Weekend Law: Iran War, Live Nation Trial Back On & War Bets

15:44Kal Raustiala:Learn more at adobe.com slash do that with Acrobat.

15:48June Grasso:It's a pretty bad deal. So the core issue here was that Live Nation and Ticketmaster, when they merged a few years back, they became so powerful that they were able to raise ticket prices.

15:58Eric Talley:The landmark antitrust trial against Live Nation was supposed to fix the exorbitant fees that have made concert tickets a luxury item, not to mention the technology that makes them a headache. to purchase. But then on Monday, only four days into the trial, it came crashing to a stop with an unexpected settlement between the Justice Department and the world's largest live events ticket seller. It even took the trial judge by surprise. But the trial isn't over yet. A bipartisan group of more than 30 states has refused to settle and will resume the antitrust trial on Monday, taking over the lead from the Justice Department.

16:41Eric Talley:Like North Carolina's Attorney General Jeff Jackson, the state AGs say it's a bad deal for consumers that keeps Live Nation's monopoly in place.

16:53June Grasso:The vast majority of the AGs who started on this lawsuit are going to stay on this lawsuit. That's Republicans and Democrats, a couple dozen of us from across the country. We're working out the timeline, but we've told Live Nation they can expect to see us back in court very soon.

17:07Eric Talley:In fact, as soon as Monday at 8.30 a.m. My guest is antitrust law expert Harry First, a professor at NYU Law School. Harry, let's start with the trial judge's reaction to this surprise settlement. Judge Arun Subramani scolded the parties at a hearing on Tuesday. He said the DOJ's lack of transparency about its settlement negotiations was mind-boggling, and the party's actions strain the boundaries of acceptable conduct. I mean, four days into the trial, the secrecy, what's up here?

17:43June Grasso:Well, these are great questions. You know, we can speculate. I'm glad to speculate, but we don't know for sure. Here's my guess. My guess is the trial staff, they have really top people trying this case. My guess is they were blindsided. My guess is that they were not involved in this settlement. These are real long-serving professionals, both in and out of the Justice Department. I think that this was done above them. That's a guess. And the term sheet, I've never seen, this is the crazy term sheet. What is this, a deal? The term sheet is signed by the Acting Assistant Attorney General, not by anyone on the trial staff.

18:26June Grasso:And for this to become what's called a consent decree that the judge enters, it's got to look a little more formal than this. So whether they'll sign it or not, I think would be a good question. And I don't know. I think that's to look forward to. And I would be close to certain that the states were completely out of the loop on this. I think everyone was concerned that this case was going to be sold out. And I mean sold out in the literal sense that this was a political deal. And, you know, whether it's actual money changing hands or just straight lobbying, that this is another example of, you know, something happening like that.

19:08June Grasso:And, you know, people were watching this case to see if it was ever going to go to trial, you know, whether it would be settled out before with exactly the thing that we see, which is that Live Nation doesn't have to give up Ticketmaster.

19:20Eric Talley:You're right that Live Nation CEO Michael Rapinoe was apparently in D.C. signing the last-minute deal with the acting head of the antitrust division. Under the terms, Live Nation will open up concert venues it owns to rival ticketing services, and it will allow rival concert promoters to put on shows at its venues and cap fees at 15%. That doesn't address the main relief sought in the case, which is Live Nation selling Ticketmaster. So what does the public get from this settlement?

19:54June Grasso:A little bit older and deeper in debt. Wasn't that the song? I don't think the public interest is served. I don't think the public gets very much. There may be some money. Who knows how much? The states have to agree to it. There's some pullback. They were negotiating the terms Sunday night before this term sheet was released. So it really isn't clear. And if they have to go back on some of the contracts, the exclusivity, the problem is not in the formal contracts. The problem is in the economics of this business and tying the ticket sellers to the talent. I mean, that's what it is. And you're not going to solve it by saying, excuse me, don't insist on a contract.

20:36June Grasso:That's where they started out in 2010. It never worked and it never will work. So it's just really not something to advance the public interest. The second part is some access to Ticketmaster's API so some other ticketing company can do something. They actually tried this before. That was part of the 2010 settlement. And one of the things that happened is the company that was supposed to be given access to it didn't want it. I mean, it's just it's failed, failed, failed. And it fails because venues will not want to offend Live Nation by using a different ticketing company. And Live Nation has said, they said in testimony, they said, you know, we're going to make the choice that makes us the most money.

21:20June Grasso:Guess what? So it's sad, but overlaying it is this question of political influence, which has been the song of antitrust from the beginning. And here we are again, I think.

21:34Eric Talley:The states had asked for a mistrial and for 60 days so that their attorneys could get up to speed because the Justice Department had been leading the litigation. But the judge ordered them to negotiate this week and six Republican-led states did settle with Live Nation. But 34 states are going to resume the trial on Monday. Won't the state's attorneys be at a disadvantage?

21:58June Grasso:The states are now in a tough spot. They were sitting there watching the trial. They knew that this could blow up at any point. I don't think they're surprised in that sense. But of course, there's a difference between sitting there watching the trial and stepping up there and trying the cases before jury. I don't know how it goes. You know, you can see why they'd want to miss trial, not want to have to come before the jury without the Justice Department there and say, hi, we're your new friends. You remember those other folks? Do you explain this to you? I don't know how exactly that would work.

22:32June Grasso:This is really weird. There have been cases, well, one case in which I'm familiar is the Microsoft case, where states and the federal government tried the case together, and then the Justice Department settled with Microsoft, but not all the states did. And they continued to litigate the remedy, but not, you know, whether there's a liability. So it's still a little different. Didn't go so well for them. So it's hard. They're in a hard position. There are two reasons to do it. One is to get good law made, is to get a verdict against Live Nation and Ticketmaster. It will help in some other private litigation.

23:10June Grasso:Maybe not so much help, but a little. And the second is that relief to get divestiture. And, you know, maybe they can make the case if they've got the right experts, And that this is the only way to solve this problem and to have competition in ticketing is to change the incentives of the parties in this industry.

23:29Eric Talley:And suing Live Nation is also popular with the public because buying concert tickets has become a luxury item. Every time you go to buy tickets on Ticketmaster, it seems like the prices have climbed yet again. So what do the states have to lose by going forward with the trial?

23:48June Grasso:Well, part of the answer is that the remedy of splitting them apart will not, you know, the day after produce lower ticket prices. It's a market process. And you hope that new companies will enter the ticketing business particularly and bring some competition there. But, you know, Taylor Swift concerts are still really expensive and there will still be resale markets. So it's a slow fix. So, yes, it looks attractive from the point of view of the states. and, you know, pushing on and being in the public interest. But it is a longer term public interest. So maybe there's some quick fix or something.

24:25June Grasso:Everybody who bought a Taylor Swift ticket gets a free up. I don't know, you know, get some money. So maybe they'll increase the money in the pot. There's a lot of money here.

24:36Eric Talley:So when the judge rejected the request and said that if the parties truly want to settle, a deal could be made within a week. And the in-house attorney for Live Nation, Dan Wall said, I've done this for 45 years and there's zero chance we get this done by Friday. And the judge said, not with that attitude.

24:55June Grasso:I love that. That was great. Yeah. Dan Wall is very sure of himself, let's say. But the states have now apparently hired a very, very successful antitrust trial lawyer, Jeffrey Kessler. It's a smart, sharp move. But they are up against a difficult tactical position here. And they have to be sure that they really want to go ahead and push for divestiture. It's not impossible, but the states don't generally do so well once they've been deserted by the Justice Department. There are past cases, not always, but it's hard. Now, you know, they need the experts, the economists and industry experts. They need a top lawyer, I guess.

25:35June Grasso:They have good lawyers in the house, but they've hired a guy who could go up against Dan Wall.

25:40Eric Talley:I don't envy the state's lawyers walking in on Monday and just picking up where the Justice Department left off.

25:47June Grasso:Yeah, I don't know how actively involved they've been in trial prep. There's always an underlying tension between the states and the feds, even when they're trying cases together. You know, playing with your friends doesn't always go smoothly, even if you're good friends. But my guess also is that the professionals on the staff, the trial staff, will not be the roadblocks. But the front office, who knows what they'll do with the witnesses they've got and the information they've got and how hard they'll make it for the state. I don't know.

26:22Eric Talley:And also the judge can always reject the settlement, right?

26:25June Grasso:So there's a legal process for the settlement itself. They have to file what's called a competitive impact statement. They have to let it open for public comment for a period of time. then there's a hearing before the judge. It's called the Tunney Act. And the judge has to approve the settlement as in the public interest. Now, that, as it's been interpreted over time, does not give the judge, you know, the broadest power to say, this is a crappy settlement. Forget it. I want you to try this case. But the judge does have some power. And this will certainly provoke a lot of public comment. And that's a process that will go forward while the case is being tried, apparently.

27:09June Grasso:I mean, this has to be put into a formal decree. Yes, and the judge has to eventually review it and approve it. And then it can be appealed, actually. So we're not at the end of this process.

27:22Eric Talley:Also, under this agreement, the government could sue them again.

27:25June Grasso:So as it's written, this is not, you know, we're forever done. It's hard to know what to make of that. I mean, the government did sue in 2010 when Ticketmaster acquired Live Nation and entered into a consent decree. They re-upped the consent decree in 2019, where they threatened to sue again. And then this is a suit with a different legal theory that they filed in 2024. So the standard rule is the government is not stopped from, unless they've signed a piece of paper from, bringing a new suit. So the answer to that is yes, they could bring another suit. I mean, in a way, it's cold comfort. We've now had from 2010 to 2026, this monopoly, you know, they've made a lot of money off of this.

28:14June Grasso:Thank you very much. We could eventually sue them at some point. When?

28:18Eric Talley:Yeah, it seems like a lot of litigation that's gone nowhere. Thanks so much, Harry. That's Professor Harry First of NYU Law School. Coming up next, was insider trading involved in betting on the Iran war? I'm June Grosso, and you're listening to Bloomberg.

28:35Kal Raustiala:Hello, hello. I'm Malcolm Gladwell, host of the podcast Smart Talks with IBM. I recently sat down with IBM's chairman and CEO, Arvind Krishna, and I asked him, how can companies use AI to its fullest potential to create smarter business? My one advice to them, pick areas you can scale. Don't pick the shiny little toys on the side. For example? If anybody has more than 10 % of what they had for customer service 10 years ago, they're already five years behind it. if anybody is not using AI to make their developers who write software 30 % more productive today with the goal of being 70 % more productive.

29:22June Grasso:Yeah, wow.

29:23Kal Raustiala:So we are not asking our clients to be the first experiment on it. We say, you can leverage what we did. We are happy to bring out all our learnings, including what needs to change in the process, because the biggest change is not technology. It's getting people to accept that there's a different way to do things. To listen to the full conversation, visit ibm.com slash smarttalks.

30:15Kal Raustiala:We'll see you next time. Learn more at adobe.com slash do that with Acrobat.

30:46Kal Raustiala:before investing. Risks include principal loss and the use of derivatives, which could increase risks and volatility. Monthly income is not guaranteed. Prepare by BlackRock Investments, LLC.

30:54Eric Talley:As U.S. and Israeli bombs fell on Iran on February 28th, bettors on Polymarket were cashing in. Cryptoanalytics firm Bubble Maps pointed to six accounts that had all been funded within the previous 24 hours and made about a million dollars in profit by betting that the U.S. would strike Iran by the 28th, raising suspicions of advanced knowledge of the attacks. The Commodities Future Trading Commission, which regulates prediction markets in the U.S., bars contracts tied to assassination, terrorism, or war, themes Polymarket as an offshore venue continues to lift. This week, the CFTC gave its first official response to the controversies that have surrounded prediction markets by issuing new guidance.

31:44Eric Talley:But will it help? Joining me is business law professor Eric Talley of Columbia Law School. Eric, tell us about the bets on Polymarket that are causing concern.

31:54Harry First:Polymarket is one of two major event-driven contract websites that people use that are prediction market, you know, sort of platforms. And both Polymarket and Calci had various types of events, including events that might occur in Iran. And many of those pertained to the continued integrity of the Ayatollah Khamenees and whether it would still be in power, say by the end of February or by the end of the first week of March. And these were essentially binary bets. They call them contracts, but they're essentially bets where you can bet on yes or bet on no. And it became pretty apparent in the hours before the Israeli and U.S.

32:42Harry First:strike on Iran that ended up killing both Ayatollah Khamenei and many other senior members of the Iranian government that was essentially betting against the continuing viability of the Khamenei government past some future date. The interesting part about this, June, is that while there were a lot of bets that were being placed on this, most were small scale and kind of went on both sides of the transaction. But there were some really big ones that got placed literally within hours of the bombing that were all betting against the Ayatollah's fate. And all of them at least purportedly paid out.

33:19Harry First:That gave rise, unsurprisingly, to a pretty significant kerfuffle about who created these brand new accounts. Why were they placing hundreds of thousands, even millions of dollars in betting on this particular event when these accounts hadn't made any bets before.

33:34Eric Talley:And Bubble Maps, which is a company that tracks data on crypto transactions, identified what it called six suspected insiders who made$1.2 million in wagers that the U.S. would strike Iran. Senator Chris Murphy was one of the people who said, you know, it's insane that this is legal and that the unusual betting suggested that even decision makers might have had a stake in the outcome, which the White House denied. But insider trading?

34:08Harry First:Look, so a couple of points to pick apart in that statement. The first has to do with, is this in fact legal or not legal? Now, you know, because prediction markets are new in the U.S., there's still a battle raging about how exactly these contracts get classified. I think most people think that they are a type of derivative contract. That's kind of my belief as well. They tend to have a lot of the look and feel of a lot of other call options, put options, various exotic auctions that you can buy and sell on the Chicago Mercantile Exchange. And so those Those are, in fact, to the extent that they are derivative contracts, they are, in fact, regulated by the Commodities Future Trading Commission or CFTC.

34:52Harry First:And that commission has a pretty robust insider trading prohibition. But I think that the senator, all due respect, might be leaping to conclusions to say that this wasn't prohibited by law. In addition, there are a lot of state laws that might also sweep in to prohibit this type of inside trading that can also have criminal implications. So irrespective of, you know, current bills pending in Congress, this is definitely something that I would expect that CFTC lawyers might be kicking the tires off. As to who did it, we still don't really know. We don't know who the owners of these accounts were.

35:31Harry First:And, you know, the fact of the matter is this could range from anyone from senior decision makers in the process, in the room making these decisions, to potentially mid-level staffers or even White House interns who are asked to run papers back and forth. One thing that's kind of interesting, June, is that, you know, I don't know whether you have a Polymarket or Calci account.

35:54Eric Talley:Absolutely not.

35:54Harry First:Yeah, I'm just going to say that there is a definite generational skew on who has these accounts. I have them. But the only reason that I have these accounts is that I teach finance to 24 year olds and they all have them. And so I have to kind of get inside their head to figure out how I'm going to present the material. So I would say, yeah, it's certainly possible that senior leadership in the Trump administration White House was engaged in some of this trading. But I wouldn't be surprised if a 24-year-old intern wasn't also asked to shuffle some papers back and forth, put two and two together, and then got on calci and borrowed a bunch of money to make a one-directional bet.

36:34Eric Talley:The CFTC has the authority to investigate this, but doesn't seem to be doing that. Now, last month, Israeli authorities arrested several people and charged two, a civilian and a military reservist, with using classified information to place bets on Pali market. Anyone in the U.S. who used classified information to place a bet, I mean, would be subject to criminal prosecution, right? Is anybody looking into that? Is there an agency besides the CFTC?

37:07Harry First:I'm pretty positive there are some state attorneys general that are looking at this as well. One of the things that's kind of interesting about this, June, is that it gets a little bit into the details of how insider trading law works. And there are a couple of theories behind it, but the one that would most likely apply to this situation is something that lawyers call the misappropriation theory. And what it basically means is if my employer or someone with whom I have some kind of a relationship of trust and confidence reveals inside information to me, that is going to happen with either the stated or implied restriction that I have to keep that confidential.

37:46Harry First:So if I go out and trade on it, then I have breached that confidentiality. And that is effectively what triggers a lot of criminal and civil liability for insider trading. The fact that I've misappropriated, I've violated this order, this command of confidentiality that came from the source. Maybe it's my employer or someone else. But the thing that's always been weird about this theory, and that applies also in the derivatives context, is that it hinges very, very critically on what does your employer permit and not permit. Right. And so you could, in principle, have an employer who develops a lot of confidential information and their inside employee policies say, you know what, rather than paying you salaries, we're just going to let you trade rampantly on this inside information.

38:34Harry First:And the third parties, the third party suckers who trade with these informed folks, they have no idea even who they're trading with or what the inside policy is of the employer. But that's going to have a huge effect on whether there will be civil or criminal liability, whether there was such a prohibition. So you transport this over to the administration in which clearly for classified information, there is both an implicit and an explicit prohibition on, you know, trying to make money off of your own private knowledge of classified information. On the other hand, as we learned from the first Trump administration's classified documents gate, there's a big question about, well, what constitutes classified and not classified and who gets to determine when something is suddenly classified or declassified and when?

39:20Harry First:And President Trump basically made the claim on behalf of himself that as he spirited these documents out of the White House at the end of his first administration, he basically declared possibly to himself or possibly in passing that they're all declassified now and therefore he doesn't have any liability. So query whether, I don't know, some staffer or employee or person higher up in the administration was placing some of these bets, the way that it would trigger, you know, most directly insider trading prohibitions is because they were classified. If, you know, President Trump said, oh, no, I declassified that in a meeting.

39:59Harry First:I did it orally, but it's totally fine. Who knows what's going to happen there? Now, having said that, that doesn't necessarily take these folks off the hook for state level offenses. And there are some state law offenses that easily could be applied here. California, New York have pretty rigorous prohibitions on inside trading transactions. There are also various other types of provisions out there, the Wire Fraud Acts, the Computer Fraud and Abuse Act, that might also kind of play a peripheral role in this context. You know, at the federal level, that's only going to be as strong as the stomach of the federal prosecutors who are going to bring these cases.

40:34Harry First:and if they've gotten a command from on high that they shouldn't bring any of them, that I think is largely going to be left up to state attorneys general.

40:42Eric Talley:Are they difficult to investigate because the main prediction platform operates offshore, the bets are placed on the blockchain, the identities of the accounts making the trades are anonymous. So let's say state attorneys general investigating. Would it be difficult for them to get through all those layers.

41:02Harry First:This has always been a difficult thing in investigating trades made on the blockchain. Compared to 10 years ago, it's much easier to trace the identity of who was making these trades. You know, where was this wallet created? Who did the creation of this wallet? It's possible to get that information. Lava would rest on subpoena power that might have to be applied extraterritorially because all these companies are based in Ireland or England and so forth. So that creates a stumbling block, not one that is necessarily insurmountable. I could certainly imagine various regulators inside the EU or the UK being equally worried about the use of prediction markets for insider trading and being perfectly willing to assist a request from, say, the New York State Attorney General or the California State Attorney General for some of that information, or at least to say, yeah, we are willing to serve your subpoena in Europe.

41:53Eric Talley:On Thursday, the CFTC issued new guidance for prediction markets. Will that solve any of the problems we've been talking about?

42:02Harry First:It remains to be seen. This is going to be a long road ahead. The CFTC has put out a notice of proposed rulemaking and guidance that basically tries to do two things. First of all, it tries to convince everyone that CFTC is the only regulator for these event-driven contracts. And that's in dispute, by the way. And then the second is that it basically tries to remind people that because the CFTC is the regulator of these contracts, they are subject to CFTC rules, including rules on insider trading and various types of fraudulent activities. But to back up a little bit, June, the question about whether these prediction market contracts constitute derivatives or whether they constitute some form of gambling or gaming is still very, very much up in the air.

42:55Harry First:A lot of state attorneys general, as well as Native American tribes, as well as organized groups of gaming outfits have challenged the CFTC's ability to claim a lot of the types of event-driven contracts that would have traditionally fit into the category of sports betting. And the CFTC has in its own rules that it's there to basically regulate commodities and derivatives, but not gaming. And so there's going to be an interesting question about whether the CFTC's jurisdiction extends across all of the different types of prediction market contracts.

43:31Eric Talley:More questions than answers, it seems. Thanks so much, Eric. That's Professor Eric Talley of Columbia 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 slash podcast slash law. And remember to tune into the Bloomberg Law Show every weeknight at 10 p.m. Wall Street time. I'm June Grosso, and you're listening to Bloomberg.

44:06Kal Raustiala:If you follow markets, you know the value of long-term thinking. You plan, you diversify, you prepare for volatility. But in life, even the best strategies can't prevent every bad day. A fire, a loss, a disruption that demands immediate attention. When that happens, what matters isn't just what you planned, it's who shows up. That's where Cincinnati Insurance comes in. For more than 75 years, they've helped individuals and businesses navigate life's toughest moments with care, expertise, and personal attention. Together with independent agents, Cincinnati Insurance focuses on relationships, not transactions.

44:44Kal Raustiala:Their approach is grounded in experience, follow-through, and trust built over time. Bad days happen, and when they do, you deserve an insurance partner who understands risk, respects what you've built, and is ready to help you move forward. The Cincinnati Insurance Companies. Let them make your bad day better. Find an independent agent at c-i-n-f-i-n dot com.

45:11Harry First:With Bali from iShares, you get access to both monthly income and growth potential in one simple ETF.

45:18Kal Raustiala:It's the best of both worlds. Discover Bali, iShares large cap premium income active ETF. iShares, the market is yours. Visit www.iShares.com to view perspectives for investment objectives, risks, fees, expenses, and other information that you should read and consider carefully before investing. Risks include principal loss and the use of derivatives, which could increase risks and volatility. Monthly income is not guaranteed. Prepare by BlackRock Investments, LLC. Deadlines shift, plans change, and sometimes you just need promo products fast. Turn to 4imprint. 4imprint has hundreds of promotional items available with 24-hour turnaround.

45:48Kal Raustiala:From custom apparel and drinkware to trade show gear, writing tools, and more. And their 360-degree guarantee promises your logo will be printed with care. Your order ships fast, and it'll show up right and on time. That's the certainty of 4imprint. Check out the full 24-hour selection at 4imprint.com. For imprint. For certain.