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NFL Takes On Kalshi & Sentencing at SCOTUS · Bloomberg Law

0:02
Speaker 1: This is Bloomberg Law with June Grosso from Bloomberg Radio.
0:08
Speaker 1: Excuse me, sir. Have you heard of Calchi? Yes, I have.
0:12
Speaker 2: They're the prediction market that lets you trade on anything
0:14
Speaker 2: from sports to culture.
0:16
Speaker 3: Just find an event and select yes or no depending
0:19
Speaker 3: on what you think will happen.
0:21
Speaker 2: But the NFL is not happy with bets on football
0:25
Speaker 2: made on Kalshi. Unlike the MLB, it's not lining up
0:30
Speaker 2: to make any alliances with prediction markets. In fact, just
0:35
Speaker 2: the opposite. It's opposing Kalshi and the Trump administration in
0:39
Speaker 2: a high-stakes legal battle and asking the Supreme Court to
0:43
Speaker 2: step in. The NFL says federal regulators and the prediction
0:47
Speaker 2: markets have refused to impose needed safeguards, including bans on
0:53
Speaker 2: certain types of wagers and a requirement that people placing
0:57
Speaker 2: bets be at least 21 years old. The league is
1:01
Speaker 2: urging the Supreme Court to allow states to regulate the
1:04
Speaker 2: prediction markets. saying the laissez-faire attitude of the Commodity Futures
1:09
Speaker 2: Trading Commission could allow unscrupulous actors to cause mischief, trade
1:14
Speaker 2: on inside information, and harm the integrity of the game.
1:18
Speaker 2: Joining me is an expert in securities law, James Park,
1:21
Speaker 2: a professor at UCLA Law School. Jim, explain why the
1:25
Speaker 2: NFL is asking the Supreme Court to take up this
1:29
Speaker 2: appeal by New Jersey regulators in a clash over who
1:33
Speaker 2: should regulate Kalshi.
1:35
Speaker 3: Well, they're trying to get the Supreme Court to review
1:38
Speaker 3: a decision by the U.S. Court of Appeals for the
1:41
Speaker 3: Third Circuit, which held that it was likely that calci,
1:44
Speaker 3: a prediction market, could show that various event contracts relating
1:50
Speaker 3: to sporting events like NFL football games are swaps. And
1:55
Speaker 3: if they are swaps, they are regulated by a federal
1:57
Speaker 3: agency called the Commodities and Futures Trading Commission, the CFTC.
2:03
Speaker 3: And the NFL is saying the CFTC is not up
2:06
Speaker 3: to the job, that they only have 500 employees. Pennsylvania has,
2:11
Speaker 3: you know, 300 or 400 employees alone that are dedicated
2:14
Speaker 3: to gaming. The CFTC does a lot of other important things,
2:18
Speaker 3: you know, overseeing commodities and derivative markets. How much attention
2:23
Speaker 3: are they going to be able to focus in on
2:26
Speaker 3: regulating event contracts relating to sporting events?
2:29
Speaker 2: The NFL says it's written multiple letters to the CFTC
2:34
Speaker 2: outlining the kind of contracts it objects to. For example,
2:38
Speaker 2: ones that can be easily manipulated by a single athlete,
2:42
Speaker 2: like field goals where a kicker could intentionally miss. It
2:47
Speaker 2: also objects to bets tied to injuries, officiating, and other
2:52
Speaker 2: things where insiders would know in advance, like the first
2:56
Speaker 2: play of a game. And the NFL says that the
2:59
Speaker 2: CFTC has failed to act on these. So does it
3:03
Speaker 2: seem like there is an unwillingness on the part of
3:06
Speaker 2: the commission to act on the NFL's concerns?
3:10
Speaker 3: Maybe an unwillingness or an inability because the CFTC really
3:14
Speaker 3: doesn't have expertise with respect to regulating betting. And so
3:18
Speaker 3: they may simply, you know, not have the infrastructure in
3:22
Speaker 3: place to make considered determinations about these types of requests.
3:26
Speaker 3: That's one possibility. Another possibility is this is part of
3:30
Speaker 3: a deliberate policy choice by the CFTC to permit these
3:36
Speaker 3: types of sporting event contracts to flourish without regulation. That's
3:41
Speaker 3: also a possibility that it could be a deliberate policy choice.
3:45
Speaker 2: One of the other things that the NFL wants is
3:48
Speaker 2: a requirement that people placing the bets be at least
3:51
Speaker 2: 21 years old, because most states mandate that for sports betting.
3:56
Speaker 2: On Calshi, customers as young as 18 can bet. So
4:00
Speaker 2: that's not something that would be so difficult for the
4:02
Speaker 2: CFTC to implement, is it?
4:05
Speaker 3: It's not difficult, but it would be a little bit
4:08
Speaker 3: complicated because it would then become a uniform rule across
4:13
Speaker 3: the country. And I suspect that there are some states
4:17
Speaker 3: that have different gambling ages, and so do they want
4:20
Speaker 3: to go so far as to sort of side with
4:23
Speaker 3: the NFL and implement a uniform betting age? They could
4:27
Speaker 3: do it, but I think the question is, do they
4:29
Speaker 3: feel comfortable doing it, given that there may be some
4:32
Speaker 3: variation in state practices about gambling age?
4:36
Speaker 2: Thirty-nine states have also urged the Supreme Court to take
4:40
Speaker 2: the case. Tell us where the circuit courts stand.
4:43
Speaker 3: There is a circuit split. The Third Circuit said there's swaps.
4:46
Speaker 3: The Sixth Circuit and Ninth Circuit said we're not going
4:49
Speaker 3: to interpret these event contracts as swaps. Therefore, they're regulated
4:53
Speaker 3: by the states. And so that's a reason the Supreme
4:56
Speaker 3: Court will take on a case. The fact that so
4:58
Speaker 3: many states want The Supreme Court, to hear the case,
5:01
Speaker 3: also indicates maybe concern about the lack of clarity with
5:05
Speaker 3: respect to what the law is. Is gambling going to
5:08
Speaker 3: be regulated by the states, or is it going to
5:10
Speaker 3: be regulated by the CFTC? And then you have other
5:13
Speaker 3: stakeholders like the NFL, which are affected by decisions relating
5:17
Speaker 3: to gambling, who want to weigh in as well. So
5:20
Speaker 3: there seems to be an outpouring of support for the
5:24
Speaker 3: Supreme Court to provide some clarity. And what the NFL
5:27
Speaker 3: has said in its amicus brief is that you know,
5:29
Speaker 3: part of it is we want to know who the
5:30
Speaker 3: regulator is, right? If we know, then we can really
5:33
Speaker 3: focus in on the CFTC. If it is the CFTC,
5:36
Speaker 3: if not, you know, we don't want to waste time
5:39
Speaker 3: with a federal agency that is not truly the regulator
5:42
Speaker 3: of these event contracts.
5:44
Speaker 2: I mean, how much will this be, you know, states'
5:47
Speaker 2: rights versus federal rights, where in their brief, the NFL said,
5:52
Speaker 2: What constitutional power allows Congress to override states' traditional police
5:56
Speaker 2: powers to regulate intrastate gambling? I mean, how much is
6:00
Speaker 2: that part of what the Supreme Court may consider if
6:03
Speaker 2: it takes the case?
6:05
Speaker 3: I think that'll be a big part of the Supreme
6:08
Speaker 3: Court's sort of concern in evaluating the case, because under
6:12
Speaker 3: the Third Circuit opinion, you will have effective federal preemption
6:17
Speaker 3: of state regulation of gambling. And there's a question of
6:20
Speaker 3: did Congress intend to do this when it passed Dodd-Frank
6:24
Speaker 3: in 2008. And as the NFL points out, at the
6:28
Speaker 3: time there was a federal ban essentially on sports gambling.
6:31
Speaker 3: And so it would seem odd for this Dodd-Frank law
6:35
Speaker 3: that gives the CFTC jurisdiction over swaps to be intended
6:40
Speaker 3: to permit the CFTC to regulate gambling when it was
6:43
Speaker 3: prohibited by another statute at the time. And the NFL
6:47
Speaker 3: cites the major questions doctrine. Do we read a statute
6:50
Speaker 3: in a way so that it would reconfigure a major
6:53
Speaker 3: national regulatory structure that has significant impacts for the economy?
6:58
Speaker 3: So I think it's going to be a very significant
7:00
Speaker 3: consideration for the Supreme Court.
7:02
Speaker 2: If the Supreme Court takes it, is the decision based
7:05
Speaker 2: on whether it's swaps or betting, or are there a
7:09
Speaker 2: host of other things that play in?
7:11
Speaker 3: I think it'll be a combination of the two. I
7:14
Speaker 3: think they'll first look at the statute. They'll try to
7:16
Speaker 3: interpret the language. They will try to evaluate, are they
7:20
Speaker 3: swaps under the text of the statute? And In addition
7:25
Speaker 3: to that, I think if the language is ambiguous, they're
7:28
Speaker 3: going to look at other considerations such as the major
7:31
Speaker 3: questions doctrine and other broader policy concerns that may bear
7:36
Speaker 3: on what Congress intended to do. I think it's going
7:38
Speaker 3: to be a combination of all of those different things,
7:40
Speaker 3: which is why you have different circuits concluding differently, because
7:46
Speaker 3: the answer does not really point clearly in one direction.
7:50
Speaker 3: If you really focus in on the text, the Third
7:52
Speaker 3: Circuit was able to read the text reasonably as including
7:57
Speaker 3: event contracts relating to sports. And so that is certainly
8:01
Speaker 3: a plausible textual reading of the provision. And so it's
8:05
Speaker 3: really up to the Supreme Court to decide who is correct.
8:10
Speaker 2: The NFL and the states are arguing that sports prediction
8:14
Speaker 2: contracts are effectively gambling, not financial swaps, as Kalshi and
8:19
Speaker 2: the CFTC claim. Tell us about the parameters of that issue,
8:24
Speaker 2: which is key here.
8:25
Speaker 3: It's a tricky line to draw, right? A swap is
8:29
Speaker 3: basically an agreement that pays out depending on some occurrence
8:33
Speaker 3: or event. And the statute said it has to be
8:36
Speaker 3: associated with a potential financial, economic, or commercial consequence. And
8:40
Speaker 3: so the traditional reading of a swap is that I
8:43
Speaker 3: enter into swaps in order to hedge economic risks. whether
8:48
Speaker 3: it's the risk that interest rates are going to go
8:51
Speaker 3: up or commodity prices are going to go down, I
8:54
Speaker 3: can enter into swaps to manage economic risk. The question
8:58
Speaker 3: is whether event contracts that are based on something happening
9:02
Speaker 3: in a sports game would qualify. They do have some
9:07
Speaker 3: economic impact if you win a bet. But are you
9:11
Speaker 3: entering into the sports event contract to manage economic consequences?
9:17
Speaker 3: Usually not, right? And most of the time, it's just gambling.
9:20
Speaker 3: You're just betting. And it's not because you feel like
9:23
Speaker 3: if this team wins, that's going to have some impact
9:26
Speaker 3: on my business, although there may be a small number
9:28
Speaker 3: of cases where that could occur. So it's a very
9:31
Speaker 3: fine line as to what Congress meant when it says
9:34
Speaker 3: that the contract has to relate to various economic consequences. And,
9:39
Speaker 3: you know, the Third Circuit said, yes, there are economic
9:41
Speaker 3: consequences if the bet pays out one way or the other.
9:45
Speaker 3: The Sixth and Ninth Circuits said, well, it's not really
9:49
Speaker 3: about managing sort of economic events that could affect your
9:53
Speaker 3: business or something of that nature, which is the more
9:55
Speaker 3: traditional understanding of what a swap is.
9:58
Speaker 2: The CFTC basically complained that the NFL didn't sign a
10:03
Speaker 2: memorandum of understanding with it and that the league hasn't
10:08
Speaker 2: engaged with it. But why would the NFL sign something
10:11
Speaker 2: like that?
10:12
Speaker 3: I think that what the NFL might say is, well,
10:14
Speaker 3: can we really enter into an agreement if we don't
10:18
Speaker 3: really know you're our regulator, right? If we know for
10:21
Speaker 3: sure you're our regulator, then we know sort of our
10:25
Speaker 3: position and we know what we will try to agree
10:27
Speaker 3: to and not agree to. Why would we waste our
10:30
Speaker 3: time negotiating this extensive agreement with someone who we don't
10:34
Speaker 3: even think is our regulator? We want to get some
10:37
Speaker 3: clarification on that first. So, you know, the CFTC does
10:40
Speaker 3: also have point in that, you know, maybe you should
10:43
Speaker 3: be working with us a little bit. And if you're
10:46
Speaker 3: criticizing us for not being up to the job, give
10:49
Speaker 3: us a chance, you know, give us a chance to
10:51
Speaker 3: do this. And you haven't given us that chance yet.
10:54
Speaker 2: The CFTC under Trump, is the CFTC different? Is there
10:58
Speaker 2: a different outlook or a different regulatory approach under Trump
11:03
Speaker 2: than there was under Biden?
11:07
Speaker 3: It's definitely more deregulatory. And, you know, my understanding is
11:11
Speaker 3: they may still have just one commissioner and they don't
11:13
Speaker 3: have a balance of commissioners who can weigh in and
11:16
Speaker 3: at least make the case for a stronger regulatory approach.
11:21
Speaker 3: And so it is definitely different than under the Biden administration.
11:25
Speaker 3: And it's possible in a future administration that, you know,
11:28
Speaker 3: the CFTC could be more favorable towards regulation. So it's
11:32
Speaker 3: not quite clear what is best for the NFL. If
11:35
Speaker 3: you're against regulation, it may not be a great idea
11:39
Speaker 3: to put all the power in the CFTC because maybe
11:42
Speaker 3: a later administration then decides, we're going to write a
11:45
Speaker 3: whole bunch of rules relating to gambling, and they're going
11:48
Speaker 3: to be very extensive. So that's certainly a possibility that
11:52
Speaker 3: could come down the line in two years or six
11:55
Speaker 3: years or however long it may take for a new administration,
11:58
Speaker 3: a new democratic administration to come in.
12:01
Speaker 2: So, Kalshi is gambling that the CFTC will stay in
12:05
Speaker 2: this deregulatory mode.
12:07
Speaker 1: It is.
12:08
Speaker 3: It is.
12:09
Speaker 2: Also, Kalshi said that the CFTC's ongoing rulemaking addresses many
12:14
Speaker 2: of the NFL's supposed concerns. Do we know what the
12:18
Speaker 2: rules are yet?
12:19
Speaker 3: I don't think so. I think there's still a work
12:22
Speaker 3: in progress and... I think that what the NFL is
12:27
Speaker 3: saying is that it's just not comfortable working with this regulator,
12:31
Speaker 3: that it's got some concerns about what its approach has been.
12:35
Speaker 3: And that's why they've given some examples of proposals that
12:39
Speaker 3: they want the CFTC to adopt, which they have not adopted,
12:43
Speaker 3: or it does not appear that they are going to adopt.
12:45
Speaker 3: So even if they are going forward with rulemaking, I
12:49
Speaker 3: think the NFL's point is, well, they're not really listening
12:52
Speaker 3: to us. And they're taking an approach we think is
12:56
Speaker 3: going to harm the game, that's going to harm our business.
12:59
Speaker 3: And we would rather work with state regulators in this
13:01
Speaker 3: particular area.
13:03
Speaker 2: And the numbers are stunning. The NFL noted that On
13:07
Speaker 2: the first Sunday of the 2026 season, more than half
13:11
Speaker 2: of all prediction markets trading volume, $ 1. 8 billion out of
13:15
Speaker 2: $ 3. 3 billion, was related to the NFL. And they said
13:19
Speaker 2: that any delay from the court will result in increasing
13:22
Speaker 2: consumer harm and risk to game integrity. But it seems
13:26
Speaker 2: like the MLB is not concerned about game integrity because
13:31
Speaker 2: five teams have made multi-year deals with Calshi.
13:35
Speaker 3: Yeah, I think given the size of the amount that
13:39
Speaker 3: is being wagered on the NFL, given the profitability of
13:44
Speaker 3: the league, and really concerns about there being so many
13:48
Speaker 3: different things where corruption could come into the game in
13:51
Speaker 3: very subtle ways. And if we lose confidence in the
13:55
Speaker 3: integrity of the outcome, if we don't believe that it
13:59
Speaker 3: is a true competitive game, then... The fear is that,
14:04
Speaker 3: you know, fans are going to be turned off and
14:07
Speaker 3: do something else. I think that is essentially their concern
14:09
Speaker 3: is that there are secondary effects to manipulation and fraud,
14:15
Speaker 3: you know, on other stakeholders. And so the sort of
14:18
Speaker 3: speculation that's going on is something that the NFL is
14:21
Speaker 3: very concerned about because it's very hard to police. It's
14:24
Speaker 3: very hard to police things like officiating. It's very hard
14:27
Speaker 3: to police, you know, things like if somebody gets injured and,
14:32
Speaker 3: Things like that could really open up a big can
14:36
Speaker 3: of worms in terms of questions about what's really going
14:39
Speaker 3: on at critical times in these sporting events.
14:43
Speaker 2: I'd be surprised if the Supreme Court doesn't take this case.
14:47
Speaker 2: And we could hear as soon as December whether they'll
14:49
Speaker 2: take the case in the current term. Great to talk
14:53
Speaker 2: to you as always, Jim. That's Professor James Park of
14:56
Speaker 2: UCLA Law School. You often hear about federal sentencing guidelines.
15:01
Speaker 2: But at the Supreme Court on Tuesday, the focus was
15:04
Speaker 2: on the commentary to the guidelines. And the justices appeared
15:08
Speaker 2: wary of reducing the deference judges have to pay to
15:12
Speaker 2: the commentary when sentencing defendants. Several of the justices, like
15:16
Speaker 2: the chief justice, seem to suggest that it's best to
15:20
Speaker 2: leave well enough alone.
15:21
Speaker 4: Of course, after Booker, the guidelines are advisory, and I'm
15:26
Speaker 4: not sure why we should I invite the lower courts
15:29
Speaker 4: to engage in somewhat, it strikes me, as an academic
15:32
Speaker 4: exercise of interpreting.
15:35
Speaker 2: Justice Katonji Brown-Jackson, who served as vice chair of the
15:38
Speaker 2: Sentencing Commission from 2010 to 2014, said the guidelines and
15:44
Speaker 2: commentary are inextricably linked and work together.
15:49
Speaker 5: Sentencing judges use the guidelines manual to do what is
15:53
Speaker 5: essentially a calculation. It's kind of like math. that the
15:58
Speaker 5: guidelines themselves have certain components to them. And the commentary
16:03
Speaker 5: tells you how those pieces fit together, how you are
16:07
Speaker 5: supposed to take them into account. When you are a judge,
16:10
Speaker 5: you're using both to reach the right answer under the guidelines.
16:14
Speaker 5: And there is a right answer.
16:16
Speaker 2: Justice Samuel Alito was one of those who expressed concerns
16:20
Speaker 2: about the number of defendants that would have to be
16:23
Speaker 2: resentenced if the court overturned a three-decade-old rule.
16:28
Speaker 6: Is it reasonably foreseeable that overruling Stinson would require the
16:34
Speaker 6: resentencing of, what, 10,000 defendants from 2025 alone?
16:39
Speaker 2: Joining me is Sam Merchant, a professor at the University
16:44
Speaker 2: of Minnesota Law School and an expert in sentencing. Sam,
16:48
Speaker 2: will you start by telling us just what the sentencing
16:51
Speaker 2: guidelines are and how judges use them.
16:56
Speaker 7: To understand the sentencing guidelines, this requires a bit of unpacking.
16:59
Speaker 7: To sort of take us back a little bit before
17:01
Speaker 7: we even had sentencing guidelines, for most of America's history,
17:05
Speaker 7: judges were left on their own to sentence anywhere within
17:08
Speaker 7: these broad statutory ranges of punishment that Congress establishes. So
17:14
Speaker 7: for a crime, take burglary, for example, Congress might say
17:17
Speaker 7: that the statutory range would be probation to 20 years
17:21
Speaker 7: in prison. And this was supposed to take into account
17:24
Speaker 7: the fact that there are a lot of aggravating and
17:26
Speaker 7: mitigating circumstances in a burglary that Congress just didn't want
17:30
Speaker 7: to account for in the statute or else the statute
17:32
Speaker 7: books would be 100 times longer than they already are.
17:34
Speaker 1: And so, for example, you might have a burglary.
17:37
Speaker 7: Maybe the defendant is going to his friend's house to
17:40
Speaker 7: try to reclaim some property he believes is his property.
17:43
Speaker 7: That's one version that a burglary might take. Another could
17:46
Speaker 7: be a burglary in which the defendant attacks an elderly woman.
17:49
Speaker 1: And causes injury, right? Something like that. That'd be a
17:51
Speaker 1: much more severe crime.
17:52
Speaker 7: And so Congress, not wanting to establish every permutation of
17:56
Speaker 7: a burglary, just said, we're going to defer to judges
17:59
Speaker 7: to sentence anywhere within those broad statutory ranges of probation
18:02
Speaker 7: in 20 years. As you can imagine, under this system...
18:05
Speaker 7: With that much discretion to judges, they were sentencing sort
18:09
Speaker 7: of all over the place. And so seemingly similar offenders
18:13
Speaker 7: would be sentenced to one year and in a different
18:14
Speaker 7: jurisdiction or in a different case, another would get 15 years.
18:17
Speaker 7: And this just seemed very unfair. And so in 1984,
18:21
Speaker 7: Congress passed the Sentencing Reform Act. And the goal here
18:26
Speaker 7: was to try to have more uniformity and certainty in
18:29
Speaker 7: sentences by narrowing the ranges of punishment that are available
18:33
Speaker 7: to judges. And so instead of a statutory range of
18:36
Speaker 7: zero to 20 years, you'd map on top of that
18:40
Speaker 7: sentencing guidelines that would narrow that range to maybe 10
18:43
Speaker 7: to 11 years. And then hopefully the idea would be
18:46
Speaker 7: you have similar sentences imposed on similar defendants all around
18:49
Speaker 7: the country. At the same time, Congress created the U.S.
18:52
Speaker 7: Sentencing Commission and instructed the Sentencing Commission to create these
18:56
Speaker 7: guidelines to help judges guide their sentencing practices. And here,
19:00
Speaker 7: the Sentencing Commission did that, and they created guidelines and
19:03
Speaker 7: commentary underneath those guidelines to help judges... sort of parse
19:07
Speaker 7: through some of the language of the guidelines. And at
19:10
Speaker 7: this time, these sentencing guidelines were binding on judges. The
19:13
Speaker 7: commentary was binding, the guideline was binding, and so judges
19:15
Speaker 7: had to follow them. Then we get in 2005, a
19:18
Speaker 7: Supreme Court case called U.S. v. Booker, and the Supreme
19:21
Speaker 7: Court said, a binding guideline regime violates the Sixth Amendment,
19:25
Speaker 7: and so... The way to remedy this constitutional violation is
19:28
Speaker 7: just to make the sentencing guidelines advisory only. And so
19:32
Speaker 7: now we are left with a system of advisory guideline
19:35
Speaker 7: ranges that advise judges on what the Sentencing.
19:37
Speaker 1: Commission thinks is an appropriate sentence in a case.
19:40
Speaker 7: But after the judge calculates that, the judge can then
19:43
Speaker 7: reject that advice and pose a sentence that they think
19:45
Speaker 7: is fair.
19:46
Speaker 2: Tell us about the sentencing of the defendant here and
19:48
Speaker 2: what the issue is then.
19:50
Speaker 7: In this case, Kendrick Beard was caught with a Glock 17,
19:54
Speaker 7: one of the most common handguns in America. And he
19:57
Speaker 7: was a prohibited person under the statute. He was not
19:59
Speaker 7: supposed to possess a firearm, but he possessed a firearm.
20:02
Speaker 7: And the firearm had a standard 17-round magazine. And the
20:07
Speaker 7: sentencing guidelines for this offense were... have an enhancement if
20:11
Speaker 7: the weapon of the firearm can, quote, accept a large
20:15
Speaker 7: capacity magazine. But the guidelines don't define what a large
20:19
Speaker 7: capacity magazine is. And so to figure out what that means,
20:23
Speaker 7: the Sentencing Commission has some commentary under the guideline that
20:26
Speaker 7: helps define what the Sentencing Commission thinks a large capacity
20:30
Speaker 7: magazine means. And the commentary says that anything over 15
20:33
Speaker 7: rounds is considered.
20:35
Speaker 1: By the commission at least, a large capacity magazine.
20:38
Speaker 7: So here, the question is essentially, do judges have to
20:41
Speaker 7: defer to the guidelines commentary here, or can judges completely
20:45
Speaker 7: ignore the commentary and interpret what a large capacity magazine
20:49
Speaker 7: means on their own? And if that happens here, the
20:53
Speaker 7: judge could ignore the commentary and not impose this enhancement
20:56
Speaker 7: because the judge could say, I don't think this is
20:58
Speaker 7: a large capacity magazine. This is a pretty average size magazine.
21:01
Speaker 7: And so I'm not going to apply this enhancement. If
21:03
Speaker 7: the commentary is binding in some way, or judges are
21:06
Speaker 7: supposed to give some deference to the commentary, then the
21:08
Speaker 7: enhancement applies. And as applied here, it amounted to around
21:11
Speaker 7: an extra year on this defendant's sentence. And so it
21:15
Speaker 7: really matters whether the guideline commentary is binding or not
21:18
Speaker 7: on judges.
21:18
Speaker 2: I thought you said before that the guidelines were advisory only.
21:22
Speaker 7: Yeah, so these are advisory only, but under the spin
21:24
Speaker 7: court's precedence, the judges still have an obligation to accurately
21:28
Speaker 7: calculate the guideline range. And so they have to go
21:30
Speaker 7: through the process and accurately apply the enhancements and reductions.
21:35
Speaker 7: and then come to the advisory guideline range and then
21:37
Speaker 7: make a decision about whether to follow that guideline range
21:40
Speaker 7: or not. And a part of coming to the accurate
21:42
Speaker 7: guideline range in this case is, do we have to
21:46
Speaker 7: give deference to the commentary when we're calculating the guideline range?
21:49
Speaker 7: Or can we ignore the commentary when we're trying to
21:51
Speaker 7: calculate the guideline range? And that matters here. Again, it's
21:55
Speaker 7: sort of a year difference. And in some cases, it
21:57
Speaker 7: could be several years difference, whether the commentary is given
22:00
Speaker 7: deference or whether it's ignored.
22:01
Speaker 2: And what did the justices focus on during the oral arguments?
22:06
Speaker 7: The oral argument in the Beard case was sort of
22:08
Speaker 7: fascinating in that the Sentencing Commission is a very unique
22:12
Speaker 7: agency as far as agencies go.
22:14
Speaker 1: When Congress creates administrative.
22:16
Speaker 7: Agencies, it almost always puts them in the executive branch.
22:20
Speaker 1: And it put the U.S. Sentencing Commission in the judicial branch.
22:24
Speaker 7: And so the Supreme Court has sort of grappled with
22:26
Speaker 7: what to do with that since Congress created the Sentencing
22:29
Speaker 7: Commission in 1984. And as we know from following the
22:32
Speaker 7: Supreme Court, the Supreme Court has taken a much more
22:35
Speaker 7: skeptical view in the last sort of 10, 15 years
22:38
Speaker 7: of executive branch agencies and deference to executive branch agencies
22:43
Speaker 7: and the congressional design of executive branch agencies and So
22:46
Speaker 7: now the question is, how much of that skepticism is
22:48
Speaker 7: going to then apply to a judicial branch agency like
22:51
Speaker 7: the Sentencing Commission? And so a lot of the oral
22:53
Speaker 7: argument was grappling with whether the court wants to import
22:58
Speaker 7: some of its precedents and doctrines from executive agency administrative
23:02
Speaker 7: law cases to the Sentencing Commission, or whether the Sentencing
23:05
Speaker 7: Commission really needs its own deference analysis and doctrinal analysis,
23:10
Speaker 7: because what it's doing is ultimately different than what executive
23:13
Speaker 7: branch agencies are doing. So there was a lot of
23:15
Speaker 7: discussion about Executive various agencies, deference, whether Congress has the
23:19
Speaker 7: power to do this, whether the Sentencing Commission has the
23:21
Speaker 7: power to promulgate the commentary that it does, whether that
23:25
Speaker 7: commentary is binding or it's advisory or whether judges can
23:28
Speaker 7: ignore it. In the executive agency context, the courts are
23:32
Speaker 7: getting more and more in the camp of allowing judges
23:35
Speaker 7: to interpret de novo agency interpretations. And so do you
23:39
Speaker 7: want to apply that to the sentencing guidelines, context, and commentary?
23:43
Speaker 7: So a lot of that was what the justices were
23:45
Speaker 7: grappling with in this oral argument.
23:47
Speaker 2: Coming up next, we'll talk about the likely outcome of
23:50
Speaker 2: the case. You're listening to Bloomberg. I've been talking to
23:54
Speaker 2: sentencing expert Sam Merchant, a professor at the University of
23:57
Speaker 2: Minnesota Law School. So Justice Katonji Brown-Jackson served as vice
24:03
Speaker 2: chair of the Sentencing Commission for about four years. I mean,
24:07
Speaker 2: could you tell which side she was on?
24:09
Speaker 1: We could.
24:10
Speaker 7: So Justice Jackson had some very helpful framing points in
24:14
Speaker 7: this oral argument that I think a lot of the
24:16
Speaker 7: other justices drew on with some of their questioning. And
24:20
Speaker 7: this likely comes from her experience as a vice chair
24:23
Speaker 7: on the Sentencing Commission. And so Justice Jackson basically framed
24:27
Speaker 7: the issue in this way. She basically says... We don't
24:31
Speaker 7: need to look that dispositively at our executive agency jurisprudence
24:36
Speaker 7: in this case, because the Sentencing Commission is very different,
24:39
Speaker 7: and what it does is very different, and what the
24:40
Speaker 7: guidelines do is very different than executive branch agency regulations.
24:45
Speaker 7: She analogized to, as a hypothetical, she analogized to a
24:50
Speaker 7: situation in which effectively, before every sentencing hearing around the country,
24:54
Speaker 7: the U.S. Sentencing Commission would send each judge a a
24:58
Speaker 7: memo saying, this is what we think an appropriate sentence
25:01
Speaker 7: would be based on the aggravating and mitigating circumstances in
25:05
Speaker 7: this case and based on the defendant's criminal history. We
25:08
Speaker 7: think this is what a reasonable sentence would be. This
25:10
Speaker 7: is what other judges around the country are doing. And
25:12
Speaker 7: so as the US Sentencing Commission, the entity that studies
25:15
Speaker 7: these things in detail, we think this is an appropriate sentence.
25:18
Speaker 7: And they send that to every judge all around the country.
25:20
Speaker 7: Instead of a procedure like that, under the current guidelines
25:23
Speaker 7: and the current system that we have, each judge looks
25:26
Speaker 7: at the sentencing guidelines manual and tries to figure out
25:30
Speaker 7: what the U.S. Sentencing Commission thinks a reasonable sentence would be.
25:33
Speaker 7: And so it's a similar outcome. And then all the
25:36
Speaker 7: judges are doing is trying to get advice from the
25:38
Speaker 7: Sentencing Commission on what an appropriate sentence would be. And
25:41
Speaker 7: so Justice Jackson's point here is that all you're trying
25:45
Speaker 7: to do here is get sort of advice, including with
25:49
Speaker 7: the commentary. We're trying to get advice on what the
25:50
Speaker 7: Sentencing Commission thinks these guidelines mean. In this case, what
25:54
Speaker 7: a large capacity magazine actually means. Once judges accurately figure
25:59
Speaker 7: that out, giving deference to the commission on what it
26:01
Speaker 7: thinks a large capacity magazine means, then judges have their
26:05
Speaker 7: guideline range. We have what the sentence commission thinks is
26:08
Speaker 7: an appropriate sentence. And then judges can sort of disregard
26:12
Speaker 7: that if they don't think that's appropriate and sentence in
26:14
Speaker 7: a way that they think is fair. And so it's
26:16
Speaker 7: totally different from what happens in the executive agency context.
26:20
Speaker 7: In the sentence commission context, it's sort of a different procedure.
26:24
Speaker 7: And for those reasons, the Sentence Commission can get deference
26:27
Speaker 7: because all you're giving deference to is what the Sentence
26:29
Speaker 7: Commission thinks is a reasonable sentence.
26:31
Speaker 2: There seem to be questions about whether if they ruled
26:34
Speaker 2: in favor of the defendant, tens of thousands of defendants
26:39
Speaker 2: would have to be resentenced.
26:41
Speaker 7: There was some concern from several of the justices. Justice
26:44
Speaker 7: Alito was concerned with that. Justice Kavanaugh was concerned with that.
26:47
Speaker 7: This was sort of framed as the pendulum swinging too
26:50
Speaker 7: far in the other direction. such that we would need
26:53
Speaker 7: to have tens of thousands of resentencings here. Or if
26:56
Speaker 7: the Supreme Court agrees with amicus here and ultimately with
27:02
Speaker 7: what the lower court judge did in this case, then
27:05
Speaker 7: you wouldn't have a lot of those resentencings and the
27:08
Speaker 7: system wouldn't change very much. And so under the current system,
27:12
Speaker 7: judges essentially defer to the Sentencing Commission on its commentary
27:17
Speaker 7: interpreting the sentencing guidelines. And so that seemed to get
27:20
Speaker 7: a consensus view. There weren't a lot of justices that
27:23
Speaker 7: were interested in displacing that view. And so if the
27:27
Speaker 7: Supreme Court sort of goes down that road, you wouldn't
27:29
Speaker 7: have all these resentencings. You wouldn't have to worry about
27:32
Speaker 7: the Sentence Commission having to take some extreme action in
27:34
Speaker 7: order to remedy the problem that the Supreme Court might
27:37
Speaker 7: identify if they agreed with the defendant in this case.
27:40
Speaker 7: But if they agreed with the defendant in this case,
27:42
Speaker 7: you would potentially have tens of thousands of resentencings and
27:46
Speaker 7: a lot of different actions that the Sentencing Commission will
27:49
Speaker 7: probably need to take to bring the guidelines into compliance
27:52
Speaker 7: with the Supreme Court's decision. By my count, it looked
27:54
Speaker 7: like it was really kind of eight to one in
27:57
Speaker 7: favor of agreeing with Amicus and rejecting the defendant's argument.
28:00
Speaker 1: Maybe seven to two.
28:03
Speaker 7: Justice Thomas seemed a little bit on the fence at times.
28:05
Speaker 7: We're not really sure where he's ultimately going to land,
28:08
Speaker 7: and so we'll have to see. Justice Gorsuch was clearly
28:10
Speaker 7: on the side of the defendant. He regularly pressed all
28:13
Speaker 7: sides to say, We should give essentially no deference to
28:17
Speaker 7: the Sentencing Commission and these types of issues. He's been
28:20
Speaker 7: a long skeptic of deference to administrative agencies. It seems
28:24
Speaker 7: quite clear that he will dissent in this case, but
28:26
Speaker 7: it did seem like at least seven other justices were
28:29
Speaker 7: interested in maintaining the current system, some version of the
28:32
Speaker 7: current system that we already have, which would not be
28:35
Speaker 7: much of a difference on the ground for defendants or
28:37
Speaker 7: for the sentencing procedure.
28:39
Speaker 2: I thought in criminal cases, Justices Gorsuch and Sotomayor agreed usually.
28:45
Speaker 1: Yes, they often agree.
28:46
Speaker 7: And Justice Gorsuch sort of has a reputation of being
28:49
Speaker 7: relatively defendant-friendly on a lot of criminal cases, at least
28:53
Speaker 7: coming from the conservative side of the bench. And I
28:57
Speaker 7: think what he might calculate, if that's true in this case,
28:59
Speaker 7: is just that a lot of the commentary is might
29:03
Speaker 7: not be defendant-friendly, it might be government-friendly. And so if
29:06
Speaker 7: the judges don't have a deferential attitude toward the commentary,
29:10
Speaker 7: then they're freed up from some of these more government-friendly
29:13
Speaker 7: definitions and commentary.
29:15
Speaker 1: I haven't audited the commentary. I think the Sentence Commission
29:18
Speaker 1: probably has.
29:19
Speaker 7: I haven't audited the commentary to see how much of
29:22
Speaker 7: it would be defendant-friendly versus how much would be government-friendly.
29:26
Speaker 7: Certainly some commentary, and this came up in our argument,
29:29
Speaker 7: some commentary cuts in favor of the defendant and some
29:31
Speaker 7: commentary cuts in favor of the government. And so the
29:34
Speaker 7: justices seem to think that it would be more of
29:36
Speaker 7: a wash. But Justice Gorsuch, I think, seems to think
29:38
Speaker 7: that if we disregarded the commentary, it might be beneficial
29:41
Speaker 7: to defendants in the aggregate.
29:43
Speaker 2: Is it odd that the U.S. Solicitor General's office sided
29:47
Speaker 2: with the defendant here?
29:49
Speaker 7: I guess I should say it is a bit unusual
29:51
Speaker 7: for the Solicitor General to do this. But ultimately, it
29:53
Speaker 7: came out of oral argument that there's not that much
29:56
Speaker 7: daylight in between the amicus. So when you don't have
30:00
Speaker 7: anyone defending the decision below, the court appoints amicus to
30:03
Speaker 7: argue on behalf of the decision below. And that happened here.
30:07
Speaker 7: And there wasn't that much daylight in between the government's
30:09
Speaker 7: position and the amicus position. So they both disagree with
30:13
Speaker 7: the defendant. But on the other side of the V,
30:15
Speaker 7: there really wasn't that much daylight. And it came up
30:18
Speaker 7: regularly at oral argument, where the deputy solicitor general Fagan said,
30:23
Speaker 7: We really wouldn't oppose a decision that rules in favor
30:26
Speaker 7: of amicus as long as it's sort of phrased in
30:28
Speaker 7: the way that we think is appropriate.
30:29
Speaker 2: And what was your take on the oral arguments in general?
30:32
Speaker 7: This was a really interesting oral argument in that you
30:35
Speaker 7: had a lot of references to other justices across ideological lines.
30:40
Speaker 7: I watched the court very closely, and I have for years,
30:42
Speaker 7: and that's a little bit unusual. Usually you have some
30:45
Speaker 7: of the more conservative justices referencing other conservative justices and
30:48
Speaker 7: their questions and some of the more liberal justices referencing
30:51
Speaker 7: each other. But here you have Justice Alito saying, I
30:54
Speaker 7: want an answer to Justice Sotomayor's question. And Justice Sotomayor saying,
30:58
Speaker 7: you didn't really give me a complete answer to Justice
31:01
Speaker 7: Kavanaugh's question. There's a lot of crosstalk between the justices
31:04
Speaker 7: and across sort of what some people might think are
31:06
Speaker 7: the political lines or the partisan lines.
31:09
Speaker 1: And that's another.
31:09
Speaker 7: Indication to me that we'll probably see some unanimity here,
31:13
Speaker 7: maybe eight to one or seven to two. One other
31:16
Speaker 7: point on what Justice Jackson sort of reiterated throughout the
31:19
Speaker 7: oral argument, she really got to the purpose of the
31:22
Speaker 7: Sentencing Reform Act. And so we talked a little bit
31:25
Speaker 7: earlier about what American sentencing looked like before the Sentencing
31:28
Speaker 7: Reform Act and how judges were sort of all over
31:30
Speaker 7: the place. on their sentences, and there wasn't a lot
31:32
Speaker 7: of uniformity. Justice Jackson reiterated that the whole point of
31:36
Speaker 7: the Sentencing Reform Act was to constrain judicial discretion. We
31:39
Speaker 7: think judges are exercising too much discretion, and that's leading
31:43
Speaker 7: to unfair sentences and unwarranted sentencing.
31:46
Speaker 1: Disparities across the country.
31:48
Speaker 7: We want to constrain judicial discretion with the Sentencing Reform Act,
31:51
Speaker 7: and one way to do that is through sentencing guidelines.
31:54
Speaker 7: And so Justice Jackson sort of reiterated If that's the
31:56
Speaker 7: whole point of the Sentencing Reform Act, then why would
31:59
Speaker 7: we have a doctrinal interpretation of how judges are supposed
32:02
Speaker 7: to consider the commentary in a way that expands judicial discretion?
32:06
Speaker 7: By giving them the ability to analyze commentary or completely
32:09
Speaker 7: reject the commentary and analyze the guidelines in the way
32:14
Speaker 7: that they think is appropriate. In which case, you'd have
32:17
Speaker 7: hundreds of judges all around the country potentially saying, interpreting
32:21
Speaker 7: the language of the guideline in different ways. The whole
32:23
Speaker 7: point is to constrain judicial discretion. And so she sort
32:25
Speaker 7: of reiterated that point a few times. And I think
32:27
Speaker 7: that resonated with a lot of the other justices.
32:30
Speaker 2: Sometimes it's nice to have an oral argument where there's
32:32
Speaker 2: no tension. Thanks so much, Sam. That's Professor Sam Merchant
32:37
Speaker 2: of the University of Minnesota Law School. And that's it
32:41
Speaker 2: for this edition of the Bloomberg Law Show. Remember, you
32:43
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32:46
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32:59
Speaker 2: Wall Street time. I'm June Grosso, and you're listening to Bloomberg.