Endangered Species Put at Risk & Prediction Markets

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2:30Advisory services by Public Advisors, LLC, SEC Registered Advisor. Complete disclosures available at public.com slash disclosures. This is Bloomberg Law with June Grosso from Bloomberg Radio. 13 environmental groups are suing the Trump administration, asking federal courts in California and Washington state to throw out the administration's deletion of the Endangered Species Act's definition of harm. The deletion allows developers and private landowners to modify or even destroy endangered species habitat without it being considered harm to the species, even though the destruction of their habitat is the main reason that species become endangered.

3:21An attorney at the Western Environmental Law Center representing the plaintiffs, Pete Frost, said in a statement, no longer protecting where grizzlies, salmon, and owls live will make them go extinct. We're hopeful the court will clarify what the Endangered Species Act has always meant. Joining me is an expert in environmental law, Pat Parenteau, a professor at the Vermont Law and Graduate School. Pat, start by explaining what the Trump administration has done here to the Endangered Species Act. Well, they have just published a final rule rescinding what's called the harm rule under the Endangered Species Act, which has been on the books for over 50 years, was first enacted in 1975 in the Gerald Ford administration.

4:11And it's been upheld by the U.S. Supreme Court in 1995 in the case Sweet Home versus Babbitt. So now the Trump administration is saying, forget about all that. We hereby rescind the harm rule. And oh, by the way, we're not going to propose a replacement. We're just going to say we don't need a harm rule at all. We don't need to define the word harm, which is in the statute, right? We don't even need to do that. So we're just going to repeal it. We're not going to comply with NEPA. We're not going to do an environmental impact statement. We're not going to comply with the Endangered Species Act itself, which requires consultation.

4:53It's internal consultation before you take an action like this and produce what's called a biological opinion to demonstrate that the action that you're taking will not jeopardize endangered species or result in the adverse modification of their critical habitat. So it's crazy on stilts what we're talking about. You can boil it down to this. The Trump administration has hereby decreed that destroying the habitat of endangered species is not harmful. The administration claims that this change would reduce permitting requirements and compliance costs for farmers, landowners and energy producers.

5:47Right. Without producing real data to show that this rule is responsible for what I guess you would call it unreasonable costs. I mean, it's certainly true that every law that Congress enacts is going to impose certain obligations on people that will in turn require the expenditure of some money. That's what regulation is all about. The money being spent is for a good purpose, a public purpose, right? You can argue about how important saving endangered species is. If you ask the American people, they will tell you it's really important. That has been a consistent polling result over the life of the Endangered Species Act from 1973 to today.

6:37The amount of public support for this law is in the 90 percent range. OK, so, yeah, do compliance with laws require money? Sure they do. And is it true that the loss of habitat causes more species to go extinct than any other single factor? Yes, it is the leading cause of species extinction in the U.S. and globally. The other thing about it is the Endangered Species Act is all about habitat. I mean, the very stated purpose of the law is to conserve the ecosystems upon which these species depend. So right from the get-go in 1973, this is really kind of amazing for Congress to be this ecologically literate in 1973.

7:27they were talking about ecosystems. They were talking about habitat. That was the whole point of the law. Congress recognized that loss of habitat was driving species to extinction, and unless it was both stopped or arrested and mitigated, more and more of the species would go extinct. Right now, 13 environmental groups are suing in two different federal courts, one in California and Washington state. What is the basis of their lawsuit? Multiple grounds for all three. There's three lawsuits now, and there's more in the works, by the way. They start by saying the Sweet Home decision in 1995 is still the law of the land.

8:14It has not been overturned. The Trump administration is clearly aiming to get this issue back in front of the Supreme Court in their hope that the Supreme Court will reverse its decision in Sweet Home and basically adopt the dissent in Sweet Home written by the late Justice Antonin Scalia. I mean, what we're seeing is almost a resurrection of Scalia. You know, there's an echo here, right? Because this is the same strategy that Lee Zeldin is pursuing under the Clean Air Act to repeal the endangerment finding. Once again, EPA, the Trump administration, is saying the Supreme Court got it wrong in Massachusetts versus EPA.

8:59We don't have authority to regulate greenhouse gases, and we're going to get that issue back in front of the court so they can overturn Mass versus EPA. Same thing is happening here with the harm rule. They want to get this case back to the court in the hopes that they can get a decision overturning the Sweet Home decision. The reason they believe they have a shot at this, of course, is because the Supreme Court has now overturned the Chevron doctrine with deference to agency interpretations. It's true that the Sweet Home decision was based on Chevron because Because at that time, 1995, that was the framework that the Supreme Court was using to evaluate statutory terms that were ambiguous.

9:47And the principle of Chevron was if the words of a statute are ambiguous, and I suppose some might say the word harm is ambiguous, although the dictionary makes it crystal clear that it includes anything that hurts something. You know, the interpretation that harm does involve destruction of habitat, which causes, by the way, actual injury. The rule, I didn't really explain it, the rule says habitat modification or destruction that actually injures or kills a species. So the test is approximate cause test. That's what the Supreme Court said in Sweet Home. So, you know, it's not an easy test to meet.

10:31You really have to be able to say the cutting of these trees, which will take down nests of the spotted owl, will lead to actual injury of an identifiable owl. So the test is stringent. OK, it's not loose at all, but it is a vital test because if you don't save nesting habitat, breeding habitat of species, guess what? They go extinct. You spoke about the late Justice Scalia, and the Interior Department said in a statement that it was reversing a regulatory overreach not authorized by Congress and will defend its authority to honor the law's plain text. Are they basically saying, yeah, we're going to follow what Justice Scalia said?

11:17Oh, yeah, they've adopted the Scalia dissent in Sweet Home, lock, stock and barrel. But here's two problems with that. Number one, in Justice Stevens' majority opinion in Sweet Home, which, by the way, was six to three, with the late Justice O 'Connor filing a very strong concurring opinion and taking on the Scalia dissent wholeheartedly, shall we say. So in Justice Stevens' majority opinion in Sweet Home, a majority of the court agreed that the Scalia interpretation was not supported by the text of the law or the context of the law or the history of the law or the purpose of the law. In other words, it was roundly rejected.

12:05And they weren't relying on Chevron for that. They were taking on Scalia's interpretation and saying it is not the best reading. They didn't use those words in those days. That's what the court will use today is the best reading test for interpreting a statute, right? But the point is, again, the majority in Sweet Home rejected the test that the Trump administration now wants to adopt. The second problem here with what Scalia was saying is that in 1982, Congress amended the Endangered Species Act to create what's called the Incidental Take Permit Program. Okay. I testified in support of that amendment, by the way.

12:51But the point is that amendment was addressing the harm rule. It was addressing the fact that the Ninth Circuit, in a very famous case, the Palila case out of Hawaii, involving this endangered bird on Mauna Kea in Hawaii, the Ninth Circuit had said, yeah, the harm rule is the law. And yes, destroying the habitat of the Palila is unlawful under the Endangered Species Act. And the court, the Ninth Circuit, ordered the state of Hawaii to remove the exotic sheep that were being imported for hunters to shoot because it was destroying the habitat. So Congress was reacting to a specific court decision, applying the harm rule, and instead of overturning the harm rule, which is what the Trump administration is saying Congress would have done if it had the chance to do it, instead of that, Congress basically codified the harm rule by saying you need a permit and you need a permit for habitat destruction or modification.

14:00And oh, by the way, to get the permit, you have to prepare a habitat conservation plan to offset the impact on the habitat from your activity. So there you go. You have two really strong arguments against what the Trump administration is trying to do in resurrecting the late Justice Scalia's dissent in Sweet Home and making it the law of the land. Well, many of the conservatives on this supermajority revere Justice Scalia. That's one point. Another is that this last term, they reversed two longstanding decisions. One, Humphreys executor, more than 90 years old, and a 25-year-old campaign finance rule, plus effectively reversing the Voting Rights Act.

14:53So do you have any confidence that they will follow precedent? Well, we know, of course, that the court will do what the court will do with five votes. I think this one will be a closer call. I don't rule out, of course, the prospect or the danger that the Supreme Court might do what Trump is asking it to do. You can't rule that out. But here's the thing. Justice Roberts, in the Loper-Bright case, which overturned the Chevron doctrine, said very clearly, our overturning Chevron does not mean that prior decisions of this court that relied on Chevron are not still the law. They are still the law unless and until, of course, the Supreme Court changes the law.

15:47So the argument that Loper Bright automatically means Trump wins is wrong. It's just flat wrong on the face of the Loper Bright decision. It's certainly true that if this case gets to the Supreme Court, there's a risk that it'll do the wrong thing. from the standpoint of protecting endangered species, I would be naive to the extreme to think that the Supreme Court is bleeding over the fate of endangered species. But on the other hand, this principle, which is called statutory stare decisis, when the Supreme Court has said that a statute means something specifically, that is a strong precedent.

16:33So it doesn't get overruled with the snap of a finger or the fact that there's a new administration in town who doesn't like the prior ruling. So that's not enough to get that victory that Trump is hoping for in this case. I'll ask you the question I usually ask you, which is, so let's say that there's a Democratic administration that comes in next and overturns the overturning of the harm rule. How much damage can be done in the remaining two years of the Trump administration if there's not an injunction put in place? Yeah, well, there is going to be a request for a preliminary injunction and maybe even a temporary restraining order right out of the box.

17:16The Earth Justice is handling that one of the major cases in Boyer, that's the most formidable environmental litigating group in the country. They will leave no stone unturned. So the problem is by saying that the harm rule is no longer in effect, that influences all kinds of activities that are ongoing. It means that the Forest Service now, you know, the Trump administration wants to ramp up timber harvest in the habitat of many endangered species, spotted owls, marble mural, as you go down the list, A whole bunch, right? So what happens now in that context of when agencies still have the obligation to ensure that their actions do not result in jeopardy or adverse modification of critical habitat?

18:05If the Fish and Wildlife Service and NOAA, with regard to marine species, if they are no longer engaged in analyzing whether the destruction of the habitat is going to result in harm to the species, that's going to affect a lot of the decision making that multiple agencies are doing. The Fish and Wildlife Service won't be providing them with the kind of biological information they need to meet the demand of the Endangered Species Act. So they'll be subject to more litigation over that. Now, the Trump administration doesn't really care about that. They're happy to see chaos in litigation. That seems to make their day.

18:47But the regulated community is not going to be happy about that. Timber companies that are relying on Forest Service decisions or BLM decisions for grazing or mining or any number of things, you know, if you start tearing out the foundation of how the Endangered Species Act is supposed to work, including looking at the effects of habitat loss, you're going to destabilize the whole regulatory framework. So some of this is being laid out already. I've seen it in the complaint that Earth Justice has filed. They've called out specific projects that will be affected by this decision right now, today.

19:29I predict we will see a motion for at least a preliminary injunction very soon. I think the administration is just ignoring that endangered species are something that people care about. No one wants to see a species go extinct. They will. I think in time, you're going to see more and more, maybe backlash is the word, I don't know, more reaction from the public over this and communities that have seen the value of the restoration of endangered species. If you think about the wolf reintroduction or the fact that the grizzly bear population has improved, whether it's been fully recovered is another question, but they certainly have improved.

20:12And what has that created? It's created a really robust ecotourism industry, if you will, recreation based. Those gateway communities around Yellowstone are there to see the wolves. And that's money in the pocket of local businesses, local communities and schools and all the rest. So it's not true that restoring endangered species is a cost without taking account of the benefits that it creates. So I don't think you can make a case, frankly, that the investment in recovering these species isn't worth it. Quite the contrary. Beyond the sort of ethical or moral dimensions of the question, the on-the-ground benefits of restoring ecosystems, which is what the law is all about, benefits local communities economically and in many other ways.

21:04And Pat, you've written an article for The Conversation that breaks all the legalities down. in a way that's easy to understand. It's entitled, Why Trump's Move to Gut the Endangered Species Act Likely Won't Hold Up in Court. A pleasure as always, Pat. Thanks so much. That's Professor Pat Parenteau of the Vermont Law and Graduate School. Support for the show comes from public.com. If you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge. On public, you can now create AI agents that handle all these tasks on your behalf.

21:43Just describe what you want to do in plain English. Like, if the VIX hits 25, buy a put option on the S &P 500. Or, if my cash balance goes above$20 ,000, move the excess into my direct index. You approve the workflow and your agent handles the rest. Monitoring the market, watching for your conditions, and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com slash market and fund your account in five minutes or less. That's public.com slash market.

22:22Paid for by Public Investing. Brokered services by Open to the Public Investing, Inc., member FINRA and SIPC. Advisory services by Public Advisors, LLC, SEC Registered Advisor. Complete disclosures available at public.com slash disclosures. Ask yourself, what are your best people spending their time on right now? Expense reports, receipt chasing, month-end close that takes weeks. You become what you spend on, and that's not what you're building toward. Brex is the intelligent finance platform that eliminates that work before it starts. AI agents that handle the manual stuff automatically, so your team can spend their time on what actually compounds.

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23:42There's fierce litigation between the states and the Commodity Futures Trading Commission over whether those platforms, like Calci and Polymarket, constitute illegal gambling or federally regulated financial derivatives. More than 20 lawsuits and cease and desist actions have been filed by states against the platforms. And the CFTC has now initiated legal actions against nine states over their push to rein in prediction markets. In a case involving a White House teleprompter operator that's drawn attention, it's the CFTC doing the enforcing. My guest is Columbia Law School professor Joshua Mitts.

24:26He's a leading authority on prediction markets and insider trading. His new paper is entitled, From Iran to Taylor Swift, Informed Trading in Prediction Markets. So President Trump's teleprompter operator is on unpaid leave from the White House after reports that he used inside knowledge to make bets about President Trump's speeches. What do we know about this? I don't think there's been a lot of detail released, but my understanding is that he essentially traded on CalShe, and it was basically a market which paid off. My understanding is that it's a mentioned market, meaning a market that essentially paid off when certain words or phrases or text are read aloud.

25:13And of course, or a statement is made at a press conference. And of course, a teleprompter operator would have access to information regarding what was going to be said, presumably would have the transcript of the plan statement. So would be uniquely in a position to profit from trading based on that information. Kalshi is the one that alerted the CFTC to what was going on. I'm not sure how they knew that there was suspicious activity. Yeah, so CalShe runs quite a bit of surveillance on their platform. And this is something we talk about in our paper, the role of platforms to surveil and police this kind of activity.

25:55What they look for is abnormal trading, trading that seems to reflect some sort of either you were very lucky, or you had potentially an informational advantage. Part of Kalshi's process is a know your customer so-called KYC process by which in order to trade on their platform, you have to provide certain information about yourself, where you work, what the source of your funds are and so forth. So presumably, and this is really just speculation, but I think it's consistent with what we've seen, Kalshi would have undergone some sort of surveillance review for abnormally profitable trades and then look to see if there was any possible connection between the individual and the source of the information that might be, in fact, material to a given market.

26:45During the investigation, reportedly, the CFTC alerted the federal prosecutors in Manhattan. They didn't open a criminal investigation. And I'm wondering why not when they have opened two criminal investigations, one involving a special forces soldier who allegedly bet on the capture of Venezuelan President Nicolas Maduro and a Google employee who allegedly bet on user searches using internal company data. I mean, isn't this similar to those? So for a criminal case, we're going to need to see more typically than simply taking advantage of the information. But what prosecutors are often looking for is a kind of conscious awareness of wrongdoing or sort of obvious departure from ordinary norms of behavior to where it's just straightforward to conclude that you were operating with criminal intent.

27:42The issue here, and I don't have any, just to be clear, any information myself about this case, other than what's been publicly reported. But the issue here may be that I believe it was reported that the words were relatively common words or words that may have occurred in a given speech by random chance alone, just sort of like words that may have been used in the speech regardless. And that might make it a little bit more difficult for a criminal prosecutor, because if there's even some reasonable doubt that the individual may have been in possession of the information, but may have nonetheless believed at the time of the bet that they were not actually using the non-public information, but that they were essentially wagering on the same sort of probabilities that anyone else could have wagered on, and that the likelihood of using a particular word was sufficiently sort of well known, or it would have happened anyway, then, you know, there's at least possibly a defense that could have given prosecutors some concern that the information was not actually used.

28:50The other possibility here is that the individual may have not necessarily sort of set out in an intentional way. And it could have been that there was some other data that we're not aware of, which showed perhaps, for example, let's say they were betting on lots and lots of words. And when you look at the totality of what they were doing, the intent points in a slightly different direction, or at least there's an interpretation that this particular trade was part of some broader set of trades, where the intent may not have been to use this information. So if there was evidence of this kind, and again, I have no information one way or the other.

29:28If there was evidence of this kind, it might have given criminal prosecutors some pause about bringing criminal charges. Coming up next, the CFTC fights the states. This is Bloomberg. Support for the show comes from public.com. If you're actively involved in your portfolio, you probably catch yourself repeating the same actions, buying the dip, manually sweeping idle cash, putting on a hedge. On public, you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English. Like, if the VIX hits 25, buy a put option on the S &P 500. Or, if my cash balance goes above$20 ,000, move the excess into my direct index.

30:09You approve of the workflow, and your agent handles the rest. Monitoring the market, watching for your conditions, and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com slash market and fund your account in five minutes or less. That's public.com slash market. Paid for by Public Investing. Brokered services by Open to the Public Investing, Inc., Member FINRA, and SIPC. Advisory services by Public Advisors, LLC, SEC Registered Advisor. Complete disclosures available at public.com slash disclosures.