"The CFTC Wants You Off-Line"




by Scott Bullock - The Institute for Justice, Washington, D.C.

The ability to speak and publish freely is the birthright of all Americans. But not if the U.S. Commodity Futures Trading Commission (CFTC) gets its way.

The CFTC wants to license individuals who publish about trading commodities. Anyone who for compensation offers opinions, analysis, or even general information about this subject must register with the CFTC as a "commodity trading advisor (CTA)." Registration involves fingerprinting, submitting to a background check, paying fees, filing reports with the CFTC, turning over subscriber lists, and being subject to on-demand audits. CFTC officials have the awesome force of law behind them - anyone not registered who publishes on commodities violates federal law, and faces $500,000 in fines and up to five years in jail.

Institute for Justice Attorney Scott Bullock shares with the media how the CFTC tried to limit the speech of Institute of Justice clients Frank Taucher and Steve Briese.

On July 30, the Institute filed a First Amendment lawsuit on behalf of five commodity newsletter publishers, software developers and Internet users, and five of their subscribers, seeking to end government-compelled registration of those who offer impersonal analysis and advice about commodities. The suit, filed in the U.S. District Court for the District of Columbia, aims to preserve both the rights of individuals to communicate truthful information and the ability of willing listeners to receive important information to guide their economic decision making.

The CFTC is the federal agency charged with regulating the commodity and futures markets in the United States. Unfortunately, rather than assume a discrete role for government regulation to protect individuals from fraud in the marketplace, the CFTC seeks to maximize its power at every turn. Not content to simply police individuals and firms actively managing investor accounts, in 1995 the CFTC asserted regulator power over everyone who publishes about commodities for a fee, demanding that they register as CTA's. The agency extended its broad reach even to persons who neither offer personalized investment advice nor invest customer funds.

In the 1980's the Securities and Exchange Commission (SEC) attempted to do the exact same thing to individuals who provide information on stock trading. But in 1985 the U.S. Supreme Court unanimously held that so long as individuals merely publish about securities, rather than trade them, they cannot be required to register with the SEC. As a result of that decision, the SEC returned to its authorized mission of rooting out fraud rather than harassing publishers. Importantly, this precedent did not hamper the ability of the SEC to go after the "bad guys" in the financial business, but instead led to a proliferation of new sources of information for people interested in stock trading.

Now CFTC has expanded beyond traditional publications to regulate computer software and information online. The CFTC has filed lawsuits to stop unregistered developers of computer software from offering their products. Moreover, while national attention focused on the Communications Decency Act and the government's attempt to regulate indecency on the Internet, the CFTC last year quietly attempted to regulate the Internet with potentially damaging consequences for all of society.

The CFTC's proposed Internet rule could mark the beginning of a new chapter of government regulation online. While the Communications Decency Act sought to regulate the content of speech online, the CFTC wants to regulate who may provide information. The proposal spares virtually nothing on the Internet from agency oversight and regulation - web sites, user groups, and hyperlinks come under the CFTC's assertion of jurisdiction. Anyone who establishes one of these tools must register as a CTA, complete with all the ramifications that entails. Although currently the CFTC has suspended enforcement of the rule pending further review, the proposal heralds the intrusion of the heavy hand of government into this vital emerging technology.

At its heart, the CFTC's policy is a policy of ignorance. The agency seems to believe that the less information people have about commodities, the better. Yet First Amendment and the tradition of open inquiry in this country are premised on the exact opposite principle. More information, more robust debate, and more speech create a marketplace of ideas where listeners, not government officials, choose which information is valuable and which speakers are worthy of listening to. Through its campaign, The CFTC stifles this marketplace and keeps consumers in the dark about valuable economic information.

With hope, the lawsuit filed by publishers and readers of commodity publications will close another sordid chapter in government's continuing campaign against free speech. Scott Bullock is an Institute for Justice staff attorney. Check out The Institute's Website: www.free.ij.org


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