Land speculation, a recurrent American phenomenon that was essentially a part of the frontier movement, was a significant factor in the passing of Texas land from government into private ownership. Speculation in land took one of two general forms: speculation in actual tracts of land, and speculation in unlocated land paper. Virtually all who moved to Texas were to a greater or lesser degree speculators of the first type. Some scholars think that the principal stimulus to colonization was private speculation of this type. Unlimited speculation in huge tracts such as had existed at times on the earlier American frontier to the east was restricted in Texas by the colonization program established by Mexico. Further, the liberal land terms that Mexico offered to settlers precluded profitable speculative operation on a large scale, although speculative traffic in the eleven-league grants was relatively heavy. Some large-scale speculative operations resulted from a series of laws passed by Coahuila and Texas in 1834 and 1835, although the Convention of 1836 declared void most of these laws and the largest sales under them. The liberal land policy of the republic to immigrants continued to restrict profitable speculation, but from the expiration of the last headright law in 1842 until the first functional preemption law in 1854 speculative operators became the main channel through which the public domain was put into private hands.
During this period, especially, the speculation in unlocated land paper was noteworthy. Since its first issuance by the provisional government in 1835, unlocated land paper had been in circulation. This paper, which was basically an unwieldy currency redeemable in land, consisted of land scrip, unlocated bounty and donation warrants, unlocated headright certificates, and unlocated certificates granted for internal improvements and other services (see LAND GRANTS). Generally selling for thirty-five cents to one dollar an acre, the land paper could be "laid" on any portion of the unappropriated public domain. The paper was negotiable by endorsement, and the unused portion of an individual certificate might be negotiated. A significant portion (about 15 per cent) of Texas land was thus patented by persons other than the original grantees.
As the tide of immigration increased, the value of land and land paper rose. From 1854 until 1898, however, individual settlers found it possible under the terms of the various preemption and homestead laws to obtain land directly from the state. From time to time new issues of land paper were made to colonization companies as premiums, to certain soldiers in the Mexican and Civil wars, and to individuals and companies for constructing railroads and other internal improvements (see LAND GRANTS FOR INTERNAL IMPROVEMENTS). As was natural, fraud and dishonesty were detected in some speculative operations, especially after the fifty-cent sales scrip act of 1879, but there seems little basis in fact to describe land speculation in Texas as an evil or as a hindrance to settlement. The chief complaint relative to speculation in unlocated land paper was directed against priorities of time and area occasionally granted the holders of paper. It should be noted that the use of land paper as currency in an economy that was restricted in circulating medium may have had a salutary effect on trade and commerce, especially in the early days of the republic. See also PUBLIC LANDS.