The Problem of Speech

David G. Post
American Lawyer, "Plugging In," May 1997
[Return to D.Post home page]

You may freely redistribute this column; please retain author and publication attribution. If you are not currently receiving these columns directly and would like to do so, please send me an e-mail at and let me know -- D. Post

As I write this column, the Supreme Court has just heard oral arguments in the case of Reno v. ACLU, the "Communications Decency Act" case. Much has been written about this case, with good reason -- this is the Supreme Court's first chance to address the question of how the First Amendment's free speech protections apply on the Internet, and the decision (to be issued before the Court's summer recess) will surely help frame that debate for some time to come. But Reno v. ACLU is only the tip of the First Amendment iceberg in cyberspace, and the question of "indecent" or "obscene" material on the Internet something of a sideshow as the free speech landscape undergoes a more fundamental transformation on the net.

Consider this illustration provided -- presumably unintentionally -- by recent action taken by the Commodity Futures Trading Corporation (CFTC), the regulatory agency charged with oversight of U.S. futures markets. Here's the problem. The Commodities Exchange Act, the CFTC's enabling statute, defines "commodity trading advisors" as persons who "for compensation or profit, engage[] in the business of advising others, either directly or through publications, . . . as to the value of or the advisability of trading in" commodity futures contracts, or who "issue[] or promulgate[] analyses or reports concerning" any such activities. 7 USC 1a(5)(A). All such persons must register with the CFTC, comply with certain agency-promulgated record-keeping requirements concerning their activities (e.g., maintaining, and making available for public inspection, "a list of the name and address of each client and each subscriber"and all written agreements entered into with each subscriber), and make certain required disclosures about the risks of futures trading to those with whom they deal.

These registration and record-keeping requirements are, in the Commission's view, a "cornerstone of the regulatory framework enacted by Congress," enabling the Commission to fulfill its statutory mandate of protecting the investing public by allowing it to monitor the activities of those providing trading advice on which members of the public will rely. The CFTC has, by its own admission, interpreted the term "commodity trading advisor" expansively -- to include, for example, not just brokers who manage customer accounts but those publishing newsletters or other "impersonal or indirect" forms of communication containing information on the value of futures trading generally -- and even, in a number of cases, the designers and distributors of computer software programs that generated commodity trading recommendations or strategies.

One might be -- one should be -- at least a bit troubled by the First Amendment implications of all of this. Does this mean that the Wall Street Journal has to register with the CFTC -- have to obtain, in effect, a government license -- before it can publish stories about commodities markets? Could this possibly be compatible with the "free press" clause of the Constitution? Congress, aware of the potential First Amendment problems with this kind of prior restraint on a publications' ability to communicate with its readers, excluded "any news reporter, news columnist, or news editor of the print or electronic media," as well as "publisher[s] or producer[s] of any print or electronic data of general and regular dissemination," from the definition of "commodity trading advisor." 7 USC 1a(5)(B).

So the Wall Street Journal, and Forbes, and the Financial News Network, etc. are all safe from any requirement that they obtain CFTC approval before they commence publication. As a means of saving this statute from unconstitutional application, this "press exemption" works tolerably well -- at least in a world in which we can reasonably easily identify "news reporters" and "news editors", "publishers," and the like.

But this is precisely the kind of world we are leaving behind. To quote the federal district court in the ACLU v. Reno case: "Because of the different forms of Internet communication, a user of the Internet may speak or listen interchangeably, blurring the distinction between "speakers" and "listeners" . . . Chat rooms, e-mail, and newsgroups are interactive forms of communication, providing the user with the opportunity both to speak and to listen. It follows that unlike traditional media, the barriers to entry as a speaker on the Internet do not differ significantly from the barriers to entry as a listener. Once one has entered cyberspace, one may engage in the dialogue that occurs there. In the argot of the medium, the receiver can and does become the content provider, and vice-versa."

The world, in other words, is no longer divided up into neat categories of speakers and listeners, members of "the press" and everyone else. This fundamental distinction, enshrined not merely in the CFTC regulations but in the Constitution itself, is going to be increasingly difficult to maintain in the new environment where everyone with a computer and a phone line can set up a worldwide publishing operation. Who is (and who is not) a "publisher or producer of any print or electronic data of general and regular dissemination" on the World Wide Web, where every 8th grade class in the country, it seems, will soon have its own home page capable of being read by millions of people worldwide? If that class "publishes" the results of its class project on the workings of the commodity futures market on that home page, has it suddenly become a "commodity trading advisor" that must register with the CFTC and prepare a disclosure document for distribution to all of its clients'? How can the agency distinguish between those providing advice as part of an (exempt) "publishing operation" from those who are properly subject to the statute's requirements?

One response, of course, is that the CFTC will cease trying to make that unworkable distinction, and will simply try to expand its regulatory jurisdiction to cover *all* commodity trading advice on the net. That seems to have been the agency's first reaction to this problem. In an interpretive release published in the Federal Register (61 FR 42146, August 14, 1996), the agency gave its views on the "uses of electronic media by the managed futures industry," and came to some rather startling conclusions. Take a look at these examples: "John Doe, a school teacher who studies the stock and futures markets for his own financial benefit . . . discusses his trades with [three friends]. The three friends ask John to furnish commodity trading advice to them. [John] operates a website and he posts the performance data of his friends' trading accounts on his website. By placing the performance data on a public electronic forum that can be readily accessed by others, John would be holding himself out as a commodity trading advisor . . ." "WXY's website on the World Wide Web allows site visitors to "sign up" to receive information on products and services that are of particular interest to the site visitors by allowing the site visitors to click on . . . a particular location if they are interested in receiving commodity trading and investment information. . . . WXY forwards to various commodity trading advisors the names of and other information concerning the persons who requested information on commodity trading and investments. By engaging in such activities, WXY must therefore register as . . . as a commodity trading advisor." "Hyperlinks, . . . can be used in such a manner as to communicate advice about the value of or advisability of trading in commodity interests, e.g., by labeling, describing, or otherwise introducing the hyperlinked sites [as where] the operator of a website provides editorial comment about the hyperlinks or provides a list of hyperlinks that represent a pre-selected, defined category of persons or services . . .

In such a case, the person providing the hyperlinks would be required to register as a commodity trading advisor. [For example, if] XYZ operates a website that contains a list of hyperlinks to commodity trading advisors described as the Ten Best commodity trading advisors for 1996,' . . . XYZ is required to register as a commodity trading advisor." Well, that will keep the CFTC busy for a while, I suppose - monitoring each of the millions of websites worldwide, looking for anyone who has a pre-selected set of hyperlinks to persons providing commodity trading advice, who publishes information about her commodity trading strategies, or who shares information about website visitors with the purveyors of commodity trading advice. [Just for fun, run a search at one of the major Internet search engines like altavista ( or excite ( for "commodity futures" and take a look at some of the 3,000-5,000 websites that are listed.] And while they're at it, they can also begin monitoring the thousands of daily postings to Usenet groups like "misc.invest.options" and "misc.invest.futures" to make sure that the required disclosures accompany all dispensations of commodity trading advice by participating (and unlicensed) commodity trading advisors.

Alternatively, they might ask themselves whether the enormous cost of this undertaking is justified by the benefits it provides to investors. True it is, in the words of the ACLU v. Reno court again, that "the absence of governmental regulation of Internet content has unquestionably produced a kind of chaos . . . and cacophony of unfettered speech," but equally true that "the strength of the Internet is that chaos." In the face of this tidal wave of commodity trading advice, they might be advised to swallow hard and let the conversation proceed, caveat investor; indeed, they might even turn what looks to them like a lemon into lemonade, by devising ways to take advantage themselves of the medium's communicative potential (for example, by periodically informing all participants on "misc.invest.options" that the CFTC is not looking over their shoulders anymore, or by helping investors devise their own means of separating good from bad advice).

Regulatory agencies don't often have to re-invent themselves in this way, but the net may call for just such action. As the CFTC itself may be in the process of recognizing; implicitly acknowledging the serious problems that might arise by expanding its statutory mandate to the net, the agency has "indefinitely delayed" implementation of the interpretive release quoted above. [61 FR 65940, Dec. 16, 1996]. Cooler heads may thus prevail in this instance, but this is not the last we will hear of this general problem. The regulatory jurisdiction of many federal and state agencies is triggered when "advice" of various kinds -- medical advice, securities advice, and, of course, legal advice -- is dispensed. It is surely only a matter of time before these agencies, too, discover that this new worldwide conversation makes their task of determining to whom their regulations apply a great deal more complicated.