First Amendment Lawsuit Ends CFTC’s Campaign Against On-Line Publishers and Software Developers

John Kramer
John Kramer · March 6, 2000

Washington, D.C.– After a nearly three-year court battle, the Commodity Futures Trading Commission (CFTC) capitulated on March 3, 2000, by publishing a rule exempting newsletter publishers, software developers and Internet website operators from the agency’s licensing requirements.

“We’re glad the CFTC has caved,” said Scott Bullock, senior attorney at the Institute for Justice, a Washington, D.C., public interest law firm that represented publishers in a court battle with the agency, Taucher v. Born. “The CFTC’s campaign was a blatant First Amendment violation, and now even the federal government recognizes it’s wrong to try to license Internet publishers and software developers.”

Currently, the CFTC is appealing a decision handed down last June by U.S. District Court Judge Ricardo Urbina, who ruled that Internet publishers and computer software developers as well as traditional newsletter publishers could publish without first being licensed by the CFTC. That case, which was closely watched by people in the high-tech industry, those interested in protecting civil liberties in cyberspace and people engaged in the commodity business, set 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. The case is scheduled for oral argument before the U.S. Court of Appeals for the D.C. Circuit on April 11, 2000.

The Institute sued the CFTC in July 1997 after the agency 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 could 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. Publishing without registration risked $500,000 in fines and up to five years in prison.

“We ended an early attempt by the federal government to regulate software and the Internet,” said Chip Mellor, president and general counsel for the Institute for Justice. “Unfortunately, this will not be the last attempt to regulate online content and the development of software, and we will remain vigilant against future government efforts to violate free speech rights in emerging technologies.”