First Amendment case against federal commodity regulators headed to trial

Wednesday, January 27, 1999

A federal lawsuit that could well set a precedent for free speech on the Internet is now scheduled to go to trial in March in Washington, D.C.

At issue in Taucher v. Born are provisions of the Commodity Exchange Act that require anyone who publishes information about commodities or futures trading for compensation to register as a “commodity trading advisor.”

The Commodities Future Trading Commission interprets the law to apply to virtually anyone who runs a Web site that discusses commodities.

Ten individuals challenged the regulations in July 1997, contending that they violated First Amendment free-speech and free-press rights. Because the law requires a publisher to obtain a government license before speaking, the plaintiffs also contend it constitutes an unconstitutional prior restraint on speech.

The plaintiffs include publishers of books, newsletters and Internet Web sites that discuss commodity and futures trading, as well as subscribers to these media. None of the plaintiffs manages funds or offers personalized investment advice.

Nevertheless, under the CFTC’s interpretation of federal law all must undergo a registration process that includes providing fingerprints, undergoing background checks, paying fees and filing reports with the commission. Those who fail to register are subject to severe civil and criminal penalties.

The challengers of the law state in their suit that the “registration requirements, including the investigation, fee system, and CFTC oversight powers, unconstitutionally condition the exercise of First Amendment freedoms on the surrender of privacy rights.”

According to the challengers, implementation of the law “violates their First Amendment rights to publish freely without prior restraint or compelled registration.”

“What the CFTC is trying to do is regulate who gets to speak on the Internet,” said Scott Bullock, attorney with the Institute of Justice, the public interest law firm representing the plaintiffs.

“The CFTC is saying that ‘only people we approve of can offer opinions on financial matters on the Internet,’” Bullock said. “That destroys the whole purpose of the Internet, where everyone can be publisher.”

In April 1998, U.S. District Judge Ricardo Urbina rejected the CFTC’s motion to dismiss the case on procedural grounds and ordered the agency to answer the lawsuit.

Earlier this month Urbina rejected the plaintiffs’ motion for summary judgment and set the case for a bench trial (a trial before a judge only) on March 29. Urbina also requested there be Internet access available in the courtroom for the proceedings.

Bullock says he is still “confident” that the plaintiffs will prevail. He says the judge wants a more fully developed factual record before making a ruling.

“This will be one of the first and most important free-speech cases on the Internet outside the indecency or pornography area,” Bullock said.

On its Web site, the Institute of Justice states: “The CFTC’s proposal is as disturbing as it is sweeping. It strikes at the very heart of freedom of speech and the press – and it flagrantly violates the First Amendment. Unless, the CFTC is stopped, those who disseminate pornographic pictures over the Net could now receive greater protection than information about pork bellies and Japanese yen.”

Bullock warns that if the government is allowed to license speech by requiring registration for those who simply discuss commodities on a Web site, there is nothing to stop the government from also requiring non-lawyers who discuss legal issues on a Web site to submit to some sort of registration process.

A CFTC spokesman said the agency had “no comment.”