Dan Katz (Michigan State), Michael James Bommarito, Tyler Soellinger (Michigan State), and Jim Chen (Michigan State) have posted a new paper that studies empirically the impact of SCOTUS opinions on the share prices of the winning and losing corporate parties.  WSJ Blog blurb here.  As corporate law professors know, the SCOTUS docket is not mainly corporate law cases or cases in which one corporation's prospects might be substantially changed (employment case, etc.), but the study did find 79 cases in the relevant period that seem to match changes in stock price equal to $140 billion.

Why do the authors think that's important?  Obviously, in cases in which corporations get large securities fraud lawsuits dismissed or on the other hand, get a ruling that opens the door to a class action or multiple lawsuits, the share price could react.  But what the authors are really interested is predicting that movement and exploiting it.  Here is there information market website:  https://fantasyscotus.lexpredict.com/.  Here is their algorithm:  http://arxiv.org/abs/1407.6333.  

From a securities law standpoint, I can't help but wonder when predictive trading on court decisions begins to cross the "outside trading" line.  No, the information isn't nonpublic -- the information is public, but only accessible through an enormous amount of computing power.  Bud Fox following a corporate raider around all day and making very informed guesses as to his next target is one thing, but following every CEO around with invisible drones is another.  At some point, does technology make information gathering cross the line?  I don't have an answer for this, but I know that Larry Ribstein and Bruce Kobayashi hinted at the positive aspects of this in "Outsider Trading as Incentive Device," which responded to Ian Ayres and Steven Choi's "Internalizing Outsider Trading" and the concern that the ability to trade in similar ways would lead to excessive search costs.  (None of the authors contemplated a scenario in which technology makes information that for all practical purposes was nonpublic and uses it for trading purposes.)  I look forward to hearing more.

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