Physical-delivery possibility, not actual delivery, marked legal futures off from gambling.

Evidence

For much of the late nineteenth century and the early twentieth century, courts in the United States had struggled to find a clear distinction between legitimate futures trading and gambling. Their efforts were complicated and sometimes contradictory (Swan 2000). However, a test that commanded wide agreement was whether or not a futures contract could be settled by physical delivery of the underlying commodity, for example grain. … If a futures contract could be settled by delivery of the underlying asset, courts generally ruled that it was legal and enforceable. If it could not if the contract could be settled only in cash it was in general held to constitute a wager.’ Hence, as noted in chapter 1, even if delivery was seldom demanded, it had to be possible. If it was not, a futures contract was against the law of Illinois and of any other state in which gambling was prohibited. — Donald MacKenzie, An Engine, Not a Camera, 639

Categorization

• DEFINE: The ‘delivery test’ is a precise legal doctrine: a futures contract was legal iff physical delivery was possible, even if never exercised.
• XREF: connects to: Physical delivery once legally distinguished futures trading from gambling. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 761; American law defined legitimate futures by physical delivery and outlawed cash settlement — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 58

Broader Connections

• Physical delivery once legally distinguished futures trading from gambling. #corroborates (0.90) — Donald MacKenzie, An Engine, Not a Camera, 761