CFTC Challenge

Taucher v. Born
IJ Defeats the Commodity Futures Trading Commission’s Licensing of Internet & Software Publishers

In one of the first cases to extend First Amendment protections to the Internet, the Institute for Justice successfully defeated an attempt by the Commodity Futures Trading Commission to license Internet and software publishers.  If the regulators had prevailed, development of software and online content would have been dramatically curtailed as government agencies would have aggressively licensed and regulated information providers across these evolving media.

In this case, the Institute for Justice represented publishers of online content, websites, software, books and newsletters designed to assist people in analyzing the commodity and futures markets, and consumers who subscribed to the sites, on-line services and publications to find information and make their own decisions.  Like most content providers, the Institute’s clients did not invest customer funds; nor did they give person-to-person trading advice.  Instead, they simply provided information and analysis to their customers.

The federal government, specifically the Commodity Futures Trading Commission (CFTC), however, wanted to establish its authority to regulate and license anyone who spoke on topics under its jurisdiction—in this case the commodity markets.  The CFTC claimed that it, and only it, could grant the right to publish information on commodity trading.  The agency demanded registration as a “Commodity Trading Advisor” before one could publish any information on these markets.  Registration required 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.  Even after obtaining government’s approval to speak, the license could be revoked if the agency believes the licensee does not operate in “the public interest.”  If one failed to register, he or she risked $500,000 in fines and up to five years in prison.

This case halted the next wave of government regulation—a regime under which individuals and companies would have had to secure government approval before developing software or publishing online.