CFTC registration requirements for journalists struck down

WASHINGTON, D.C.–In late June, federal District Judge Ricardo Urbina in Washington, D.C., struck down as unconstitutional a Commodity Futures Trading Commission rule requiring publishers and Web site operators who provide futures-trading information to register with the government.

Ruling in favor of three publishers that either publish a Web- based newsletter or sell futures-trading software over the Internet, Urbina held that the rule constitutes “an impermissible prior restraint upon the exercise of free speech and runs afoul of the First Amendment.”

According to Urbina, although the government may regulate a profession, including commodities trading, the CFTC’s registration requirement was an attempt to regulate speech. Urbina said that the publishers in the lawsuit do not go so far as to “exercise judgment” on behalf of those who purchase their products. The publishers never have any personal contact with their customers and never make trades for them. In addition, the customers must go through some other licensed broker to actually purchase securities, he noted.

In 1995 the CFTC began requiring “commodity trading advisors” to register, a process that requires finger printing, fees, and an FBI background check. The CFTC defined an advisor to include anyone who provides information, analysis or advice about commodity trading either directly or through publications, writings or electronic media.

Under the rule, the CFTC can restrict or grant registration based on the “training, experience and such other qualifications as the Commission finds necessary of desirable to ensure the fitness of persons required to be registered.” Registration can also be revoked “in the public’s interest.”

Upon registration, publishers had to maintain copies of their publications, lists of past and current subscribers and financial records to be available on demand for CFTC audits. The publishers were also required to file reports “as prescribed by the Commission.”

Larger publications, such as The Wall Street Journal and Investors Business Daily, were excluded from the registration requirement because their publications do not exclusively report on commodities. But if smaller publishers did not register, they faced fines up to $500,000 and five years in jail for a felony offense.

In 1997, a group of small newsletter publishers, software developers and Internet users sued the CFTC, saying its news licensing requirements restricted their free press rights under the First Amendment. (Taucher v. Born; Media Attorney: Scott Bullock, Washington, D.C.)