Everybody get on the commodity speculation train.

A federal judge today threw out the Dodd-Frank provision that empowered the Commodity Futures Trading Commission to set position limits on commodity trading. Judge Robert Wilkins said in his ruling that the CFTC did not prove the necessity of position limits to curb runaway speculation, and that the law itself did not “constitute a clear and unambiguous mandate to set position limits, as the Commission argues.”

Here’s the punchline: Judge Wilkins was appointed by President Obama in 2010.

CFTC already set the position limits, and they were weeks from going into effect in the oil, grain, coffee, gold and other markets, 28 in all. At the time, Sens. Bernie Sanders, Maria Cantwell and others called it weak. Under CFTC’s rule, a single speculator could still hold as much as 25% of all deliverable oil supply in any given month. But now there will be no rule at all, unless CFTC can come up with a better rationale. Judge Wilkins sent the rule back to the CFTC for “further consideration.” But this, of course, is how Wall Street rules get watered down. The initial rule wasn’t all that effective, and yet the industry managed to litigate that away. Any substitute would have to be even more compromised to avoid the ire of the judge. And at that point it becomes close to meaningless.

This was actually somewhat expected since back when Judge Wilkins first heard the case in February. It nevertheless comes as a blow to those who want to curb speculation in the commodity markets, which has been held responsible by analysts for a host of price spikes in oil and food.

The lawyer representing the industry trade groups, particularly the odious International Swaps and Derivatives Association and the just as odious Securities Industry and Financial Markets Association, in this case? Eugene Scalia, Nino’s kid.

I have a couple reactions. First, from Rep. Maxine Waters, poised to become the Democratic ranking member on the Financial Services Committee.

The CFTC’s rules are critical to protecting American consumers from increasing fuel prices, which are partly the result of excessive speculation.  Once again, special interests were able to delay and derail a key provision in Wall Street Reform that would protect the public.  I urge the CFTC to persist on a position limits rulemaking after conducting the further analysis recommended by the court.

And now the statement from Robert Weissman, the President of Public Citizen:

Excessive speculation on oil and other commodity markets is driving up prices for consumers. Goldman Sachs has suggested that speculation increases the price of a gallon of gas by 65 to 70 cents. Exxon CEO Rex Tillerson has said that speculation has maintained oil prices a third above what they would otherwise be […]

The court held that Dodd-Frank did not, as the CFTC had concluded, establish an unambiguous requirement that the agency set position limits, notwithstanding briefs filed by many of the key drafters of the legislation explaining that the intent of the law was to require the CFTC to issue position limits.

The winners and losers from this ruling are clear: Wall Street wins, consumers lose.

This is the key point, you have a judge rewriting the intent of the framers of the law to suggest that they didn’t imply what they said they implied.

No word yet from CFTC if they plan to appeal.

David Dayen

David Dayen