CFTC OKs Cantor market but mulls film contract

By Sue Zeidler and Christopher Doering

LOS ANGELES/ WASHINGTON (BestGrowthStock) – Cantor Fitzgerald LP won U.S. regulatory approval on Tuesday to launch a “contract market” for the trading of box office futures, but whether it can proceed with its controversial plan to offer contracts based on movie receipts is still far from certain.

The U.S. Commodity Futures Trading Commission (CFTC) said on Tuesday it had approved Cantor’s application for designation as a “contract market,” clearing the first hurdle the firm needed to begin trading options or futures contracts.

But the CFTC said it is still considering whether to allow Cantor to offer a contract tied to the box office receipts of a movie, and commissioners so far do not appear convinced the contracts will pass muster.

Last week, the CFTC also approved a new market request by Media Derivatives Inc that could one day be used to trade box office receipts.

The efforts by Cantor and Media Derivatives have drawn vigorous opposition by Hollywood studios which believe such a market could be susceptible to manipulation.

“In the upcoming days, we will continued to urge the CFTC to finally reject both the Cantor proposal and a separate proposal by Media Derivatives Inc,” said Howard Gantman, a spokesman for the Motion Picture Association of America (MPAA). The trade group represents large studios such as Walt Disney Co and News Corp’s Twentieth Century Fox.

Separately, members of Congress have also raised serious questions about the financial harm that these proposals could cause.

Senator Blanche Lincoln, chairman of the Senate Agriculture Committee, has introduced legislation that contains a provision banning such box-office wagering services. A markup on this bill is scheduled on Wednesday.

And on Thursday, the House Agriculture Subcommittee on General Farm Commodities and Risk Management, chaired by Representative Leonard Boswell, will be holding a hearing on the issue.

Media Derivatives CEO Robert Swagger and interim MPAA CEO Robert Pisano will be testifying.

“At this point in time, I have not heard any arguments to persuade me that ‘movie futures’ generally can overcome some fundamental design flaws,” CFTC Commissioner Bart Chilton said of Media Derivatives’ application.

A form of betting on the success and failure of box office flicks has been around for more than a decade. In 1996, a website called The Hollywood Stock Exchange was started where participants could invest fake dollars on box office outcomes. A division of Cantor Fitzgerald bought the site in 2001.

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(Reporting by Sue Zeidler; Editing by Richard Chang)

CFTC OKs Cantor market but mulls film contract