CFTC Challenge - Release: 6-21-1999


Institute for Justice Scores Major Victory For Internet/Software Speech

WEB RELEASE: June 21, 1999
CONTACT: John Kramer (703) 682-9320
[First Amendment]


Washington, D.C.-First Amendment free speech rights extend to the Internet and software. That is the finding of a hotly contested lawsuit that pitted financial publishers against a federal regulatory agency.

In a federal case closely watched by the high-tech industry, U.S. District Court Judge Ricardo Urbina today held that Internet publishers and computer software developers as well as traditional newsletter publishers can publish without first being licensed by the Commodity Futures Trading Commission (CFTC). This decision sets an early and important precedent in favor of extending First Amendment protection to software development and the Internet, areas of law where the jurisprudence is only now being established.

"Today, the First Amendment won and an overreaching federal bureaucracy lost," said Scott Bullock, senior attorney at the Institute for Justice, a Washington, D.C. public interest law firm. The Institute represented publishers of online content, websites, software, books, and newsletters designed to assist people in analyzing the commodity and futures markets, and consumers who subscribe to the sites, on-line services, and publications to find information and make their own decisions. Like most content providers, the Institute's clients do not invest customer funds; nor do they give person-to-person trading advice. Instead, they simply provide information and analysis to their customers. "The decision is an important victory for Internet publishers and computer software developers," Bullock said.

The CFTC sought to establish its authority to regulate and license anyone who speaks on topics under its jurisdiction-in this case the commodity markets. The CFTC demanded registration as a "Commodity Trading Advisor" before one can publish any information on these markets.

Registration requires fees, fingerprinting, background checks, and perhaps most onerously, handing over a list of one's subscribers and being subject to on-demand audits by the CFTC. Failing to register risks $500,000 in fines and up to five years in prison.

Judge Urbina wrote, "There comes a point, however, where government legislation crosses the line between the regulation of a profession and the regulation of speech." The judge then went on to write, ". . .the CFTC's application of the CEA's [Commodity Exchange Act] registration requirement to the plaintiffs in this case constitutes an attempt to regulate speech, not a profession."

"If the regulators had prevailed in the suit, development of software and online content would have been dramatically curtailed as government agencies aggressively licensed and regulated information providers over these evolving media," said the Institute's Managing Vice President John K. Keppler.


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