CFTC approves second movie futures contract

WASHINGTON  – U.S. regulators on Monday narrowly approved a request by Cantor Fitzgerald LP that would allow the firm to offer futures contracts tied to box office receipts.

It was the second contract approved by the U.S. Commodity Futures Trading Commission, but looming over the contracts is the financial regulatory reform bill that Congress will vote on this week.

A provision in the bill, which regulates the $615 trillion over-the-counter derivatives market, explicitly bans futures tied to box office receipts.

The approval on Monday by the CFTC will allow Cantor to offer a contract for "The Expendables" with Sylvester Stallone, to be released on August 13.

The CFTC said Cantor's contract has "no material difference" from one it approved earlier this month: Media Derivatives Inc's contract based on the opening weekend box office revenues for "Takers," a Sony Corp movie.

"We find that the Cantor ... futures contract is based on a commodity, is not susceptible to manipulation and can be used to fulfill an economic hedging purpose," the CFTC said.

Similar to the Media Derivatives contract, two of five CFTC commissioners -- Jill Sommers and Bart Chilton -- voted to oppose the proposal.

"The contracts are subject to disruptive trading and manipulation because movie studios have a tremendous influence on box office returns," said Chilton.

"If you are a movie studio and you alter your marketing budget for a film, that could impact ... box office returns," he said.

The Motion Picture Association of America, which represents the major studios, has told the CFTC that trading movie futures is nothing more than gambling, which would damage the reputation of the industry and make the box office susceptible to market manipulation.

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.