaker 5: polymarkets interests to try to try to do that, but
[27:58] Speaker 5: they're hardly ever going to be able to get it.
[28:00] Speaker 5: And a lot of times, you know, the underlying nature
[28:04] Speaker 5: of these of these securities bet if you will, are
[28:07] Speaker 5: essentially going to be around the fringes of what you know,
[28:10] Speaker 5: the designers of Calci and Polymarket are capable of anticipating
[28:13] Speaker 5: in advance.
[28:14] Speaker 2: Calhi faced backlash over a multimillion dollar market on whether
[28:19] Speaker 2: Commania would be ousted, and they actually issued refunds on
[28:24] Speaker 2: the market citing regulations barring wagers on death. Yeah, so
[28:29] Speaker 2: they self regulated.
[28:31] Speaker 5: They sort of self regulated, and you know, I think
[28:34] Speaker 5: that there is you know, in some ways because a
[28:37] Speaker 5: lot of these bets were very very one sided. Calshi
[28:40] Speaker 5: actually you know, faced possibly a little bit of exposure
[28:43] Speaker 5: on this as well, and so I think, you know,
[28:46] Speaker 5: some people are trying to say, was this Calshi basically
[28:48] Speaker 5: trying to cover their own backsides, or were they legitimately
[28:52] Speaker 5: trying to enforce a prohibition on various types of effectively
[28:57] Speaker 5: what becomes wagering at the form level, you know, where
[29:01] Speaker 5: they ended up sort of coming down was this sort
[29:03] Speaker 5: of I think a little bit of a messy distinction
[29:07] Speaker 5: between you know, were they going to pay off at all?
[29:09] Speaker 5: And if they were, were they going to pay off
[29:11] Speaker 5: only a portion of the wager that was put down?
[29:14] Speaker 5: And you know, I think that you know, created a
[29:16] Speaker 5: lot of ire amongst their clients who felt, you know,
[29:19] Speaker 5: maybe some of them honestly were you know, making a
[29:21] Speaker 5: wager in a direction that paid off and they didn't
[29:24] Speaker 5: have any inside information on and suddenly they were getting
[29:27] Speaker 5: short changed on it by the same token.
[29:30] Speaker 4: You know, these platforms absolutely have an incentive not to
[29:34] Speaker 4: develop a reputation as being kind of the place where
[29:37] Speaker 4: suckers go to lose their money.
[29:39] Speaker 2: Coming up next, what about possible prosecutions? This is Bloomberg.
[29:46] Speaker 2: I've been talking to Columbia Law School professor Eric Talley
[29:49] Speaker 2: about the controversy over Bett's placed on the prediction market
[29:54] Speaker 2: platform Polymarket, correctly predicting the US strike on Iran. So Liebruary,
[30:00] Speaker 2: Israeli authorities arrested several people and charged to a civilian
[30:05] Speaker 2: and a military reservist with using classified information to place
[30:10] Speaker 2: bets on Polymarket. Anyone in the US who used classified
[30:14] Speaker 2: information to place a bet, I mean it would be
[30:17] Speaker 2: subject to criminal prosecution. Right Is anybody looking into that?
[30:23] Speaker 2: Is there an agency besides the CFTC.
[30:26] Speaker 5: I'm pretty positive there are some state attorneys general that
[30:29] Speaker 5: are looking at this as well. One of the things
[30:31] Speaker 5: that's kind of interesting about this June is that it
[30:34] Speaker 5: gets a little bit into the details of how insider
[30:37] Speaker 5: trading law works, and there are a couple of theories
[30:40] Speaker 5: behind it, but the one that would most likely apply
[30:42] Speaker 5: to this situation is something that lawyers call the misappropriation theory,
[30:47] Speaker 5: and what it basically means is if my employer or
[30:52] Speaker 5: someone with whom I have some kind of a relationship
[30:54] Speaker 5: of trust and confidence reveals inside information to me that
[31:00] Speaker 5: is gonna happen with either the stated or implied a
[31:04] Speaker 5: restriction that I have to keep that confidential. So if
[31:07] Speaker 5: I go out and trade on it, then I have
[31:09] Speaker 5: breached that confidentiality, and that is effectively what triggers a
[31:14] Speaker 5: lot of criminal and civil liability for insider trading, the
[31:17] Speaker 5: fact that I've misappropriated, I've violated this order or this
[31:22] Speaker 5: command of confidentiality that came from the source, maybe it's
[31:25] Speaker 5: my employer or someone else. But the thing it's always
[31:28] Speaker 5: been weird about this theory, and that applies also in
[31:31] Speaker 5: the derivatives context, is that it hinges very very critically
[31:36] Speaker 5: on what does your employer permit and not permit, right,
[31:41] Speaker 5: And so you could, in principle, have an employer who
[31:44] Speaker 5: develops a lot of confidential information and their inside employee
[31:48] Speaker 5: policies say, you know what, rather than paying you salaries,
[31:51] Speaker 5: we're just going to let you trade rampantly on this
[31:54] Speaker 5: inside information. And the third parties, the third party suckers
[31:57] Speaker 5: who trade with these informed folks, they have no idea
[31:59] Speaker 5: even who they're trading with or what the inside policy
[32:02] Speaker 5: is of the employer. But that's going to have a
[32:04] Speaker 5: huge effect on whether there will be civil or criminal liability,
[32:08] Speaker 5: whether there was such a prohibition. So you transport this
[32:11] Speaker 5: over to the administration in which clearly for classified information
[32:16] Speaker 5: there's both an implicit and an explicit prohibition on, you know,
[32:21] Speaker 5: trying to make money off of your own private knowledge
[32:24] Speaker 5: of classified information. On the other hand, as we learned
[32:29] Speaker 5: from the first Trump administration's you know, classified documents Gate, right,
[32:34] Speaker 5: there's a big question about, well, what constitutes classified and
[32:37] Speaker 5: not classified and who gets to determine when something is
[32:40] Speaker 5: suddenly classified or declassified and when? And President Trump basically
[32:46] Speaker 5: made the claim on behalf of himself that as he
[32:49] Speaker 5: spirited these documents out of the White House at the
[32:51] Speaker 5: end of his first administration, he basically declared, possibly to
[32:56] Speaker 5: himself or possibly in passing, that they're all declassified now
[33:00] Speaker 5: therefore he doesn't have any liability. So query whether I
[33:04] Speaker 5: don't know some some staffer, employee or you know, person
[33:09] Speaker 5: higher up in the administration was placing some of these bets.
[33:13] Speaker 5: The way that it would trigger, you know, most directly
[33:17] Speaker 5: inside of trading prohibitions is because they were classified. If
[33:20] Speaker 5: you know, President Trump said, oh, no, I de classified
[33:22] Speaker 5: that in a meeting, that I did it orally, But
[33:25] Speaker 5: it's totally fine.
[33:27] Speaker 4: Who knows what's going to happen there now?
[33:29] Speaker 5: Having said that that doesn't necessarily take these folks off
[33:31] Speaker 5: the hook for state level offenses, and there are some
[33:34] Speaker 5: state level offenses that easily could be applied here. California
[33:37] Speaker 5: and New York have pretty rigorous prohibitions on inside trading transactions.
[33:42] Speaker 5: There are also various other types of provisions out there,
[33:46] Speaker 5: the wire fraud acts, the computer fraud and abuse acts
[33:49] Speaker 5: that might also kind of play a peripheral role in
[33:53] Speaker 5: this context. You know, at the federal level, that's only
[33:57] Speaker 5: going to be as strong as the stomach of the
[33:59] Speaker 5: federal prosecutors who are going to bring these cases. And
[34:02] Speaker 5: if they've gotten a command from on high that they
[34:05] Speaker 5: shouldn't bring any of them, then I think we're going
[34:07] Speaker 5: to be largely going to be left up to state
[34:10] Speaker 5: attorneys general.
[34:11] Speaker 2: Are they difficult to investigate because the main prediction platform
[34:16] Speaker 2: operates offshore, the bets are placed on the blockchain, the
[34:21] Speaker 2: identities of the accounts making the trades are anonymous. I mean,
[34:25] Speaker 2: let's say state attorneys general, would it be difficult for
[34:27] Speaker 2: them to get through all those layers?
[34:30] Speaker 5: Yeah, this has always been a difficult thing in investigating
[34:33] Speaker 5: trades made on the blockchain. Compared to ten years ago,
[34:36] Speaker 5: it's much easier to trace who, you know, the identity
[34:39] Speaker 5: of who was making these trades.
[34:40] Speaker 4: You know, where was this.
[34:41] Speaker 5: Wallet created, Who did the creation of this wallet. It's
[34:45] Speaker 5: possible to get that information. LIVA would rest on subpoena
[34:48] Speaker 5: power that might have to be applied extra territorially right
[34:51] Speaker 5: outside the country, because ice companies are based in Ireland
[34:55] Speaker 5: or England or Europe and so forth. So that creates
[34:58] Speaker 5: a stumbling block, not one that is necessarily insurmountable. I
[35:03] Speaker 5: could certainly imagine various regulators inside the EU or the
[35:09] Speaker 5: UK being equally worried about the use of prediction markets
[35:13] Speaker 5: for insider trading, and being perfectly willing to assist a
[35:17] Speaker 5: request from say the New York State Attorney General or
[35:20] Speaker 5: the California State Attorney General for some of that information,
[35:24] Speaker 5: or at least to say, yeah, we were willing to
[35:26] Speaker 5: serve your subpoena in Europe.
[35:30] Speaker 2: So, finally, Eric, what do you think about You know,
[35:32] Speaker 2: you talked about bills, and yesterday Senator Adam Schiff, Democrat
[35:36] Speaker 2: of California, introduced legislation seeking to explicitly ban any entity
[35:41] Speaker 2: regulated by the CFTC from listing a contract that involves
[35:44] Speaker 2: relates to a references terrorism, assassination, war or death. I mean,
[35:49] Speaker 2: what do you think about these bills? Long chances they
[35:51] Speaker 2: go through, But if they did, I think it's.
[35:54] Speaker 5: A valued attempt by center shif. I think there's a
[35:57] Speaker 5: couple things that are going to be challenged for it.
[36:00] Speaker 5: So thing one is that if you take a look
[36:03] Speaker 5: at that distinction that we talked about earlier between you know,
[36:07] Speaker 5: events that no one has much control over practically versus
[36:11] Speaker 5: events that that you know, decision makers do have control over.
[36:16] Speaker 4: You know, these things sit.
[36:17] Speaker 5: Right in the middle, right, terrorist events, war, you know,
[36:21] Speaker 5: in a lot of circumstances, those are completely extraneous events
[36:25] Speaker 5: to a lot of participants in these markets. And these
[36:28] Speaker 5: markets June are also you know, potentially helpful ways to
[36:31] Speaker 5: hedge various types of risk that you might bear. Right,
[36:33] Speaker 5: if you're running, I don't know, a wholesale operation that
[36:36] Speaker 5: requires shipping things through the strait of horror moves and
[36:41] Speaker 5: and you're quite worried that war is basically going to
[36:43] Speaker 5: shut down your business, you know, having some type of
[36:47] Speaker 5: insurance or a more exciting version of insurance, right, taking
[36:50] Speaker 5: a position in these in these prediction markets might be
[36:54] Speaker 5: a particularly good way to to try to hedge those risks.
[36:57] Speaker 5: So on some level, you know, is this just gonna
[37:00] Speaker 5: push things back into insurance markets that may be less
[37:04] Speaker 5: competitive than having more choices out there, So, you know,
[37:08] Speaker 5: I think that's gonna be, you know, potentially a problem.
[37:10] Speaker 5: I think another one is, you know, we're exactly do
[37:12] Speaker 5: you set the boundaries things like terrorism and war affect
[37:15] Speaker 5: a lot of other things that don't at least optically
[37:18] Speaker 5: look like their terrorism and war. Right, Like, you know,
[37:21] Speaker 5: does a prediction market contract that says, you know, we're
[37:25] Speaker 5: making predictions on how many ships are going to pass
[37:28] Speaker 5: through the strait of horror moves? Is it going to
[37:30] Speaker 5: be more than a hundred or less than one hundred,
[37:32] Speaker 5: you know a day in the month of April. Is
[37:35] Speaker 5: that a war contract? Or is that a shipping contract?
[37:38] Speaker 4: Right?
[37:39] Speaker 5: And you know, on some level it could be both.
[37:42] Speaker 5: And so I envision a lot a lot of sort
[37:45] Speaker 5: of boundary marking that's going to be heavily freighted, and
[37:48] Speaker 5: there's easy it's going to be easy to spot things
[37:50] Speaker 5: that ended up on the permitted side of the boundary
[37:53] Speaker 5: that pretty much look and walk and talk and act
[37:56] Speaker 5: as though they're a bet on war or terrorism, a lot.
[37:59] Speaker 2: More to come with these platforms. Thanks so much.
[38:02] Speaker 4: Eric.
[38:03] Speaker 2: That's Professor Eric Tally of Columbia Law School. His podcast
[38:07] Speaker 2: is called Beyond Unprecedented. And that's it for this edition
[38:11] Speaker 2: of The Bloomberg Law Show. Remember you can always get
[38:14] Speaker 2: the latest legal news on our Bloomberg Law podcasts. You
[38:17] Speaker 2: can find them on Apple Podcasts, Spotify, and at www
[38:21] Speaker 2: dot Bloomberg dot com slash podcast Slash Law, And remember
[38:26] Speaker 2: to tune into The Bloomberg Law Show every weeknight at
[38:29] Speaker 2: ten pm Wall Street Time. I'm June Grosso and you're
[38:32] Speaker 2: listening to Bloomberg

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