The Motion Picture Association of America (MPAA) has requested the Commodities Futures Trading Commission (CFTC) to block the proposed trading of futures contracts based on box-office receipts, according to a letter obtained by the New York Times.
In the letter sent last week by Robert Pisano, the interim MPAA CEO states that the “reputation and integrity of our industry could be tarnished by allowing trading in the movie futures contracts in a manner which allows them to be viewed as the economic equivalent of legalized gambling on movie receipts.”
Two companies have announced plans to open film stock exchanges.
Cantor Fitzgerald’s Hollywood Stock Exchange touts itself as “the world’s leading entertainment gaming site.” Founded in 1996, the Los Angeles-based website invites visitors to use Hollywood Dollar® currency to buy and sell virtual shares of celebrities and movies. According to the New York Times, the company has recently begun allowing customers to fund their accounts with real dollars and expects to get final CFTC approval for its exchange in April.
Veriana Ventures recently announced its plans to launch The Trend Exchange—the first federally regulated exchange to offer futures contracts based on domestic box office receipts for the opening weekend of MPAA films.
Founder and CEO Robert Swagger believes that TrendEx signals a new opportunity for both the futures industry and Hollywood:
By offering speculators and hedgers a market-based solution to transfer the considerable financial risks associated with major movie productions, The Trend Exchange will perform the same public service that futures exchanges have been providing to commercial users for nearly two hundred years.
The MPAA sees things differently. According to the letter obtained by the New York Times, Bob Pisano argues that, by prohibiting certain investors to hedge investments, such contracts undermine one of the central purposes of the futures market. He alleges that the Cantor application bans investors in a movie, such as a movie studio, from trading futures for that film.
The decision rests in the hands of the Commodity Futures Trading Commission (CFTC). Congress established this independent agency in 1974 with a mandate to regulate U.S. commodity futures and options markets. The Commission is expected to make a decision on this matter sometime soon.
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