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Oregon & Illinois Sue Trump & Senior Leaders Exit DOJ
Oregon and Illinois have filed lawsuits against the Trump administration over the deployment of National Guard troops to their states, arguing that there is no legal basis for such actions. The discus...
Oregon & Illinois Sue Trump & Senior Leaders Exit DOJ
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Speaker A
This is Bloomberg Law with June Grosso from Bloomberg Radio. The place is burning down and they pretend like there's nothing happening.
Speaker C
Facts on the ground in Oregon haven't changed. There's no need for military intervention in Oregon.
Speaker D
There's no insurrection in Portland. There's no threat to national security. Oregon is our home. It is not a military target. President Trump still maintains that Portland is burning to the ground and is war ravaged, despite what the governor of Oregon, Tina Kotek, has said, and despite the fact that a federal judge found over the weekend that there were no facts to support Trump's claims that anarchists and professional agitators were trying to burn the city down. Judge Karen Immergut, a Trump appointee, issued two orders in two days. The the first blocked the Trump administration from deploying Oregon National Guard troops to Portland. But the judge said the administration directly contravened that order by calling up the California Guard. So she issued a second order blocking the administration from sending any National Guard troops into Portland. Oregon's Attorney General, Dan Rayfield, described the administration's actions as whack a mole trying to use Guard units from different states to get around court orders and the rule of law.
Speaker A
The judge's order was not some minor procedural point for the president to work around like my 14 year old does when he doesn't like my answers.
Speaker D
Judge Immergut's ruling found that the Constitution leaves policing powers to state and local governments, while granting Congress the power to call up state. State militias to execute federal laws, suppress insurrections, and repel invasions. This is a nation of constitutional law, not martial law. My guest is constitutional law expert Harold Krent, a professor at the Chicago Kent College of Law. So, Hal, quite an opinion from a Trump appointee. And she said the administration had violated her order. It seems like this is a direct contravention of the order this court issued yesterday. Tell us what the Trump administration was trying to do here.
Speaker C
The Trump administration, somewhat parallel to Los Angeles and perhaps to Chicago as well, is trying to send National Guards troops into Portland in what they think is an effort to restore order. And principally, the judge in Oregon said that there has been no basis shown for federalizing the National Guard. In other words, that President Trump lacks the authority under the statutory scheme to send National Guards into Portland because there's no insurrection, there's no invasion, there's no showing that there's a failure of general law enforcement. And so she then decided to ensure that not only was there no troops sent from Oregon, no troops sent from California, no troops sent from anywhere, in order to ensure that the administration did not try to circumvent her order. Whether or not the government will comply with her order remains to be seen, but we're watching carefully.
Speaker D
She said it was a direct contravention, but what had happened was she ordered that they couldn't send the Oregon National Guard troops into Portland. So the Trump administration then moved to call up the Texas National Guard and the California National Guard. Is that a direct contravention, or were they trying to, you know, use a loophole?
Speaker C
I think they were trying to use a loophole. And so I don't think it was any kind of contemptuous behavior. Certainly it violated the spirit of the Oregon court's order, but not the letter. And indeed, I think that the Oregon District Court's decision is iffy, to put it that way. It's true that the prerequisites for federalizing the National Guard have not been met statutorily, but the Supreme Court has recognized a kind of inherent protective power of the president to protect federal facilities, at least. And so to the extent that the National Guard were used, not for general law enforcement, certainly, but just to protect federal buildings in Portland, I think the president would be on stronger ground. Now, of course, there's no factual predicate for thinking that the federal buildings are in jeopardy in Portland or in Chicago, but that at least would be, I think, put the president on his strongest legal ground.
Speaker D
I mean, the judge made a factual determination. She said the president's determination was simply untethered to the facts. He has claimed that the city's overrun with agitators and insurrectionists who are responsible for burning the city to the ground and that Portland was war ravaged. So she's found that that's not true. Those facts that he suggested are not true. So then he doesn't have the power, does he?
Speaker C
Yeah, the president's overreached. Right. And the president should have made a much more narrow cabin decision stating that there was a potential or real threat in his understanding, to federal facilities in Portland and therefore needed to dispatch National Guard's troops in order to protect those buildings. But instead he is, you know, ranted about Portland and anarchists for years and years, and he's just refreshing those means. And of course, the court in Oregon was much more familiar with what's going on in Oregon, said, you know, if that's your factual basis, you're out of out of court.
Speaker D
Why do you think the Trump administration is making these overbroad arguments about cities burning down and violence on the streets everywhere when there's no factual basis for it? And there's video that shows there's no basis. Any violence, if there is any, seems to be limited to the areas around federal buildings with ICE facilities. Why not limit it to what's provable?
Speaker C
I mean, there is a political question underlying your statement and maybe a psychological one as well. Is President Trump doing this to inure the American to the site of federal troops on their streets? If so, incredibly frightening, because it may mean that he's planning to use federal troops for other purposes, such as, you know, during I move the day, but during the midterms. Or alternatively, is this just something that he can help his base with by suggesting he's strong and he cares about people and he's going to send troops wherever it's needed to protect against lawlessness. I don't know which it is, but certainly this has been a consistent theme with his. He wants to send troops to be tough, to be seen as the law and order president, even if troops aren't needed and even if that violates statutes and even if it undermines the tradition in our country of not having a standing army or even the National Guard being used for general law enforcement purposes.
Speaker D
The Oregon AG described this as a whack, a mole with different states Guard units being used to get around the court's order. The judge, she expressed frustration with the Justice Department's lawyer, Eric Hamilton, saying he was missing the point of her earlier order. And she said, quote, Mr. Hamilton, you're an officer of the court. Do you believe this is an appropriate way for you to deal with my order or with an order you disagree with?
Speaker C
Yeah, I mean, to be fair, I think that the Justice Department was reading the order narrowly, which it's entitled to do, and the order banned the Oregon National Guard from being federalized. It didn't talk about the Texas National Guard or the California National Guard. And maybe that was just a failure of litigation and that loophole has been closed forthwith. Certainly, again, it was against the spirit of the rule. There's no question about it, what the government did, but I don't think it's contemptuous.
Speaker D
And explain the judge's ruling about why the deployment likely violated Oregon's 10th Amendment rights.
Speaker C
Well, the Oregon governor is put in control of the National Guard of Oregon. And so here there is, we have the president who's ordering the Oregon National Guard into active duty, despite the fact that the governor, who's in charge of it, commander of it, has declined to do so. Therein lies the 10th amendment struggle because he seemingly, the president, has asserted the governor's authority to be, in effect, the head of the troops, National Guard, at least within Oregon.
Speaker D
On Sunday, California Governor Gavin Newsom filed a separate lawsuit to prevent Trump from sending his state's National Guard to Oregon. So the National Guard is under the control of the governor of the state. So does the president have the authority to take that National Guard out of the control of the governor of the state and send them to another state?
Speaker C
Yeah, I mean, I think that obviously we don't have precedence on that power. And certainly I would think in an emergency, perhaps the authority might exist in the president to order a state's National Guard into active duty, even if the governor didn't want to. This seems like a far stretch. And that's why the 10th Amendment issue arises. Because here there is a claim that the California National Guard is needed in a different state, and that seems to directly cut against, unless there's a national emergency or an insurrection, the idea of ordering one state's Guard to go into another state, particularly without the approval of the governor, seems to be directly contrary to the regime of militias, which has long been supervised by state governors from the revolutionary time onward.
Speaker D
Representative Adam Smith, the senior Democrat on the Armed Services Committee, has said that he couldn't remember another time when one state's National Guard was deployed to another state over the objections of both governors involved. So no precedent.
Speaker C
It's unprecedented. It's unprecedented here. And it seems to be directly an affront to the 10th Amendments, which lodges responsibility in states to their governors and to their elected representatives. But there just hasn't been a lot of precedents on point. So obviously the courts are going to have to weigh in.
Speaker A
Donald Trump's deranged depiction of Chicago as a hellhole war zone and the worst and most dangerous city in the world was just complete BS he clearly has decided to declare war on a great American city that has the lowest homicide rate in 60 years in a state that has record employment and near record tourism.
Speaker D
That's Governor J.B. pritzker. As Illinois becomes the latest state to sue the Trump administration over its plans to send National Guard troops into one of its cities against the wishes of state and local officials. Officials I've been talking to Professor Harold Krent of the Chicago Kent College of Law. So, Hal, tell us what's happening in your city. Are there troops there yet?
Speaker C
I don't think they're there yet. The attorney general has already filed suit. The mayor of Chicago has made a vaguely worded statement like we must resist with all force. But no one knows what that means. So tensions are heightened. And we will expect to see National Guard troops from Texas, evidently, who will be coming to Chicago nearby. And again, yes, there has been problems with some kind of ICE enforcement. ICE has killed somebody in Chicago. They've arrested other people in trying to make these raids. But there has been no complete falling apart of any kind of ordinary law enforcement. And indeed, there's been some evidence that ICE itself has instigated the protests by the manner in which they are trying to conduct raids. So, again, this is, I think, for show. The president wants to be seen as tough. And if he wants to send troops into Chicago, he's bygone. He's going to do it. And Governor Abbott of Texas is willing to comply. So there's no 10th amendment violation there with using Texas National Guard troops.
Speaker D
What's the basis of Illinois's suit against the deployment?
Speaker C
There's several bases, but they first would say that the statutory prerequisites are not met in terms of federalizing National Guard, in terms of there's no invasion, there's no absence of general law enforcement, there's no insurrection. And so then I think the issue will likely boil down to whether there is some kind of protective power inherent in the presidency that can allow the president to send troops, at least for the narrow purpose of defending federal facilities. This really gets us back to what Judge Breyer said in the California litigation that if there is this protective power, it's very limited. It's limited to protecting federal facilities, and it cannot be used to justify a broader federal presence in terms of general law enforcement, in terms of accompanying ICE officers along the way, et cetera, et cetera. So we may get involved in that, but that's down the road because first there's the question of authorization. And again, President Trump is being too broad. He's saying there's lawlessness in Chicago and that justifies him using the Texas National Guard. And if there's a factual predicate there to be decidedly. I'm sure the judges here will hear the evidence, and they're very unlikely to back President Trump and his broad assertions.
Speaker D
Did he also call up the Illinois National Guard?
Speaker C
He has not done that yet, to my knowledge, he has threatened to. And of course, Governor Pritzker has not only said that he would do over his objection, but at the same time, he also said that President Trump has not even called him to ask for permission. So that may happen down the line. Maybe it's already happened. But not to my knowledge has the.
Speaker D
Supreme Court even come close to resolving something similar in this sort of frame, or not even close.
Speaker C
And there are some vague similarities of what's happened under the militia acts back 200 years ago. And the Supreme Court has said that there is a protective power to some extent in the present to protect federal officials, federal facilities, but nothing on this order, nothing on this extent. So this clash that President Trump has introduced in Oregon, Los Angeles and in Chicago is really unprecedented. And the courts are going to have to make a very difficult decision in saying that it's pretty clear that the statutory prerequisites have not been met. So I think they'll have to grapple with to what extent there's an implicit inherent authority of the president to protect federal officials and federal facilities and how far that extends. So very difficult issues for the courts to sort through. And obviously, we just had a beginning of that with the judges in California and Oregon.
Speaker D
So last Tuesday, Trump said when he was addressing the military officers in Quantico that America's under invasion from within and he wants to use dangerous American cities run by Democrats as training grounds for the armed forces. Besides being frightening, does he have any authority to do that?
Speaker C
Well, what frightens me about that statement is this is a training ground for what? Is this a dress rehearsal for a full scale attack on Democratic strongholds? Is this a rehearsal for getting us all prepared to see federal troops during the midterm elections. I mean, what is he actually preparing the military for? I don't know. But obviously this definitely cuts against our traditions, our norms about not having a standing army. And that's why we were afraid of having a standing army, because we wanted to not see federal troops in the streets of all of our cities, both because of the respect given to states and state law enforcement and because of the dangers of having federal troops in civilian roles.
Speaker D
There's a hearing date in the Illinois case on Thursday. We'll see what happens then. Thanks, Hal. That's Professor Harold Krent of the Chicago Kent College of Law. Bloomberg Daybreak is your best way to get informed first thing in the morning, right in your podcast feed. Hi, I'm Karen Moscow.
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At least a third of senior career leaders have left the Justice Department since the start of President Donald Trump's second term, taking with them centuries of combined expertise. That's according to a Bloomberg Law analysis. The departures, both voluntary and involuntary, represent an unprecedented level of departures in recent memory, with the divisions enforcing civil rights, immigration and environmental laws among the hardest hit. They include at least 107 career Justice Department senior managers in the span of eight months. That's out of roughly 320 career leadership positions immediately below presidential appointees included in a government directory. The loss of so many senior managers, many of whom have spent their entire careers rising through the department's ranks, could take generations. The Justice Department is also losing many more trial attorneys and other career employees. Joining me is Bloomberg Law reporter Suzanne Magnak. Suzanne, tell us about all these departures.
Speaker E
We've seen just an unprecedented amount of attrition of the career workforce this year, really across the government, but we've really seen it in a significant number. At the Department of Justice. We used a federal directory posted by the Office of Personnel Management that has hundreds and hundreds of career managers. At the Justice Department, we focused on those who went through the career appointed process, and that's where we found that over a third of those who were in place in January in those career leadership positions are no longer there. And these include really broad types of positions. These include supervisors, lead attorneys, managing attorneys, people in higher level positions Some senior executive service, but some other high level positions as well, who've been there for years and years, some of them who keep work running at the Justice Department.
Speaker D
Were these voluntary departures? Were they fired?
Speaker E
It's been a real mix. There have been examples of career managers at DOJ who have been fully fired, some of whom are now contesting those terminations. A number of them chose to leave either. Some may have taken the deferred resignation policy, that fork in the road offer that was available across the government. Others may have just left for another job. And some were kind of left under what I might describe as more duress. Some people were forcibly reassigned or demoted, for example, to positions that they didn't want to be in and so then felt kind of moved to leave the department. So while technically not fired, were removed from their positions. One prominent example of that was the Sanctuary Cities Task Force. That sort of became a place where we saw some longtime career people get forcibly reassigned into. And at this point, all of those people who were reassigned into that task force, which was for the stated purpose of cracking down on so called sanctuary jurisdictions who don't want to cooperate with federal immigration authorities, all of the people in that task force have since left.
Speaker D
These are the career officials who get a job at the Department of Justice, work their way up and stay at the Department of Justice.
Speaker E
Yes, it is very uncommon to see this amount of attrition when political administrations change. I spoke to a number of former officials for this story and, you know, many describe career people as the types of people who stay across political administrations, which is kind of their very purpose. When a new administration comes in, they're going to appoint a lot of people who are their choices. There's going to be a lot of political appointees. But the real role of the career civil servant, career workforce, the civil servants are to kind of, you know, help keep things moving. You know, there's going to be a bunch of new people who don't know what they're doing, but you'll have that career workforce in place always to, you know, understand how the department runs. Yeah.
Speaker D
You talked to someone who was a political appointee who said, we took a lot of our direction from the career staff to do our jobs.
Speaker E
Absolutely. I think that that's exactly the type of example is when a new political appointee comes in. You know, they may be very qualified, but they're just going to be new to that work potentially if they don't have that exact background themselves. And, you know, political appointees. I spoke to former political Appointees really said that they relied on that career workforce to have that expertise so that, you know, they could go to someone and be, you know, ask them, you know, how something works and how to do something and just to kind of know that they have experienced people working for them.
Speaker D
Tell us how many people left or part of their reason was because of the executive order calling to prioritize accountability among the senior executive service.
Speaker E
Sure. So that was an executive order at the beginning of this administration that kind of gave us a little bit of a signal that the Trump administration was going to be taking a hard look at the senior executive service, that maybe they were distrustful of that group of people, even though historically that's just been a group of people who've been here in high level career leadership positions that are nonpartisan for many years. Obviously you can't say for sure how many, exactly how many people might have left because read that order and worried for their career trajectory. But I think the Trump administration has done a lot, very broadly, that has made career managers think twice about how long they might be able to stay in their roles, whether that's pivoting priorities at the department in terms of litigating priorities or just generally making workers feel unstable and they're going to be laid off. We've seen broad reductions in force throughout the government this year.
Speaker D
It was the civil rights division that was hit the hardest. 76% of career managers departed.
Speaker E
Yes, that's what we found going through all of the career manager directory. We found that that division within the Justice Department had the highest share of career managers leaving this year. That was similarly a mix. Many of those people had been demoted and left after that. Some did leave on their own. And that was an example of a division that really did take a hard turn in a different direction ideologically this year. And the civil rights division has always somewhat been vulnerable to those types of changes as clinical administrations come and go. But we really saw quite a significant departure that former employees have told me was very different from the way it's been in the past in terms of changing ideological priorities. For example, instead of focusing on historically marginalized populations, which was along the focus of that division, it was created during the civil rights movement. We're now seeing a focus on gun rights and anti Christian bias, for example.
Speaker D
What about the trial attorneys, you know, that are handling the cases?
Speaker E
So the project that we put together does not include trial attorneys. And that's only because we don't have access to a perfect federal directory with a list of their names to draw a statistical conclusion from that. But they that has been a huge source of attrition. I mean, certainly more so than at the manager level. We have seen trial attorneys basically hemorrhaged out of the Justice Department this year. And while this number includes both trial attorneys and managers just across the Justice Department, the department itself has disclosed in budget documents that around 4,500 employees total have taken deferred resignation offers this year. As a little bit of a look at the amount of people who have.
Speaker D
Left, 62% of the managers in the executive office for immigration review left, I'm curious about why that particular office when there's so much emphasis now on immigration.
Speaker E
That may be the very reason. I think that sometimes when we see it's the offices, at least in our analysis, that sometimes focused on some of those more hot button policy issues that this administration is really focused on and putting its own stamp on where we saw the most attrition. So while, you know, I can't speak for those who decided to leave, but we saw a lot of immigration judges being pushed out this year.
Speaker D
How many people are challenging their firings?
Speaker E
It's hard to get an exact number because challenges at the Merit Systems Protection Board, which would handle those types of cases, are not public. But we have found a number of examples of people doing that. And I think some of the challenges from people who were within the senior executive service might be, you know, tougher cases for the federal government to defend. And we've even seen at least one federal court litigation filed against a number, a handful of Justice Department employees who say that they were terminated unfairly.
Speaker D
Now, let's say the next administration comes in and is different. Can the Justice Department rebuild its staff and sort of pick up where it left off before Trump came into office?
Speaker E
They can certainly try. Former officials I spoke to, though, said that it's going to be quite a challenge that they to lose at least a third of the career staff in the span of, I mean, at this point, eight or nine months is a massive hit to a department's institutional memory, to their expertise. I think the Trump administration might say that they're looking to get those types of people out. They refer to certain government employees as deep state actors. And they talk about wanting to pivot the direction of the department. And I think that's something we've seen from senior political administration officials during the second administration. But certainly, I think indisputably, even if the goal is to pivot the direction, that's a lot of hiring for this current administration to do a lot of spots to fill and it's a lot of spots and advanced roles from people who maybe were supervising a section that they previously been an attorney in for many years now trying to fill that spot. That's going to be a challenge really for any administration.
Speaker D
Are they having a hard time hiring new people to fill slots?
Speaker E
It's a little too soon to say. So much of these departures have been in the last few months and of course with the end of the fiscal year now, those who took the deferred resignation offer will officially be removed from the payroll. So we're still seeing a lot of that hiring ongoing. We certainly see that they are actively trying to hire in the civil rights division, for example, we've seen the lead political appointee leading the office posting on social media. We're hiring, we're hiring. So we are seeing an active effort, but I think it's just a little too soon to tell what speed they're going to be able to do so for career jobs, usually there's a bit of a merit based process that has to be involved to get these people put in place. It's not something that can be done in a day.
Speaker D
It's a question I keep asking. Thanks so much, Suzanne. That's Bloomberg law reporter Suzanne Magnific.
Speaker B
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Speaker D
A litigation funder is filing lawsuits against prediction market platform Kalshi in six states using an 18th century Gambling law in an attempt to claw back losses from predictions gone wrong. The suits allege that Kalshee is violating state and federal law by allowing residents to place illegal, unregulated wagers on events such as sports and Elections. Veridas Management and its chief executive, Maximilian Amsterdam are behind entities that filed suits in Ohio, Kentucky, Illinois, South Carolina, Massachusetts and Georgia. The suits reference state versions of the anti illegal gambling statute of Ann which lets losing third parties sue winners for the values of losses plus fees. Joining me is Professor M. Todd Henderson of the University of Chicago Law School. Tell us about this prediction market platform and these lawsuits.
Speaker A
So Kalshi is a company that offers prediction markets on a variety of things. And these prediction markets have a pretty simple feature which is they will write a contract that says something like there's a state of the world in the future. Trump becomes president, the Chiefs win the super bowl, the Fed lowers interest rates by a certain amount. And if that state of the world comes true, this contract will pay $1. And if the state of the world does not come true, they will pay zero. And then they will offer those contracts for sale. And those contracts will have a price. People will trade them. And the idea is that that price will reflect something like the market's probability sense of whether this thing is going to come true. So if a Trump is going to be elected president, contract is trading for $0.56, that implies a probability that Trump is going to be elected president with about a 56% probability. And if you think it's much lower than that, you can sell that contract, you can sort of short it like you would in the stock market. So they offer these contracts for sale and they're just a market like the New York Stock Exchange that enables buyers and sellers to come together and write particular contracts just like the New York Stock Exchange lists companies for sale. And so Kalshi is offering these prediction markets in a variety of different places. And people have the view, and this goes back way before these lawsuits that these are gambling. And there's been some real hostility in the federal government towards these prediction markets. The regulators of these things like the CFTC has been quite hostile to them. There were some limited carve outs which we could talk about, but the prediction markets have sort of blazed ahead and offered them in a variety of states, especially in places where gambling is not legal, like Ohio. And there is an Ohio statute that says, you know, not only is gambling not allowed here, but that people who are not parties to a particular wager can sue to enforce our anti gambling ban. And so that's what these, that's what these suits are. They've got litigants which are trying to enforce Ohio's anti gambling ban through a means set up by the Ohio legislature for third parties. Again, someone not betting whether Trump's going to win or the Chiefs or whatever have you, but a third party suing to enforce that ban. So that's what these suits are.
Speaker D
So is it plaintiffs lawyers that are suing on behalf of clients who are the plaintiffs?
Speaker A
Well, no, not as I understand it. So as I understand the statute, it's quite clever. And they have an analog going back into our British ancestors. I think it's the statute of Anne from 7:17 something or other. But the general gist of this is that gambling is illegal in a lot of places. And so two people enter into a wager that is illegal under state law. So let's just say I've got a bookie. I live in Columbus, Ohio, and I say to my bookie, I'd really like to bet on Ohio State to win this weekend. What's the odds? My bookie tells me, I make the bet, there's somebody on the other side of that transaction. And let's say that I lose the bet and my bookie wants to collect from me. And I say, sorry, you can't collect from me. Well, my bookie is not going to go into court because the contract, underlying contract, is illegal, and courts are not going to enforce illegal contracts. So knowing that my bookie is going to resort to, well, let's just call them other means. It could be, you know, kicking me out of the pool. I can't use him as my bookie anymore. That'd be easy. Maybe uses intimidation or violence against me. That's a phenomenon that happens in any kind of black market. So in that world where people who are parties to illegal contracts will not sue to enforce them, it's a drug deal. My drug dealer gave me, you know, baking soda instead of the cocaine that I wanted. I'm not going to sue him in court because I would be revealing myself to be doing something illegal. So I think the premise of the statute is that that's also true for gambling and here prediction markets. And so the plaintiffs are not going to come forward and sue, or at least arguably. So this plaintiff is a third party. They have nothing. They're total strangers to this case. But the statute gives them what's called standing, just the right to sue even though they haven't been harmed. Normally you have to be harmed to bring a lawsuit. But what their statute does is sort of set them up as a kind of private attorney general. You know, the attorney general could bring a suit to shut down the prediction market, but we could also outsource that to private plaintiffs Lawyers to bring the suit on behalf of them. It's a little bit like a class action lawsuit in securities fraud or something like that, where the lawyers are basically the people bringing the case. In that case, you know, they do find a plaintiff who suffered some damage. Here it looks like the statute doesn't require that because of this problem about, you know, outing yourself as being a criminal.
Speaker D
It seems odd to me. Yeah, it is odd.
Speaker A
And I should say one thing, that's a very cool historical kind of footnote. There was a case in England around the time the statute was passed called the Highwayman's case. And a highwayman was a sort of robber who would, you know, hold you up on the, on the road between, you know, Stratford on Avon and London. And two criminals had a deal and one of them backed out on maybe sharing the proceeds from this job that they did, and one sued the other and the judge in the court in London ordered both men to be hung. And so that was a kind of extreme example of do not bring your we're both criminals, but we have a contract dispute to court. And in that world, something like the statute of Anne makes a ton of sense because we do want to deter like the King or, or the US Government wants to deter the bad thing, whether it's robbing people on the highway or engaging in illegal gambling. But we can't rely on plaintiffs to bring those suits because they'll be complicit. And so we need to have a third party.
Speaker D
And so the third party is the one who recovers what they call ill gotten gains.
Speaker A
I believe so. I'm not an expert on this particular statute. I find it completely amazing. As someone who teaches law and economics and you know, it's genius kind of statute to mobilize people. It is different than the normal kind of bounty that we. There are other examples. There's a doctrine called qi tam q u I t a m in federal government law that if you are someone who, let's see, Lockheed Martin is overcharging the federal government for the latest stealth fighter, and you work at Lockheed Martin and you know, they're sending bills that are too high, you can tell the government and the government will sue. And you know, let's say they collect $100 million, you get your lion's share unit some 25, 30% of that. So we pay someone a bounty to kind of uncover what we think the government might not otherwise be able to uncover. So you can think of this statute in Ohio as being a little bit like a key tam suit. Except instead of alerting the government, you could have a system where the people who know about the illegal betting go to the Attorney General of Ohio and say, I know this stuff's going on. Instead of that and taking some percentage like a plaintiff's lawyer normally would, they can get the whole thing. And the whole thing is the incentive for them to bring the suit in the first place. Now, I should say what's a little bit strange about this case is it's not exactly a surprise to the Attorney General of Ohio that Kaushi is offering prediction markets in Ohio. So we really didn't need a third party to bring this case because everybody knows that Cauchy is doing this. And so that makes it a little bit strange.
Speaker D
Is it a litigation funder that's. That's driving these suits?
Speaker A
That's my understanding, is litigation finance, which, you know, we're in the world of the strange. Let's go. Even stranger that they're the sewer, because litigation finance itself is quite controversial. They're using the statute of ban from the 1700s that's been put into Ohio law. Well, back in the 1700s through to about, you know, 10 years ago, every common law jurisdiction banned lawyers from engaging in the kind of practice that these lawyers are engaging in. That is a litigation finance arm who will kind of buy a claim from someone and bring it. And so this is very new. You know, when I was in law school, so many years ago, lawyers weren't allowed to advertise. And of course, we've crossed that line. And now we've got lawyers who are raising money from investors to invest in lawsuits. And in some jurisdictions now, you know, non lawyers can own law firms so they can raise money again to sue people. And so that's another kind of complication that people might worry about.
Speaker D
And so they're suing not only Ohio, but Kentucky, Illinois, South Carolina, Massachusetts, and Georgia. If these suits are successful, then does that mean these prediction market platforms won't be able to operate in those states?
Speaker A
Well, I'm not in the speculation. I have no idea. Damages are probably pretty substantial. And again, I'm not an expert on the statute, so I don't know if there's limitations on the damage or what the damages would be or their caps. And I should say, you know, I kind of have two views about this. On the one hand, the prediction markets who are offering things like sports betting. Okay, so now let's, let's just stick with the Super Bowl. I'm a Steelers fan, so I want to bet that The Steelers are going to win the Super Bowl. Well, I can do that in some places through legal sportsbooks. I can go to Las Vegas. If I'm in certain places, I can go on to DraftKings or bets fair or ESPN bet or whatever where those things are legal and I can place that bet. Presumably the states where I can't do that don't want me betting on whether the Steelers are going to win the Super Bowl. And now Kalshee comes along and says in Ohio, Kentucky, Illinois and places, oh, we're not gambling, we're predicting. And at some level you say, okay, this is absurd. These prediction markets, which have a really very clever origin and I've written papers about how cool they are and how useful they can be to the public and for businesses to predict things and scientists and defense and all sorts of areas. I think they should be much more widely used. But using them to bet on sports doesn't make a ton of sense because we already have sports betting and that's something that's easy to describe. And we could just, you know, recharacterizing it as prediction market is a kind of arbitrage around the law that is, I think, a bad one. So, for instance, imagine that a prediction market arose and said, we'll let you bet on whether or not Nvidia profits will be higher next quarter than this quarter. Well, we already have that market that's called the stock exchange. And so we don't need a prediction market for that. So you're offering that prediction market would just be arbitrage around a bunch of SEC rules and things like that, and it's not adding something new. So I could imagine the prediction market kind of compromise being you can offer prediction markets in places where it's not gambling on things that are predictions that are valuable, predictions that are not sports, and maybe not the stock market. Those are different markets. So if you're predicting on whether or not it's going to rain in Ohio, well, farmers might really want that information. And that market might be better than the weather people's forecast. And so that would be a new thing. It's developing new information and it's creating a market where there really isn't one that could be really useful or predicting political outcomes or all kinds of is ice going to come to this town or whatever. Those things could all be very valuable production of social information that isn't just a pure regulatory arbitrage. So I'm both quite bullish about the use of prediction markets and written about this. I think we should use them for a lot more stuff. Companies use them internally to great success. And I think the world is poorer for it that we don't engage markets to predict stuff. Instead, we rely on blowhard academics or people on TV or whatever to do that. So I want to deploy markets in new places, but I think the offering sports betting through a prediction market, just because you call it something else doesn't make it different.
Speaker D
These suits have a long way to go, so we'll see what happens. Thanks so much for joining me. That's Professor M. Todd Henderson of the University of Chicago Law School. And that's it for this edition of the Bloomberg Law Show. Remember, you can always get the latest legal news on our Bloomberg Law podcast. You can find them on Apple Podcasts, Spotify and at www.bloomberg.com podcast./law. And remember to tune into the Bloomberg Law show every weeknight at 10:00pm Wall street time. I'm June Grosso and you're listening to Bloomberg.
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