Hold onto your macaroni bowl: Kraft is about to test the limits of the CFTC, a federal commission charged with regulating the derivatives market.

• The CFTC’s (cheesy mac &) beef with Kraft: In 2015, the CFTC charged Kraft, along with Mondelēz, with manipulating the price of wheat futures and cash wheat by allegedly buying $90 million of futures and never taking delivery from the seller. The strategy, the CFTC alleged, was to create an artificial demand, and it ended up earning Kraft $5 million. 

• An unusual settlement: The parties settled in August 2019, with Kraft and Mondelēz agreeing to pay a $16 million fine. The settlement also included a gag order, which, according to the Wall Street Journal, is rare for CFTC cases.

So if there was a gag order how did we find out about the settlement? Because the CFTC filed a generic press release!

• Kraft successfully argued the CFTC violated the gag order because of the release. A judge rescinded the settlement, and that’s why another court case looms (no trial date has been set). 

The Verdict 

For Kraft, the trial presents an opportunity to not pay a hefty fine. The CFTC has more at stake: The case will be the first major test of powers granted to the CFTC under the 2010 Dodd-Frank Act.