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Pols ponder futures

Lawmakers wary of two possible markets

A handful of powerful lawmakers, including Rep. Henry Waxman (D-Calif.), Sen. Dianne Feinstein (D-Calif.) and Sen Barbara Boxer (D-Calif.), are expressing serious concerns to federal regulators about two proposals to create a market for film futures.

Studios have been lobbying lawmakers to urge them to at least slow down the process, as the Commodity Futures Trading Commission was expected to decide as early as this week whether to approve the plan of Media Derivatives Inc. to launch a market for trading on the prospects of a movie’s box office return. Another exchange, called the Cantor Futures Exchange, was to launch on April 20, subject to approval.

Waxman, the chairman of the Energy and Commerce Commitee, urged CFTC chairman Gary Gensler for a “modest delay” until April 16, “to allow for a thorough review and more complete understanding of the potential consequences of these proposals.”

In a joint letter to Gensler, Boxer and Feinstein echoed that request, and wrote that the CFTC “has an obligation to consider the film industry’s views thoroughly before authorizing the creation of a new market that would profoundly impact this business.”

Also chiming in was Rep. Lamar Smith (R-Texas), the ranking member of the House Judiciary Committee, who wrote that “unlike a traditional futures contract to sell or take delivery of corn or pork bellies at a future date, the contracts or ‘securities’ that a [futures exchange] would list do not contemplate the sale or delivery or an ownership interest in the motion picture upon whose success or failure the contract counterparties depend.” He added that the contracts “appear to be thinly veiled, ‘naked’ bets because they provide no mechanism for physical settlement.”

Rep. Bob Goodlatte (R-Va.), a member of the House Agriculture and Judiciary committees, expressed concerns that the markets “could be manipulated to undermine the value of a given piece of intellectual property,” and then “weaken the incentives for artists and inventors to create intellectual property in the first place.”

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