Case 15. Gambling in "Futures"

Titius, a grain merchant, asks the judgment of his confessor concerning the lawfulness of a certain manner of acting by no means infrequent among merchants. According to Titius, therefore, merchants frequently buy and sell grain at a certain price fixed for a certain future day, without, however, in any way intending to deliver the grain, but only to pay the difference between the fixed price and the price at which grain is sold in the market when the day has arrived. Then, by no means infrequently, several merchants enter into a certain agreement so that, when the determined day approaches, if they wish the market price to rise, they buy a very large quantity among themselves in the said manner; if they wish the price to fall, they sell a very large quantity in the same manner at a reduced price. The effect of this manner of acting is that the price in fact rises or falls according to their will. Indeed, when by this manner of acting the price has fallen, they buy a very large quantity of grain at the reduced price, not fictitiously but in reality, and, when the price has risen on account of such buying, they sell it again, obtaining a very great profit. Hence it is asked:

1. What conditions are required in order that a wager be honorable?

2. Do those who conspire to raise or lower the price of some thing sin, and in what manner?

3. What is to be said of the case?

1. What conditions are required that betting may be permissible?

The bet must not be an incentive to sin; the object of the bet must be uncertain for both, at least in the sense that neither may influence events in his own favor, and both must understand the bet in the same sense and be prepared to stand by the issue of the event. Moreover, what is staked must be at the free disposal of him who bets.¹

1 Manual of Moral Theology, vol. i, p. 560.

2. Do those who conspire together to raise or lower the price of a commodity commit sin, and how?

If a fair and reasonable price can not be got for a commodity by leaving the sale to competition, there is no harm per se in conspiring together so that a fair price may be obtained. This holds of combinations of both buyers and sellers of the commodity; the buyers may combine to lower the price, the sellers to raise it, until a fair, and reasonable, price is secured. If prices are already fair, and reasonable, it is at least uncharitable to strive by combination to influence the market in one’s own favor to the damage of others; it will be against justice if by combination prices are altered so as to be unfair and uncharitable.²

2 The same work, p. 536.

3. The case. Titius, a corn merchant, asks if it is wrong to deal in “futures,” “time bargains,” or “differences.” In itself such dealing is betting on the future price of some commodity; it is not clear that it does harm to genuine buying and selling of commodities, and so it will not be wrong if the conditions laid down above for the lawfulness of betting are fulfilled. “Bull” and “Bear” transactions, as they are called, are designed to influence the market in favor of the operator, and they are immoral except as means of self-defence against aggression. To endeavor by artificial means to lower the market price when it is fair and reasonable, with the intention of buying in at a low rate and afterward selling at a higher, is wrong and unjust. Apart from this, there would be no harm in buying at the current rate when prices are low with the intention of selling out at a profit when they rise.¹

1 Manual of Moral Theology, vol. i, p. 560.