CFTC Challenge - OpEd: Alexis Harry
No Future for Futures Speech?
By Alexis Harry
The First Amendment to the U.S. Constitution guarantees all Americans the ability to speak and publish freely, but the Commodity Futures Trading Commission (CFTC) currently violates these fundamental constitutional rights.
Today, there exists an unjustifiable double standard in the financial information world. People enjoy the freedom to publish information about the stock market without restrictive government regulation, thereby allowing for the wide dissemination of information to potential investors and others. Anyone who wants to publish about the stock market may do so, either through a book, newsletter, or Internet web site.
But what if you want to write a newsletter about seasonal trends in agricultural products or develop a software program that analyzes the Japanese Yen? Then you face a rather remarkable set of requirements. First, you must be fingerprinted by the federal government, have a background check conducted on you, and pay a fee. Then, if the government approves you, you must keep paying yearly fees and attend mandatory ethics training classes. Also, you are subject to on-demand audits and must turn over subscriber lists if the government asks. If an individual publishes without going through these steps, he is subject to fines of up to $500,000 and imprisonment of 5 years in jail.
All of these steps are dictated by the CFTC's unconstitutional practice of requiring individuals to register as a "Commodity Trading Advisor" before they publish about futures trading.
So why aren't individuals who publish information about futures trading granted the same inalienable rights as those who publish about the stock market? Until the mid-1980's, the Securities and Exchange Commission also attempted to require registration of all individuals who published information on the stock market. However, in 1985, the U.S. Supreme Court held in Lowe v. Securities and Exchange Commission that the government cannot require registration of individuals who simply publish non-personal information about securities; securities publishers therefore do not need to get a license before they are allowed to publish. The SEC got out of the business of approving who gets to speak and publish about the stock market. The ability to freely discuss the stock market has generated an explosion of sources of information on the market, such as various new, on-line publications regarding stock trading such as Motley Fool. The CFTC, however, believes it is not bound by the Lowe decision and continues its unconstitutional assault on publishers.
Not only does the CFTC require registration of individuals who publish books, newsletters, and futures trading software but they have also deemed themselves "a squad of 'cybercops,'" seeking to control who may provide information over the Internet. Despite President Clinton's assertion that he would promote the development of the Internet as a "global-free trade zone" and the recent nullification of the Communications Decency Act, the CFTC continues to follow a misguided campaign when regulating information regarding online futures trading. If this outrageous expansion of power remains unchecked, we could reach the absurd point where pornography on the Internet receives more First Amendment protection than information about pork bellies.
The unlawful campaign on the part of the CFTC against futures publishers has led a group of four publishers and their subscribers to file a First Amendment challenge to the CFTC's registration requirements. One of the plaintiffs, Fred Kastead, publishes Club 3000, an important source of information about who are the best and worst commodity advisory publishers. This publication is really an open forum that allows commodity traders and purchasers of systems to discuss and debate the merits of a particular publisher's approach. In contrast, government-imposed registration tells you nothing about the merits of a publisher. Registration does not ensure that there will be better speech; it only ensures that there will be less speech.
Publishers Frank Taucher and Stephen Briese are also challenging the CFTC's registration requirements. Both fear the CFTC will come after them for publishing without registration. And both have withheld products, such as computer software and online content, because they fear retaliation by the CFTC. This chilling effect experienced by Taucher and Briese can be felt across the whole futures publishing industry. Meanwhile, information on the stock market abounds and the marketplace of ideas reigns.
The double standard that exists between information on futures trading and the stock market can only be labeled as one thing: unconstitutional. The CFTC's claims that it is not bound by the Lowe ruling because they regulate futures trading and the SEC regulates stocks and securities. This untenable position ignores the First Amendment, which prohibits the government from licensing publishers. Moreover, the Constitution does not differentiate based on the content of information. Neither can the CFTC.
Alexis Harry is a research associate at the Washington, D.C.-based Institute for Justice, a public interest law firm that represents the publishers and subscribers in the First Amendment lawsuit against the CFTC.