Dwight D. Eisenhower, president of the United States from 1953 to 1961, had a busy presidency, and the Onion Futures Act was one of several key bills he signed into law that were part of his agenda. Two years prior to that bill, he promoted and signed a bill to create the Interstate Highway System, which laid the foundation for the most important highways and roads in the United States.
He also signed the National Defense Education Act in 1958, which infused large amounts of funding into the educational system with a focus on strengthening national defense. A year earlier, Eisenhower also signed the Civil Rights Act of 1957, which intended to support and enforce the 1954 Supreme Court ruling that officially banned segregation in schools.
President Ford Sponsored the Onion Act
The congressional hearings involving Kosuga and his partner drew the attention of Gerald Ford, then a congressman from Michigan. If the name sounds familiar it's because two decades later, Ford would rise to fame as Richard Nixon’s vice president in 1973, ultimately becoming president after Nixon resigned the following year.
Ford would keep the position until losing reelection to Jimmy Carter in 1977. Ford sponsored the bill that became known as the Onion Futures Act, which would forever enshrine Kosuga into the history books and make onions the only trading commodity to be banned in the United States to this day.
President Eisenhower Turned the Onion Act Into a Law
On August 28th, 1958, President Dwight D. Eisenhower signed the Onions Futures Act, and it officially became law. What had begun as an idea to play the commodities market in Chicago by Vincent Kosuga had spiraled in such a way that it prompted Congress to officially make a law to prevent what he and Sam Siegel had done and gotten away with. After all, their market manipulations were not illegal when they committed them.
In 1961, after the Chicago Mercantile Exchange failed to successfully challenge the law in federal court, it drew its attention to coming up with a new commodity to trade in the futures market: pork-belly futures. That’s right — Vincent Kosuga inadvertently set the course for the trading of frozen pork bellies.
Kosuga and His Partner Were Banned From Trading
The bill titled “The Onion Futures Act,” as put forward by Gerald Ford, dictated that all onion futures traded in the future would have to be sorted out in cash as opposed to actual physical onions. It also proposed that the government should have the right to set limits on the quantity of onion futures that could be traded.
Unsurprisingly, the Chicago Mercantile Exchange opposed both measures and opposed the bill in general. In the end, trading onions as a commodity was banned. For Kosuga and Siegel, the consequences they faced seem, in retrospect, to have been minor: their registrations as brokers were revoked, and they were banned from trading for ten months.
Most Traders Didn’t Like the New Law
Despite the damage that Kosuga and Siegel’s actions caused, the Onions Futures Act was not generally popular among traders. E.B. Harris, a prominent voice because of his position as president of the Chicago Mercantile Exchange, went hard against the bill and was quoted as saying “We submit that burning down the barn to find a suspected rat is a pretty drastic remedy.”
The fight against the bill continued after its passing in 1958, as the Chicago Mercantile Exchange filed a lawsuit in federal court to have it struck down on the basis that it restricted trade in an unfair and unnecessary manner. That lawsuit proved to be unsuccessful, at which point the CME decided to drop the fight instead of taking it to the Supreme Court.