Shocked, Shocked
Posted on April 22, 2010
Everyone’s favorite line from the movie “Casablanca” is when Inspector Renault says to Rick (as he collects his gambling winnings), “I am shocked, shocked to find gambling going on here.”In the case of the Commodity Futures Trading Commission (CFTC), I am actually shocked, shocked that the CFTC just gave the go-ahead to the idea of gambling on the future prospects of movie box office receipts.
The ostensible reason for such a move is to give investors a chance to hedge their investments in movies. But what it will amount to is higher regulatory costs for the movie studios and another risky trading instrument for Wall Street and for those people who are willing to bet on the future of a movie.
My good friend Dan Glickman, the former Agriculture Secretary and the former head of the Motion Picture Association of America, used to make the case that agriculture and the movie business had a lot in common. The word “culture” for example.
But in actuality, the movie business is completely different from the farming business. Farming is actually pretty predictable. You can guess the yields based on the weather and for that you have the “Farmer’s Almanac.”
In Hollywood, the old saying goes, “Nobody knows anything.” Nobody really knows what will be a hit and what won’t be. For every Avatar out there, there are a dozen Heaven’s Gates. How can anyone explain the popularity of Will Ferrell, whose movies are uniformly terrible, yet they somehow make lots of money?
So, it makes absolutely no sense to have a commission that is tasked with the authority to regulate mostly farm commodities like soybeans, West Texas Crude, and wheat futures, to get into the business of regulating a futures desk based on movie receipts.
The Congress, which is already trying to find a way to limit the widespread and fraudulent gambling on Wall Street, does not like this move by the Cantor Fitzgerald firm to make an exchange out of movie receipts.
The irony is that as the Administration makes moves to allow gambling on movies, it is also moving to ban gambling on cards.
A few years ago, the Congress passed the Unlawful Internet Gambling Enforcement Act, and now the Executive Branch is finally getting around to putting regulations in place that will make the banking industry act as a policeman to curtail the industry.
Playing poker online isn’t exactly a high crime and misdemeanor. But because of some intense lobbying by the NFL and by a few social conservative groups, it is now illegal for an American to operate a poker playing website and still live in America.
As a result, most of the industry has moved overseas, away from American regulators and away from American taxing authorities. Has this law done anything to stop poker playing online? Of course not! But it has made it impossible to collect any tax revenue from the practice and also made it impossible for poker sites to cooperate with federal authorities on best practices to responsibly regulate the industry.
So, we have an interesting situation developing with our federal government. In places where it has no business promoting gambling in an industry that doesn’t want to be gambled on, the Feds are saying, hey, go ahead. Gamble to your heart’s delight.
And in places where it should allow gambling to go ahead in an industry that wants to be regulated, the Feds are saying, nope. Stop that dastardly poker playing.
You wonder why the American people are fed up with the Federal Government. I am shocked, shocked to find anger in the streets and frustration with the status quo.