Stuart Banner's "Speculation"

Stuart Banner is Norman Abrams Professor of Law at the University of California, Los Angeles School of Law. A noted legal historian, he is the author of many books, including The Baseball Trust: A History of Baseball's Antitrust Exemption, American Property: A History of How, Why, and What We Own; Who Owns the Sky? The Struggle to Control Airspace from the Wright Brothers On; and Possessing the Pacific: Land, Settlers, and Indigenous People from Australia to Alaska.

Banner applied the “Page 99 Test” to his new book, Speculation:A History of the Fine Line between Gambling and Investing, and reported the following:

From page 99:

The same problem arose when the exchanges lobbied state legislatures for statutes banning bucket shops. “I went to Sacramento for the purpose of securing the introduction of a bill to put the bucket-shops out of business,” John Percy reported to the Board of Trade. “I was personally acquainted with a large number of the members of both houses, and interviewed them on this subject.” But Percy had no success, because he could not persuade legislators that bucket shops were any different from the Board. “In practically every instance,” he despaired, “I found that the members were entirely ignorant as to the difference between bucket-shops and legitimate brokerage houses, and all seemed to have the idea that a marginal trade through a legitimate broker was, to all intents and purposes, as fictitious as the so-called ‘purchases’ and ‘sales’ in the bucket-shops. The general impression seemed to be that the legislation I was urging was simply an attempt on the part of the big fellows to squeeze out the little ones.” The grain dealer Harry Kress was a Board of Trade member who lived in Piqua, Ohio. He tried to persuade his state legislature to ban bucket shops as gambling houses, but he was not optimistic, because most people thought the Board’s transactions were gambles too.

Speculation is about the perennial difficulty of distinguishing between investing and gambling. There has always been a consensus that investing is necessary and should be encouraged, and there has always been a near-consensus (although one that is weakening now) that gambling is dangerous and should be discouraged. But how can we tell the two apart? We have always had to draw a line between two kinds of risky transactions, a good kind the law should promote and a bad kind the law should deter. That line has never been easy to draw, and it has moved considerably over the years.

On page 99, the Chicago Board of Trade, the nation’s largest commodity exchange, is in the midst of a decades-long campaign in the late 19th and early 20th centuries to stamp out bucket shops, which were fake commodity and stock exchanges. On the Board of Trade, speculators nominally purchased commodities like wheat and corn, although in practice very few transactions involved any physical wheat or corn; the speculators were actually betting on whether prices would rise or fall. In the bucket shops, there was no pretense that actual commodities were being bought and sold; transactions were straightforward bets on prices. In trying to eliminate its ersatz competitors, the Board of Trade faced a serious problem. Lawmakers could not tell the difference between the Board of Trade and a bucket shop. In their view, both were venues for gambling.

Learn more about Speculation at the Oxford University Press website.

The Page 99 Test: Who Owns the Sky?.

The Page 99 Test: The Baseball Trust.

--Marshal Zeringue