Federal commodities regulators appeal online free-speech decision

Thursday, September 9, 1999

In a case that could have important ramifications for online speech, the Commodities Futures Trading Commission is continuing its fight in support of regulations that require Internet commodities publishers and developers of commodities software to become licensed.

Last month the CFTC asked the U.S. Court of Appeals for the District of Columbia to review an opinion by U.S. District Judge Ricardo Urbina striking down the regulations as a “prior restraint on speech.”

The agency originally had implemented an extensive registration process for commodities trading advisers, requiring fingerprinting, background checks, fees and the filing of reports with the commission. Those who failed to register were subject to severe civil and criminal penalties.

The CFTC interpreted the requirements to apply to virtually anyone who ran a Web site discussing commodities.

Ten individuals — most of whom publish books, newsletters or Web sites about commodities and futures trading — challenged the law and related CFTC regulations in federal court in July 1997. The plaintiffs in Taucher v. Born contended the law violated their First Amendment free-speech rights.

After a three-day trial last May, Urbina took the matter under advisement. On June 21, he issued his ruling striking down the registration requirements on First Amendment grounds.

“The First Amendment permits restraints on speech only when they are narrowly tailored to advance a legitimate governmental interest,” Urbina wrote. While the government has a legitimate interest in protecting consumers from potentially fraudulent speech, the judge ruled that the means chosen by the CFTC were “extreme.”

CFTC officials “have imposed a drastic prohibition on speech based on the mere possibility that the prohibited speech will be fraudulent,” the judge wrote. “Such a prior restraint on fully protected speech cannot withstand the searching scrutiny of the First Amendment.”

Scott Bullock, senior staff attorney with the Washington, D.C.-based Institute for Justice, said he was disappointed with the CFTC's decision to appeal the ruling.

“It's a shame that a federal regulatory agency still refuses to accept that the First Amendment protects publishers from licensing requirements,” said Bullock, whose public interest law firm is representing the plaintiffs.

“Our clients merely provide information, analysis and opinions,” Bullock said in a news release. “We will continue to vigorously defend both their free speech rights and Judge Urbina's well-reasoned opinion before the appeals court.”

Dennis Holden, press spokesman for the CFTC, said: “The CFTC has filed a notice of appeal but we have no other comment on the case because it is still in litigation.”

The government and the Institute for Justice will now file legal papers outlining their respective positions with the federal appeals court.