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The money pit: Feds approve another box office futures exchange

April 20, 2010 |  3:58 pm


Cantor
For the second time in a week, federal regulators gave preliminary approval to a company that wants to create a market for betting on the future box office receipts of Hollywood movies – but don’t rush to place your wager.

The Commodity Futures Trading Commission approved the Cantor Exchange’s application to serve as a clearing operation for movie futures, financial contracts that would allow investors to put a wager on how much a movie would make during its first month in theaters. The news came a few days after the CFTC gave approval to another company proposing to set up a similar exchange called Media Derivatives.

Unlike the exchange proposed by Media Derivatives, which would only allow professional investors to take part, the Cantor Exchange wants to open up its exchange to all retail investors.

Both companies face significant roadblocks before they can actually host the first trades. The CFTC has not yet approved the actual contracts that people on the exchange would use, and it has 90 days to do so.

More immediately, box office futures will be the subject of a House congressional hearing Thursday in front of the agriculture subcommittee, which oversees all derivatives markets, including futures. Arkansas Sen. Blanche Lincoln, the chairwoman of Senate Agriculture Committee, has also proposed that the financial reform package moving through Congress include a provision that bans any markets in movie futures.

The hearing and Lincoln’s legislation came after film industry leaders voiced vehement opposition to the exchanges shortly before the CFTC was set to announce its decision on Media Derivatives. An alliance of industry groups, including the Motion Picture Assn. of America, the National Assn. of Theatre Owners and the Directors Guild of America praised Lincoln’s move last week.
 
“As Congress moves forward with financial regulatory reform, we are very grateful to Chairman Lincoln for seeking to put a stop to plans to allow wagering on box-office futures, which are based on a faulty understanding of the film business and could cause real financial harm to both the film industry and other Americans drawn in by an online gaming platform that could be easily manipulated,” the industry groups said in a statement.

The chairman of the Motion Picture Assn., Bob Pisano, is set to testify on Thursday, as are the chief executives of Media Derivatives and the Cantor Exchange.

-- Nathaniel Popper

Photo: Richard Jaycobs, president of the Cantor Exchange, on the company's trading floor. Credit: Michael Nagle / For The Times

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