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S. 3886: Future of Water Act of 2022


Fittingly, the rapper named Future has a song called Thought It Was a Drought.

Context

The stock market lets you bet on the future value of an individual company or corporation, In the same way, “futures” are a bet on the future monetary value of certain commodities, including agricultural investments such as corn, wheat, soybeans, or sugar.

Just like with a stock, you’d buy if you thought the price of, for example, corn was poised to increase — and you’d sell if you thought it was poised to decrease.

(Fun fact: it’s illegal to trade futures in onions, the only such agricultural product for which futures trading is against the law, ever since some 1950s-era shenanigans by an onion farmer in upstate New York.)

In December 2020, the Chicago Mercantile Exchange launched a first-of-its-kind futures contract for water — specifically for California water. The state had only recently come out of a drought which lasted for more than seven years, from December 2011 to March 2019.

Some express concerns that, with the water supply dwindling due to the global climate crisis, a futures market could encourage powerful interests to hoard water or further limit supply in order to drive up the price.

What the legislation does

The Future of Water Act would ban futures trading for water.

The House version was introduced on March 21 as H.R. 7182, by Rep. Ro Khanna (D-CA17). The Senate version was introduced that same day as S. 3886, by Sen. Elizabeth Warren (D-MA).

What supporters say

Supporters argue that while it’s all fun and games when you bet on the price of corn or soybeans, it’s an entirely different story with water, which all living things need to survive and which the United Nations recognizes as a human right.

“Every American should agree: Clean, drinkable water is one of our most basic human rights,” Rep. Khanna said in a press release. The legislation would “prioritize human needs over corporate profits. Large companies and investors should not be allowed to use an essential public resource for their own gain. We have to stand together to protect our water.”

“Water is a human right and Wall Street shouldn’t be allowed to use this vital resource to make profits at the expense of hardworking Americans,” Sen. Warren said in a separate press release. The legislation “would protect water from Wall Street speculation and ensure one of our most essential resources isn’t auctioned off to the highest bidder.”

What opponents say

Opponents say that it’s precisely because of the climate crisis and declining water supply that a futures market is important, as a tool to potentially help predict prices and allocate resources.

“With nearly two-thirds of the world’s population expected to face water shortages by 2025, water scarcity presents a growing risk for businesses and communities around the world, and particularly for the $1.1 billion California water market,” CME Group’s Global Head of Equity Index and Alternative Investment Products, Tim McCourt, said in the September 2020 press release announcing the futures market.

“Developing risk management tools that address growing environmental concerns is increasingly important,” McCourt continued. “This innovative, new water contract builds on… our proven 175-year track record of helping end users and other market participants manage risk in essential commodity markets including agriculture, energy, and metals.”

Odds of passage

The House version has attracted 17 cosponsors, all Democrats. It awaits a potential vote in the House Agriculture Committee.

The Senate version has attracted four cosponsors: three Democrats and one Democratic-leaning independent. It awaits a potential vote in the Senate Agriculture, Nutrition, and Forestry Committee.

Last updated Apr 21, 2022. View all GovTrack summaries.

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