by Jakob von Uexkull
World Future Council
In many legal systems claims resulting from gaming or gambling are not enforceable. This is designed to protect the debtor from driving himself into financial ruin through gaming and betting debts. There is a German saying that “a gambling debt is a debt of honour”. Older case-law applied this legal principle to the financial market interactions that were speculative in nature. Many of today’s speculative financial instruments therefore lacked legal contractual protection and consequently were hard to sell. German civil code § 764 explicitly defined futures trading as gaming or betting but this paragraph was abolished in 2002. The case-law has since developed to make claims based on speculative financial instruments legally enforceable. This paper offers a short overview of the situation in Germany, Austria and Switzerland. Then it explains how the principle of legal non-enforcement, in other words the removal of legal protection from speculative financial interactions, can be applied as a regulatory method to stabilise financial markets.