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Bad Advice
by Declan McCullagh

5:10 p.m.  14.Jan.99.PST
WASHINGTON -- Ever thought of slapping up a Web page devoted to gold prices? Got an urge to vent about those overpriced pork bellies?

Be careful. Unless a public-interest law firm wins a trial scheduled for 29 March, you could face a US$500,000 fine and five years in federal prison.

That's the penalty a little-known federal agency called the Commodity Futures Trading Commission (CFTC) has ordered, and the Institute for Justice is hoping to overturn the decision with a First Amendment lawsuit.

US District Judge Ricardo Urbina rejected the institute's request for summary judgment at a hearing Thursday, saying he needed more information -- and a full trial -- before ruling on the case.

CFTC's "Interpretation Regarding Use of Electronic Media" requires anyone who wants to publish opinions on commodity futures to ask for a license -- a tedious process that includes fingerprinting, fees, audits, and a background check. Publishing without registration is a federal felony.

"They're opinions. You can't license someone who's giving their opinions," Institute for Justice staff attorney Scott Bullock said after the hearing.

"This shows the federal government is actively trying to regulate the Internet outside the context of indecency, which has received most of the attention."

Bullock was referring to the well-publicized and ultimately doomed Communications Decency Act, which restricted online indecency. Its successor is the subject of a trial in a Philadelphia federal courtroom next week.

The Institute for Justice -- a nonprofit group staffed by free-market litigators -- sued the CFTC in 1997. The lawsuit claims that requiring a person to register as a "commodity trading advisor" -- even if the person does not manage funds or offer personal advice -- violates the First Amendment's prohibition on government licensing of the press. Plaintiffs in the suit include Internet publishers, authors, and subscribers.

CFTC in 1996 updated its regulations, which already applied to newsletters, to include the Internet and computer software. The agency defends the rules as a necessary "cornerstone of the regulatory framework enacted by Congress" to protect consumers.

The regulations say anyone who, "for compensation or profit, engages in the business of advising others" through electronic media such as the Internet must register with the government. As an example, the agency says an owner of a Web site with "a list of hyperlinks" recommending other Web sites must register -- or go to jail.

Giving the Institute for Justice a boost in their lawsuit is a similar 1985 Supreme Court case that said "petitioners' publications fall within the statutory exclusion for bona fide publications" under Securities and Exchange Commission rules, though the justices did not rule on First Amendment grounds.

Congress in 1974 created the CFTC to regulate futures contracts for commodities, including oil, natural gas, currency, electricity, and agricultural products.


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