The tension in early nineteenth-century thought about securities trading discussed in the previous chapter was reflected in the way state governments regulated the market. Section I of this chapter will discuss the means by which states attempted to curb stock speculation, and the forces which limited the success of those efforts. State courts and some state legislatures tried to suppress the deceit widely thought to permeate the market, but at the same time the courts of New York, the home of the largest concentration of securities traders, were generally willing to adopt the customs of stockjobbers as rules of law. These developments will be described in sections II and III. In the first half of the nineteenth century, the legal system, considered as a whole, thus exhibited the same ambivalence toward securities trading as that which characterized public opinion.

Many of the states enacted statutes during the first half of the nineteenth century directly targeted at what was perceived as excessive stock speculation, and many more passed statutes with the indirect effect of curbing such speculation. The effect of these statutes was limited by the force of the contrary policy – the evident usefulness of certain speculative transactions. In some instances, this tension produced statutes that were rarely enforced. In other cases, where the statutes were enforced, their power was curtailed by judges who sought to interpret them in ways that would not hinder the operation of the securities market.