The Onion Futures Act

TIL that it is illegal to trade onion futures in the United States. The reason is that two traders cornered and destroyed the market for onions in 1955; wiki tells the tale:

In the fall of 1955, Siegel and Kosuga bought so many onions and onion futures that they controlled 98% of the available onions in Chicago. Millions of pounds (thousands of tonnes) of onions were shipped to Chicago to cover their purchases. By late 1955, they had stored 30 million pounds (14,000 t) of onions in Chicago. They soon changed course and convinced onion growers to begin purchasing their inventory by threatening to flood the market with onions if they did not. Siegel and Kosuga told the growers that they would hold the rest of their inventory in order to support the price of onions.

As the growers began buying onions, Siegel and Kosuga accumulated short positions on a large number of onion contracts. They also arranged to have their stores of onions reconditioned because they had started to spoil. They shipped them outside of Chicago to have them cleaned and then repackaged and re-shipped back to Chicago. The "new" shipments of onions caused many futures traders to think that there was an excess of onions and further drove down onion prices in Chicago. By the end of the onion season in March 1956, Siegel and Kosuga had flooded the markets with their onions and driven the price of 50 pounds (23 kg) of onions down to 10 cents a bag. In August 1955, the same quantity of onions had been priced at $2.75 a bag. So many onions were shipped to Chicago in order to depress prices that there were onion shortages in other parts of the United States.

Siegel and Kosuga made millions of dollars on the transaction due to their short position on onion futures. At one point, however, 50 pounds (23 kg) of onions were selling in Chicago for less than the bags that held them (effectively, for a negative price). This drove many onion farmers into bankruptcy. A public outcry ensued among onion farmers who were left with large amounts of worthless inventory. Many of the farmers had to pay to dispose of the large amounts of onions that they had purchased and grown.

via mastodon