In the course of discussing the prohibition of commerce in non-kosher food in Living the Halachic Process, vol. I,[1] we touched on the topic of “ownership on paper” through the stock market. Futures trading has elements of both stringency and leniency in comparison to standard stock transactions. We will begin with some basic background.
The gemara[2] derives from the pasuk, “v’sheketz yiheyu lachem”[3] that one may sell non-kosher animals that come into his possession, but one may not make efforts to acquire and then sell them.[4] This law also applies to some other foods forbidden by Torah law.[5]
According to most Rishonim, the prohibition of trading in forbidden foods is on a Torah level.[6] The Rashba[7] maintains that the reason for the prohibition is to minimize the possibility of eating forbidden foods; others say that it is a gezeirat hakatuv (Heavenly decree without a known reason).[8] In any case, the prohibition is associated with eating, as it applies only to items that are usually owned for eating purposes.[9]
The consensus of poskim is that this prohibition applies as long as a Jew owns the food, even if he is not expected to have direct contact with it.[10] It is debatable, however, whether it is prohibited for one to hold a small amount of stocks of a company – in other words, whether we should treat him like a partial owner – especially when the business is not built specifically on forbidden foods.[11]
Let us analyze how futures contracts differ from stocks. A futures hogs contract acquires for its buyer the (usually theoretical) right to obtain that commodity at a future date. Should this come to fruition, he will become the outright owner and controller of the pigs, which is certainly forbidden by Halacha. From this perspective, futures are worse than stocks. When in possession of the latter, one only has financial rights – but not control – over the company’s individual assets; a stockholder of McDonalds cannot demand 1,000 hamburgers for his part in the business. On the flip side, in the commodities futures markets, the average trader has no interest in obtaining the commodity, but rather plans to sell it to another buyer (hopefully at a profit) while it is still “on paper.”
Based on standard halachic rules, a futures transaction is often a davar shelo ba la’olam (something that is not presently fit to be transferred from the seller to the buyer). The pigs that an eventual buyer will get on the delivery date have not yet been born at the time of most of the transactions. Thus, although the sale takes effect based on situmta (societal consensus),[12] the contract is not viewed legally as the sale of pigs, but rather as a commitment to provide the pigs at the specified time of delivery.
Ostensibly, this resembles the Terumat HaDeshen’s[13] case of a Jew who wanted to lend money to a non-Jew, with pigs being used as collateral for the loan. The Terumat HaDeshen suggests that this might be permitted because a Jew does not acquire immediate ownership of the collateral that he receives from the non-Jew. Similarly, in our case, a process through which one can receive pigs has commenced, but it is not clear that this will happen.
The Rama[14] rules that, in general, one may not lend with forbidden food used as collateral, which might imply that our futures sales are prohibited. However, in the situation described by the Rama, the lender takes the collateral under his control and also foresees a situation in which he will take ownership of the collateral.[15] The logic of those who permit taking the non-kosher collateral is that the lender does so in order to protect himself from a loss.[16] In our case, in contrast, an average trader foresees no scenario in which he will ever become the owner of the pigs or have any physical contact with them. This case is not similar to the one that the Torah forbade – owning and/or controlling non-kosher food sources with commercial intent.
It is true that in some of the similar cases in which poskim were lenient, it was only reluctantly, when there was great financial need.[17] However, in our case, in which one is involved in a form of speculative trade on paper of mainly theoretical rights to future commodities, it is proper to permit the transactions without hesitation.[18]