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TAUCHER v. BORN

United States District Court, District of Columbia


June 21, 1999

FRANK TAUCHER, ET AL., PLAINTIFFS,
v.
BROOKSLEY E. BORN, ET AL., DEFENDANTS.

The opinion of the court was delivered by: Urbina, District Judge.

DECISION

Entering Judgment for the Plaintiffs

A bench trial was held in the above-captioned case beginning Monday, May 3, 1999 and ending Wednesday, May 5, 1999, during which the court took testimony from various witnesses and received documents into evidence. Upon reviewing the testimony and evidence, as well as the existing record and the relevant law, the court enters the following findings of fact and conclusions of law. Based on these findings and conclusions, the court will enter judgment in this case for the plaintiffs.

I. INTRODUCTION

This case involves a First Amendment challenge to Section 4m of the Commodity Exchange Act ("CEA"), 7 U.S.C. § 6m (1994), as applied to the plaintiffs who publish books, newsletters, Internet websites, detailed written instruction manuals (known in the industry as "trading systems"), and computer software that provide information, analysis, and advice on commodity futures trading. The plaintiff-publishers in this action seek a declaration that they may lawfully publish without being registered as commodity trading advisors ("CTA") with the Commodity Futures Trading Commission ("CFTC"). The defendants contend that the registration requirement is constitutional under the First Amendment.

Plaintiffs Frank Taucher, Stephen Briese, Frederick J. Kastead*fn1, and Robert Miner (hereinafter collectively referred to as "the plaintiffs") are publishers whose publications include books, newsletters, Internet websites, trading systems, and computer software. Plaintiffs Galen Cawley, Arthur Hayner, Edward W. Hearne III, Roemer McPhee, and Roger Rines are members of the public who read and use the plaintiffs' publications and other futures-related publications.

Named as a defendant is the Commodity Futures Trading Commission ("CFTC"), the independent federal regulatory agency charged with administering and enforcing the Commodity Exchange Act, 7 U.S.C. § 1 et seq., and the regulations promulgated thereunder, 17 C.F.R. § 1.1 et seq. Also named as defendants in their official capacities are the CFTC's chairperson, Brooksley E. Born, and CFTC commissioners Barbara Pedersen Holum, David D. Spears and John E. Tull, Jr.

II. FINDINGS OF FACT

A. General Facts

1. Participants in the futures market rely in part on published
  information, recommendations and analyses in order to make
  trading decisions.

2. Information may be gleaned from a variety of sources including
  but not limited to books, newsletters, Internet websites,
  computer software and advisory services.

3. Commodity Trading Advisors are one of several kinds of
  commodity trading professionals regulated by the Commodity
  Futures Trading Commission.

4. CTAs who give individually tailored advice to their clients
  normally also manage client funds.

5. In the commodity trading advisory profession as it is
  practiced today, a CTA ordinarily does not devise a specific
  trading strategy for a particular client.

6. Most CTAs have a system, program or discipline by which they
  trade

  futures contracts on their clients' behalf.

7. The CFTC requires that a CTA disclose to his clients the
  trading methods, strategies or disciplines he intends to use to
  trade for the client's account.

8. A CTA would not trade a $10,000 discretionary commodity
  account the same way he would trade a $100,000 account because
  the CTA does not have sufficient funds to trade the smaller
  account the same way he would trade the larger account.

9. Although a CTA will follow his trading program regardless of
  the size of a particular discretionary commodity account, the
  CTA may structure the actual trades differently in a smaller
  account because he has fewer funds with which to trade.

10. CTAs who manage their clients' money must execute a
    power-of-attorney agreement with their client which
    authorizes the CTA to execute trades on behalf of clients.

11. After the contract is executed, the client of a
    money-managing CTA does not approve or veto specific trading
    decisions.

12. A client of a money-managing CTA will generally not find out
    that a trade has been executed on his or her behalf until the
    client receives the next statement of account balance.

13. The CTA's trading decisions can expose the client to loss,
    even in excess of the initial amount invested.

14. When a client wishes to enter into a relationship with a CTA,
    the CTA provides the client with a disclosure document which
    contains, among other things, a "Risk Disclosure Statement."
    The Risk Disclosure Statement states, among other
    disclosures, that "[t]he risk of loss in trading commodities
    can be substantial."

15. As a general matter, money-managing CTAs do not communicate
    trading advice to their clients.

16. Rather, money-managing CTAs gather information and then use
    that information themselves to make trading decisions.

17. Individuals cannot execute trades in the market without going
    through a broker (known as a Futures Commission Merchant or
    FCM) who is licensed by the CFTC.

18. Because futures transactions are highly leveraged, a client
    can lose more money than he invests and, thus, the commodity
    trading account relationship between a client and broker
    involves unlimited risk on the part of the broker.

19. To insure that a client has sufficient funds to meet margin
    calls and cover losses in a trading account and, thus,
    minimize the client's potential default, the broker typically
    obtains from the client such financial information as assets,
    liabilities, net worth, liquid capital and risk capital.

20. There is no legal requirement that a CTA determine the
    suitability of a prospective client to engage in futures
    trading.

B. Robert Miner

21. Plaintiff Robert Miner ("Miner") is a publisher of futures
    trading information, analysis and advice.

22. Miner does business through Dynamic Traders Group, Inc.

23. He publishes a weekly publication called Dynamic Trader
    Weekly Report.

24. In Dynamic Trader Weekly Report Miner provides, along with
    other information, his opinion of the position of various
    financial and commodity markets based on his technical
    analysis,

    including specific trade recommendations and "stop levels."

25. In addition to advice and recommendations, Miner also
    provides subscribers with a trading education; each of the
    reports contains a tutorial, explaining the analysis used in
    the trading decisions and his approach to futures trading.

26. Miner has published a book, Dynamic Trading, that he offers
    for sale to the public, which explains his approach to
    futures trading.

27. Miner has a website, http://dynamictraders.com, that provides
    information on, and advertising for, the products and
    technical services offered by his company, as well as
    occasional technical analysis and trade recommendations.

28. Miner has published a Dynamic Trader Trading Course, which
    is a comprehensive instruction manual in commodities trading
    technical analysis.

29. The Dynamic Trader Trading Course teaches traders theory
    and practical application of analysis and trading strategies.

30. Miner has developed and markets a computer software program
    called Dynamic Trader Software that performs technical
    analysis of the financial and commodity markets.

31. The analysis provided by the Dynamic Trader Software
    reflects the technical analysis techniques described in the
    Dynamic Trader Trading Course.

32. The routines, reports and studies in the software program
    apply to all actively traded markets, including futures,
    stocks, indexes, and mutual funds.

33. The purpose of the analysis is to provide the trader with the
    information he or she requires in making a trading decision;
    the software also, within certain routines, provides buy and
    sell signal set-ups.

34. In order to generate meaningful trading advice, a user of the
    Dynamic Trader Trading Course or the Dynamic Trader
    Software is required to use it in conjunction with certain
    other information that the user supplies (the "User Input").
    The User Input is made up of "Price Data" and "Parameters."

35. Price Data consists of a series of data that corresponds to
    the prices of a certain instrument over a certain period of
    time. The Price Data may be supplied on a daily, weekly or
    other basis. The instrument may be a futures contract or some
    other type of instrument. The Price Data may represent an
    instrument that the user already owns, an instrument that the
    user does not own, or purely hypothetical data.

36. The Parameters are certain numerical values that the user may
    select in order to "fine tune" the mathematical output of
    routines within the program that examine a given set of Price
    Data. A user will normally select the Parameters that, based
    on the user's knowledge or experience, are likely to lead to
    the most profitable or otherwise meaningful result.

37. By using the Dynamic Trader Trading Course or the Dynamic
    Trader Software in conjunction with a given set of Price
    Data and a given set of Parameters, a user obtains output
    which the user must then interpret by using his own skills
    and knowledge.

38. Neither the Dynamic Trader Trading Course nor the Dynamic
    Trader Software require the user to input any personal
    information. Specifically, they do not require the user to
    input information about his particular investment objectives,
    available capital, risk preferences, current portfolio
    holdings, or personal risk

    exposures to fluctuations in other economic variables such as
    exchange rates, commodity prices, interest rates or stock
    market levels.

39. Every person who uses the same Price Data and Parameters in
    conjunction with the Dynamic Trader Trading Course will, if
    the instructions are followed correctly, receive the same
    output regardless of his individual needs and circumstances.
    Likewise, every person that uses the same Price Data and
    Parameters in conjunction with the Dynamic Trader Software
    will receive the same output regardless of his individual
    needs and circumstances.

40. Miner charges a fee to subscribers of the Dynamic Trader
    Weekly Report and the semimonthly Dynamic Trader Report.

41. Miner charges a fee to purchasers of his book, Dynamic
    Trading, his instruction manual, Dynamic Trader Trading
    Course, and his software program, Dynamic Trader Software.

42. Miner also offers issues of his Dynamic Trader Weekly
    Report at his website for a fee.

43. Through his various publications, Miner provides commodity
    trading advice to approximately 500 subscribers.

44. Miner distributes his several publications by various means,
    including mail, facsimile transmission and the Internet.

45. Miner's activities of publishing commodity trading advice are
    not solely incidental to his business.

46. Miner does not have discretionary control over customer
    accounts, nor does he execute trades on customers' behalf or
    otherwise manage customer money.

47. Miner's Dynamic Trader software is incapable of actually
    executing trades on behalf of a customer, or otherwise
    performing any trading-related activity other than causing a
    computer to display the output of the price data or
    mathematical manipulation of the price data for a user to
    interpret.

48. When Miner wrote and published his book, newsletters and
    Internet publications, he did not tailor their contents to
    the particular needs and circumstances of any individual
    reader.

49. When Miner wrote and published the Dynamic Trader Trading
    Course and the Dynamic Trader Software, he did not in any
    way tailor their contents to the particular needs and
    circumstances of any individual user.

50. When Miner wrote and published his book, newsletters, and
    Internet publications, he was unfamiliar with the particular
    needs and circumstances of specific individuals who might
    read them.

51. When Miner wrote and published the Dynamic Trader Trading
    Course and the Dynamic Trader Software, he was unfamiliar
    with the particular needs and circumstances of specific
    individuals who might use them.

52. Miner furnishes to every reader of his book, newsletters and
    Internet publications identical copies of the documents.

53. Miner furnishes to every purchaser of each edition of the
    Dynamic Trader Trading Course and the Dynamic Trader
    Software an identical copy of the manual or software.

54. Miner does not and cannot alter the contents of the Dynamic
    Trader Trading Course or the Dynamic Trader Software after
    it has been distributed to a given user.

55. At no time does Miner advise, by any medium, a specific
    individual user of the Dynamic Trader Trading

    Course or the Dynamic Trader Software to either
    ignore or follow a specific recommendation produced by the
    application of the course instructions or by the execution of
    the software program.

56. Miner does not operate, has not operated and does not intend
    to operate a telephone "hot line" or other medium of
    communication by which he would inform individual users
    whether they should follow or ignore specific recommendations
    of the Dynamic Trader Trading Course or the Dynamic Trader
    Software.

57. Miner's website contains an order form where users can
    provide information through an on-line form that is delivered
    electronically to Miner.

58. This information consists solely of the trading time frame
    that the user is interested in and the market(s) that the
    user is interested in.

59. Miner uses this information so that he can inform users when
    he has written a publication that may be of interest to them.

60. Miner does not use this information to tailor an individual
    trading strategy for any person.

61. The publications that Miner supplies to customers who had
    communicated information about their fields of interest
    through this portion of the website are identical to the
    publications that Miner supplies to other subscribers.

62. Miner believes that it would be a phenomenal task for him to
    retain copies of all the research and material that
    substantiate his trading recommendations.

63. Many of Miner's subscribers have requested that he not give
    their names to other parties.

64. If Miner's subscription list were ever given to a government
    agency, Miner believes that he would lose a tremendous amount
    of business due to his subscribers' negative reactions.

C. Frank Taucher

65. Plaintiff Frank Taucher ("Taucher") is a technical analyst
    and the publisher of commodity trading information, technical
    analysis and advice. Taucher's publications are geared toward
    understanding and explaining cyclical market movements.

66. Taucher currently publishes The Supertrader's Almanac, The
    Spread Investment Letter, The Supertrader's Book of Linear
    Time Cycles, and Trading the Four-Year Presidential
    Election Cycle.

67. Taucher offers for sale two previously published books, The
    Greatest Game in the World and The Supertrader's Almanac
    (Reference Manual).

68. The Supertrader's Almanac is printed biannually.

69. Taucher has a website, http://www.supertraderalmanac.com,
    which advertises his publications and provides a free "Trade
    of the Week" for anyone who goes to the site.

70. Taucher has developed computer software for use by Almanac
    and Cycle subscribers. The software presents and builds
    upon many of the studies contained in his publications. The
    software analyzes futures markets and generates trading
    analysis and recommendations. If offered to the public for
    sale, the software would be used in conjunction with data
    updates provided over the Internet and on his website.
    Taucher does not currently offer this software for sale to
    the public.

71. In order to generate meaningful trading advice, a user of
    Taucher's instruction manuals is required to use it in
    conjunction with certain other information that the user
    supplies

    (the "User Input"). The User Input is made up of "Price
    Data."

72. Price Data consists of a series of data that corresponds to
    the prices of a certain instrument over a certain period of
    time. The Price Data may be supplied on a daily, weekly, or
    other basis. The instrument may be a futures contract or some
    other type of instrument. The Price Data may represent an
    instrument that the user already owns, an instrument that the
    user does not own, or purely hypothetical data.

73. By using Taucher's instruction manuals in conjunction with a
    given set of Price Data, a user obtains either a specific
    trading recommendation or other meaningful output, which the
    user must then interpret by using his own skills and
    knowledge.

74. Taucher's instruction manuals do not require the user to
    input any personal information. Specifically, they do not
    require the user to input information about his/her
    particular investment objectives, available capital, risk
    preferences, current portfolio holdings, or personal risk
    exposures to fluctuations in other economic variables such as
    exchange rates, commodity prices, interest rates or stock
    market levels.

75. Every person who uses the same Price Data in conjunction with
    Taucher's instruction manuals will, if the instructions are
    followed correctly, receive the same recommendation (or other
    output) regardless of his/her individual needs and
    circumstances.

76. Taucher charges a fee to the subscribers or purchasers of
    each of his publications listed above.

77. Taucher would also like to offer recommendations at his
    website only to viewers who pay a fee.

78. Taucher provides information on his website that is useful
    only when used in conjunction with printed materials which
    must be purchased from Taucher.

79. Through his various publications, Taucher provides commodity
    trading advice to more than 15 individuals.

80. Taucher distributes his several publications by various
    means, including mail, facsimile transmission and the
    Internet.

81. Taucher's activities of publishing commodity trading advice
    are not solely incidental to his business.

82. Taucher does not have discretionary control over customer
    accounts, nor does he execute trades on customers' behalf or
    otherwise manage customer money.

83. When Taucher wrote and published his books, newsletters and
    Internet publications, he did not in any way tailor their
    contents to the particular needs and circumstances of any
    individual reader.

84. When Taucher wrote his trading systems, he did not in any way
    tailor their contents to the particular needs and
    circumstances of any individual user.

85. When Taucher wrote and published his book, newsletter, and
    Internet publications, he was unfamiliar with the particular
    needs and circumstances of specific individuals who might
    read them.

86. When Taucher wrote and published his trading systems, he was
    unfamiliar with the particular needs and circumstances of
    specific individuals who might use them.

87. Taucher furnishes identical copies to every reader of his
    books, newsletters, and Internet publications.

88. If he offers his currently unpublished trading systems or
    software for general sale, Taucher intends to furnish to
    every purchaser an identical copy of the system or software.

89. If he offers his currently unpublished trading systems or
    software for general sale, he does not intend to and will not
    be able to alter the contents of the system or software after
    it has been distributed to a given user.

90. Plaintiff Frank Taucher's publication, The Supertraders'
    Almanac, contains an advertisement for a broker.

91. Taucher's publication, The Greatest Game in the World,
    contains referral information for four brokers.

92. Taucher has, in the past, referred subscribers of his
    publication, The Seasonal Trade Portfolio, to a broker.

93. Taucher does not have authority over the accounts managed by
    these, or any other, brokers.

94. Taucher does not have the authority to execute trades on
    behalf of any subscriber who might have an account with
    these, or any other, brokers.

95. These brokers do not obtain Taucher's consent or approval
    before executing trades.

96. Taucher does not have knowledge of the trading activity that
    goes on in the accounts managed by these, or any other,
    brokers.

97. Taucher does not decide which broker to refer a subscriber to
    based upon that subscriber's individual circumstances.

98. Taucher required purchasers of The Seasonal Trade Portfolio
    to sign a contract that required the purchasers to assert,
    among other things, that they had sufficient risk capital and
    that the risks of losses would be "acceptable losses given
    the buyer's family, business, emotional, financial, mental,
    physical situation and age."

99. Taucher neither assessed nor received any information
    regarding a potential subscriber's family, business,
    emotional, financial, mental or physical situation or age.

100. Taucher's intent in this contract was that the potential
    subscriber or his personal advisor would conduct an analysis
    to determine the validity of the assertions made in the
    contract.

101. Taucher did not tailor the contents of The Seasonal Trade
    Portfolio to any individual subscriber.

102. Every subscriber to The Seasonal Trade Portfolio received
    an identical copy of the publication.

103. One of the four payment options for the Portfolio was
    based in part upon "billable profits."

104. "Billable profits" was an abstract calculation based upon
    theoretical prices. The theoretical prices were calculated
    using the average open, close, high and low prices on the
    recommended entry and exit dates, and on a theoretical trade
    involving only one contract.

105. "Billable profits" could differ dramatically from the actual
    profits realized by a subscriber for reasons including the
    different market timing systems that each user used to
    determine when exactly to place a trade, the fact that
    subscribers could trade different numbers of contracts, and
    the fact that brokerage fees would vary between customers.

106. The fee charged to each subscriber under this option would
    be the same regardless of the actual profits realized by each
    subscriber.

107. Taucher does not advise, by any medium, specific individual
    users of his trading system to either ignore or follow a
    specific trading recommendation produced by the application
    of the system.

108. If Taucher offers his currently unpublished trading systems
    or software for general sale, he does not intend to advise,
    by any medium, a

    specific individual user of the system or software to either
    ignore or follow a specific recommendation produced by the
    execution of the software.

109. Taucher does not operate, has not operated, and does not
    intend to operate a telephone "hot line" or other medium of
    communication by which he would inform individual users
    whether they should follow or ignore specific recommendations
    of his trading systems or software.

110. Taucher believes that audits of his home-based business
    would be highly invasive of his privacy, and objects to being
    subjected to such audits if he registers.

111. Taucher receives communications from his subscribers which
    specifically instruct him not to divulge their names to
    government agencies.

112. Taucher believes that his customers would be extremely angry
    with him if he had to turn over his subscriber list, and that
    he might suffer devastating financial damage.

113. Taucher believes that if the CFTC used his subscriber list
    to contact any of his customers, his customers would
    automatically assume that he had engaged in some sort of
    unlawful activity.

D. Stephen Briese

114. Plaintiff Stephen Briese ("Briese") is the publisher of
    Bullish Review, a biweekly newsletter that analyzes the
    CFTC's "Commitments of Traders Report."

115. Based on extremes in net trader positions from the
    "Commitments of Traders Report" and other indicators,
    Bullish Review highlights futures markets that may be due
    for a trend change.

116. Briese obtains the data analyzed in Bullish Review from
    the "Commitments of Traders Report" provided by the CFTC at
    its Internet website.

117. In the "Commitments of Traders Report," the CFTC summarizes
    weekly, and releases biweekly, data on the open interest in
    markets in which five or more traders hold positions equal to
    or above the reporting levels established by the agency.

118. Briese offers a website service, http://BullishReview.com,
    that provides price charts based on the "Commitments of
    Traders Report," current and past issues of Bullish Review
    (available for a fee), Pitpoints (a computer-generated
    listing of short-term trading signals, available for a fee),
    the JAVA Charting program (available for a fee), a
    Subscriber's Guide and information and advertising for
    Bullish Review.

119. On Briese's website, paid subscribers, through a password
    system, can receive current and recent issues of Bullish
    Review and preprinted weekly price charts that unpaid
    visitors cannot obtain.

120. Briese has also developed computer software programs,
    including CrossCurrent, that analyze futures markets and
    generate trading analysis and recommendations based on real
    or hypothetical market data.

121. CrossCurrent is a currency-spread trading system that
    produces buy and sell signals for various currency spreads.

122. In order to generate meaningful trading advice, a user of
    the CrossCurrent software is required to use it in
    conjunction with certain other information that the user
    supplies (the "User Input"). The User Input is made up solely
    of "Price Data."

123. Price Data consists of a series of data that corresponds to
    the prices of certain instruments over a certain period of
    time. The Price Data is supplied on a daily basis. The
    instruments are futures contracts on various currencies. The
    Price Data may represent an instrument that the user already
    owns, an instrument that the user does not own, or purely
    hypothetical data.

124. By using the CrossCurrent software in conjunction with a
    given set of Price Data, a user obtains either a specific
    trading recommendation or another meaningful output which the
    user must then interpret by using his own skills and
    knowledge.

125. The CrossCurrent software does not require the user to
    input any personal information. Specifically, it does not
    require the user to input information about his particular
    investment objectives, available capital, risk preferences,
    current portfolio holdings or personal risk exposures to
    fluctuations in other economic variables such as exchange
    rates, commodity prices, interest rates or stock market
    levels.

126. Every person who uses the same Price Data in conjunction
    with the CrossCurrent software will receive the same
    recommendation (or other output) regardless of his individual
    needs and circumstances.

127. Briese charges a fee to the subscribers of Bullish Review.

128. Briese also charges a fee in order for a reader to gain
    access to some of the information on his website.

129. Through his various publications, Briese provides commodity
    trading advice to more than 15 individuals.

130. Briese distributes his several publications by various
    means, including mail, facsimile transmission and the
    Internet.

131. Briese's activities of publishing commodity trading advice
    are not solely incidental to his business.

132. Briese does not have discretionary control over customer
    accounts, nor does he execute trades on customers' behalves
    or otherwise manage customer money.

133. Briese's software is incapable of actually executing trades
    on behalf of a customer or otherwise performing any
    trading-related activity other than causing a computer to
    display a trading recommendation or other piece of
    information for a user to interpret.

134. When Briese writes and publishes his newsletters and
    Internet publications, he does not in any way tailor their
    contents to the particular needs and circumstances of any
    individual reader.

135. When Briese wrote the CrossCurrent software, he did not in
    any way tailor its contents to the particular needs and
    circumstances of any one prospective user of the software.

136. When Briese writes and publishes his newsletters and
    Internet publications, he is unfamiliar with the particular
    needs and circumstances of specific individuals who might
    read them.

137. When Briese wrote the CrossCurrent software, he was
    unfamiliar with the particular needs and circumstances of
    specific individuals who might use it.

138. Briese furnishes identical copies to every reader of his
    newsletters and Internet publications.

139. Briese furnished to every purchaser of his CrossCurrent
    software an identical copy of the program.

140. Briese did not and could not alter the contents of the
    CrossCurrent software after it had been distributed to a
    given user.

141. Stephen Briese has, in the past, referred subscribers to a
    broker.

142. Briese does not have authority over the accounts managed by
    this, or any other, broker.

143. Briese does not have the authority to execute trades on
    behalf of any subscriber who might have an account with this,
    or any other, broker.

144. This broker does not obtain Briese's consent or approval
    before executing trades.

145. Briese does not have knowledge of the trading activity that
    goes on in the accounts managed by this, or any other,
    broker.

146. Briese does not decide which broker to refer a subscriber to
    based upon that subscriber's individual circumstances.

147. At no time did Briese advise, by any medium, a specific
    individual user of the CrossCurrent software to either
    ignore or follow a specific recommendation produced by the
    execution of the software program.

148. Briese does not operate, has not operated and does not
    intend to operate a telephone "hot line" or other medium of
    communication by which he would inform individual users
    whether they should follow or ignore specific recommendations
    of his trading systems or software.

149. For fear of further violating Section 4m, Briese has offered
    his software only on an extremely limited basis; he no longer
    offers any computer software trading systems for sale.

150. Individuals have asked Briese to sell CrossCurrent once
    again, but he will not do so due to fear of further violating
    the registration requirement.

151. Although Briese cannot give a precise estimation of his
    losses, he has been economically damaged due to his inability
    to sell his trading software.

152. Briese believes more individuals would subscribe to Bullish
    Review if he engaged in more advertising, which he has
    restricted due to fear of CFTC enforcement of the
    registration requirement.

153. For fear of further violating Section 4m, Briese has
    published in Bullish Review only general impersonal trading
    recommendations and does not offer specific trading advice.

154. For fear of further violating Section 4m, Briese is
    seriously considering changing his commentary from futures
    markets to securities, where impersonal publishers receive
    full First Amendment protection.

155. Briese believes that CFTC audits conducted in his home would
    be a serious invasion of his privacy.

III. CONCLUSIONS OF LAW

A. Commodity Exchange Act Registration Requirement

This case involves a constitutional challenge to the Commodity Futures Trading Commission's ("CFTC") application of certain portions of the Commodity Exchange Act ("CEA"), 7 U.S.C. § 1 et seq. Specifically, the plaintiffs challenge the CFTC's application of the CEA's registration requirement, 7 U.S.C. § 6m(1), to individuals who publish and sell information about futures trading. The registration requirement at issue provides that "[i]t shall be unlawful for any commodity trading advisor . . ., unless registered under this chapter, to make use of the mails or any means or instrumentality of interstate commerce in connection with his business as such commodity trading advisor . . ., provided that the provisions of this section shall not apply to any commodity trading advisor who, during the course of the preceding twelve months, has not furnished commodity trading advice to more than fifteen persons and who does not hold himself out generally to the public as a commodity trading advisor." 7 U.S.C. § 6m(1) (emphasis added).

As stated in 7 U.S.C. § 6m(1), the CEA's registration requirement applies only to persons who are classified as commodity trading advisors. A commodity trading advisor is defined in the CEA as any person who

  (i) for compensation or profit, engages in the
  business of advising others, either directly or
  through publications, writings, or electronic media,
  as to the value of or the advisability of trading in
  —

    (I) any contract of sale of a commodity for future
    delivery made or to be made on or subject to the
    rules of a contract market;

    (II) any commodity option authorized under section
    6c of this title; or

    (III) any leverage transaction authorized under
    section 23 of this title; or

  (ii) for compensation or profit, and as part of a
  regular business, issues or promulgates analyses or
  reports concerning any of the activities referred to
  in clause (i).

7 U.S.C. § 1a(5)(A). Excluded from this definition is "the publisher or producer of any print or electronic data of general and regular dissemination, including its employees." 7 U.S.C. § 1a(5)(B)(iv). This exclusion applies, however, "only if the furnishing of such services by persons referred to in subparagraph (B) is solely incidental to the conduct of their business or profession." 7 U.S.C. § 1a(5)(C).

Each of the plaintiffs in this case falls squarely within the definition of a CTA. They engage in the business of advising others, through publications, writings and electronic media, as to the value of or the advisability of trading in the futures market, and they do so for compensation or profit. Moreover, they are not excluded as publishers or producers of print or electronic data of general and regular dissemination because the furnishing of such services is not solely incidental to the conduct of their business or profession. To the contrary, the furnishing of such services is the plaintiffs' primary business or profession.

Accordingly, as persons who meet the definition of a CTA and who furnish commodity trading advice to more than fifteen persons per year, the plaintiffs are required to register with the CFTC pursuant to 7 U.S.C. § 6m(1). Failure to do so may result in conviction for "a felony punishable by a fine of not more than . . . $500,000 . . . [for] an individual or imprisonment for not more than five years, or both, together with the costs of prosecution. . . ." 7 U.S.C. § 13(a)(5).

Registration with the CFTC involves, among other requirements, filing an application with the National Futures Association ("NFA") and paying an annual fee of $100. See 7 U.S.C. § 6n; 17 C.F.R. § 3.1 et seq. Additional conditions placed upon registrants include: attending four hours of ethics training the first year and an additional hour every three years thereafter, maintaining books and records which are subject to inspection by the CFTC, and filing reports as directed by the CFTC. See id. Moreover, the CFTC is authorized to deny registration to applicants in accordance with 7 U.S.C. § 12a, which states in part:

The Commission is authorized —

  (2) upon notice, but without a hearing and pursuant
  to such rules, regulations, or orders as the
  Commission may adopt,

  to refuse to register, to register conditionally, or
  to suspend or place restrictions upon the
  registration of, any person and with such a hearing
  as may be appropriate to revoke the registration of
  any person [who meets the criteria listed in
  7 U.S.C. § 12a(2)(A)-(H)].

Among those to whom registration may be refused pursuant to 7 U.S.C. § 12a(2) are persons who previously had their registration with the CFTC suspended or revoked; were convicted within ten years for certain felonies, including felonies related to the commodity futures or the securities business; failed to reasonably supervise another person who was subject to their supervision; or violated the CEA or federal or state securities laws. Moreover, 7 U.S.C. § 12a(3)(M) authorizes the CFTC to "refuse to register or to register conditionally any person, if it is found, after opportunity for hearing, that . . . there is other good cause." In an Interpretative Statement, the CFTC has explained that:

  In general, the Commission interprets paragraph (M)
  to authorize the Commission to affect the
  registration of any person if, as a result of any act
  or pattern of conduct attributable to such person,
  although never the subject of formal action or
  proceeding before either a court or governmental
  agency, such person's potential disregard of or
  inability to comply with the requirements of the
  [Commodity Exchange] Act or the rules, regulations or
  order thereunder, or such person's moral turpitude,
  or lack of honesty or financial responsibility is
  demonstrated to the Commission. Any inability to deal
  fairly with the public and consistent with just and
  equitable principles of trade may render an applicant
  or registrant unfit for registration, given the high
  ethical standards which must prevail in the industry.

7 C.F.R. Part 3, App. A.

Among the plaintiffs in this case, only Robert Miner is currently registered with the CFTC as a CTA. All of the plaintiffs, including Mr. Miner, argue that the application of the CEA's registration requirement to them constitutes a violation of their rights under the First Amendment of the United States Constitution. The CFTC maintains, on the other hand, that the registration requirement constitutes the permissible regulation of a profession, and its application to the plaintiffs does not run afoul of the Constitution. Thus, as Justice White noted in his concurrence in Lowe v. Securities and Exchange Commission, 472 U.S. 181, 105 S.Ct. 2557, 86 L.Ed.2d 130 (1985), this case "involves a collision between the power of the government to license and regulate those who would pursue a profession or vocation and the rights of freedom of speech and the press guaranteed by the First Amendment." Id. at 228, 105 S.Ct. 2557 (White, J., concurring in the result).

B. Regulation of Speech Versus Regulation of a Profession

In general, the government may regulate entry into a profession as long as the regulations imposed "`have a rational connection with the applicant's fitness or capacity to practice' the profession." Lowe, 472 U.S. at 228, 105 S.Ct. 2557 (White, J., concurring in the result) (quoting Schware v. Board of Bar Examiners, 353 U.S. 232, 239, 77 S.Ct. 752, 1 L.Ed.2d 796 (1957)). This is so even if the profession that the government seeks to regulate involves speech. See Lowe, 472 U.S. at 228, 105 S.Ct. 2557. There comes a point, however, where government legislation crosses the line between the regulation of a profession and the regulation of speech. It is at this point where the protections of the First Amendment are invoked and the regulation becomes subject to a less deferential level of judicial scrutiny. See id.

The first question for the court to decide in this case, therefore, is whether by applying the CEA's registration requirement to the plaintiffs the CFTC is engaging in the regulation of a profession or the regulation of speech. This is a question with which courts have struggled in the past in an effort to articulate a principled way of distinguishing between the two kinds of regulations. In 1945, for example, the Supreme Court was faced with a controversy that required it to distinguish between a state's right to regulate the profession of labor organizers and the organizers' rights to lawfully address workers regarding their labor grievances. See Thomas v. Collins, 323 U.S. 516, 544, 65 S.Ct. 315, 89 L.Ed. 430 (1945). In a concurring opinion, Justice Jackson drew the following distinction between the regulation of a profession and the regulation of speech:

  Though the one may shade into the other, a rough
  distinction always exists, I think, which is more
  shortly illustrated than explained. A state may
  forbid one without its license to practice law as a
  vocation, but I think it could not stop an unlicensed
  person from making a speech about the rights of man
  or the rights of labor, or any other kind of right,
  including recommending that his hearers organize to
  support his views. Likewise, the state may prohibit
  the pursuit of medicine as an occupation without its
  license but I do not think it could make it a crime
  publicly or privately to speak urging persons to
  follow or reject any school of medical thought. So
  the state to an extent not necessary now to determine
  may regulate one who makes a business or a livelihood
  of soliciting funds or memberships for unions. But I
  do not think it can prohibit one, even if he is a
  salaried labor leader, from making an address to a
  public meeting of workmen, telling them their rights
  as he sees them and urging them to unite in general
  or to join a specific union.

Thomas, 323 U.S. at 544-45, 65 S.Ct. 315 (Jackson, J., concurring), quoted in Lowe, 472 U.S. at 231, 105 S.Ct. 2557.

More recently, in Lowe, the Supreme Court was faced with a challenge to the Securities and Exchange Commission's application of the registration requirement in the Investment Advisers Act. See Lowe, 472 U.S. 181, 105 S.Ct. 2557. As in the instant case, the plaintiffs in Lowe argued that the registration requirement constituted an impermissible regulation of speech, while the defendant argued that it was properly considered a regulation upon a profession. Convinced that it was necessary for the Court to reach the constitutional question presented to it, Justice White endeavored to "locate the point where regulation of a profession leaves off and prohibitions on speech begin." Lowe, 472 U.S. at 232, 105 S.Ct. 2557. He drew the distinction as follows:

  One who takes the affairs of a client personally in
  hand and purports to exercise judgment on behalf of
  the client in the light of the client's individual
  needs and circumstances is properly viewed as
  engaging in the practice of a profession. Just as
  offer and acceptance are communications incidental to
  the regulable transaction called a contract, the
  professional's speech is incidental to the conduct of
  the profession. If the government enacts generally
  applicable licensing provisions limiting the class of
  persons who may practice the profession, it cannot be
  said to have enacted a limitation on freedom of
  speech or the press subject to First Amendment
  scrutiny. Where the personal nexus between
  professional and client does not exist, and a speaker
  does not purport to be exercising judgment on behalf
  of any particular individual with whose circumstances
  he is directly acquainted, government regulation
  ceases to function as legitimate regulation of
  professional practice with only incidental impact on
  speech; it becomes regulation of speaking or
  publishing as such, subject to the First Amendment's
  command that "Congress shall make no law . . .
  abridging the freedom of speech, or of the press."

Lowe, 472 U.S. at 232, 105 S.Ct. 2557 (White, J., concurring in the result). Guided by the writings of Justice Jackson and Justice White, this court concludes that the CFTC's application of the CEA's registration requirement to the plaintiffs in this case constitutes an attempt to regulate speech, not a profession.

There are several facts that lead the court to this conclusion. The plaintiffs, through their publishing activities, do not go so far as to "exercise judgment" on behalf of those who purchase their products. Through their products, they provide advice on commodities futures trading strategies and techniques; they sell trading systems designed to influence their customers' trading decisions; in some instances, they even go so far as to offer specific buy and sell recommendations; but their advice and recommendations are identical for every customer and their products are available to all who wish to purchase them. Moreover, the plaintiffs never have any personal contact with their customers. They never supplement their general recommendations with specific recommendations directed at individual customers. They never make trades for their customers. They simply sell their products and leave it to their customers to decide for themselves whether and how they will use the advice and recommendations purchased from the plaintiffs.

This is similar to the factual scenario in Lowe. There, the petitioner did not "offer his subscribers investment advice specifically tailored to their individual needs and engage[d] in no direct communications with them." Lowe, 472 U.S. at 214, 105 S.Ct. 2557. Nevertheless, "he undeniably engage[d] in the business of advising others through publications as to the value of securities and issue[d] or promulgate[d] analyses or reports concerning securities." Id. (internal quotations omitted). Based on these facts, the concurring justices opined that "[t]he application of the [Investment Advisers] Act's enforcement provisions to prevent unregistered persons from engaging in the business of publishing investment advice for the benefit of any who would purchase their publications . . . [was] a direct restraint on freedom of speech and of the press subject to the searching scrutiny called for by the First Amendment." Id. at 233, 105 S.Ct. 2557.

Given similar facts, the United States District Court for the Southern District of New York reached a different conclusion in Commodity Futures Trading Commission v. AVCO Financial Corp., 979 F. Supp. 232 (S.D.N.Y. 1997), a case involving the CFTC's application of the same registration requirement at issue in this case. In AVCO, however, the investment advice went beyond that provided by the plaintiffs here. AVCO not only provided specific buy and sell recommendations; it also provided a telephone number that customers could call to receive additional advice about AVCO's general recommendations and it provided customers "a service by which brokers authorized by AVCO c[ould] actually make trades" for AVCO's customers. AVCO, 979 F. Supp. at 237. According to the AVCO court, these facts "negate[d] [AVCO's] assertions that AVCO's investment advice [was] entirely impersonal and not characteristic of investment adviser-client relationships meant to be covered by the CEA." Id.

In contrast to the defendants in AVCO, the plaintiffs here never engage in individual consultations with their customers regarding their standard advice and recommendations and under no circumstances do they make trades for their customers. Indeed, their customers must go through some other licensed broker before they can act on any of the plaintiffs' recommendations. On these facts, this court cannot conclude that the plaintiffs are "exercising judgment" on behalf of their customers.

Moreover, a determination that the CFTC's application of the registration requirement challenged in the instant case constitutes the regulation of speech and not a profession comports with Justice Jackson's reasoning in Thomas. Explaining the rationale behind giving the government more power to regulate a profession than to regulate speech, Justice Jackson stated:

  This wider range of power over pursuit of a calling
  than over speech-making is due to the different
  effects which the two have on interests which the
  state is empowered to protect. The modern state owes
  and attempts to perform a duty to protect the public
  from those who seek for one purpose or another to
  obtain its money. When one does so through the
  practice of a calling, the state may have an interest
  in shielding the public against the untrustworthy,
  the incompetent, or the irresponsible, or against
  unauthorized representation of agency. A usual method
  of performing this function is through a licensing
  system.

  But it cannot be the duty, because it is not the
  right, of the state to protect the public against
  false doctrine. The very purpose of the First
  Amendment is to foreclose public authority from
  assuming a guardianship of the public mind through
  regulating the press, speech, and religion. In this
  field every person must be his own watchman for
  truth, because the forefathers did not trust any
  government to separate the true from the false for
  us. Nor would I. Very many are the interests which
  the state may protect against the practice of an
  occupation, very few are those it may assume to
  protect against the practice of propagandizing by
  speech or press. These are thereby left great range
  of freedom.

Thomas, 323 U.S. at 545, 65 S.Ct. 315 (Jackson, J., concurring) (internal citations omitted). In the instant case, the CFTC is attempting to protect the public against false doctrine. That is, the Commission seeks to protect the public from obtaining and acting upon advice and recommendations offered by persons who it believes are not adequately qualified. In this regard, the CFTC is attempting to act as the "watchman for truth" for the public.

It is true that the plaintiffs seek to obtain money from their customers and, to that extent, they are pursuing a calling. Their calling, however, is the selling of ideas, not the trading of commodity futures, and they obtain money by selling their products irrespective of whether or not their customers ever trade in the commodity futures market. Because the plaintiffs do not profit from their customers' gains or losses in the market and because the plaintiffs do not exercise judgment on behalf of their customers, the court concludes that their publications fall within the definition of protected speech.

Justice Jackson stated in Thomas that modern regulators sought, at times successfully, to regulate speech by "associating the speaking with some other factor which the state may regulate so as to bring the whole within official control." Thomas, 323 U.S. at 547, 65 S.Ct. 315. Here, the CFTC seeks to associate the plaintiffs' speech with the commodity trading advice profession so as to bring the speech within its official control. In such a circumstance, it is the court's duty to "inquire whether [the] speech or publication is properly condemned by association; [otherwise the court's] claim to guardianship of free speech and press is but a hollow one." Id. In this case, the court concludes that the CFTC's attempted association is not valid and its application of the CEA's registration requirement to the plaintiffs is an effort to regulate speech, not an extension of the CFTC's official duty to regulate the commodity futures trading profession. Accordingly, the court must analyze the CFTC's application of the registration requirement under the strictures of the First Amendment.

C. First Amendment Analysis

The First Amendment provides that "Congress shall make no law . . . abridging the freedom of speech, or of the press. . . ." U.S. Const. amend. I. Not all restrictions on speech are impermissible, however, and not all kinds of speech are protected to the same extent. See Lowe, 472 U.S. at 233, 105 S.Ct. 2557. In contrast to fully protected speech, speech that is considered "commercial" may be regulated by the government provided that the regulations are "narrowly tailored to advance a legitimate governmental interest." Id. at 234, 105 S.Ct. 2557. In order to assess the constitutional validity of the CFTC's application of the CEA's registration requirement, therefore, it is necessary for the court to determine first whether the plaintiffs' publications constitute fully protected speech or commercial speech.

1. Commercial Versus Fully Protected Speech

The Supreme Court has defined commercial speech as "expression related solely to the economic interests of the speaker and its audience." Central Hudson Gas & Electric Corp. v. Public Service Commission of New York, 447 U.S. 557, 561, 100 S.Ct. 2343, 65 L.Ed.2d 341 (1980). Speech is not automatically considered commercial, however, "simply because it concerns economic subjects or is sold for a profit." Commodity Trend Service, Inc. v. Commodity Futures Trading Commission, 149 F.3d 679, 684 (7th Cir. 1998) (citing to "[a] long line of Supreme Court cases") [hereinafter CTS, Inc.]. Traditionally, only speech "which does no more than propose a commercial transaction" has been considered commercial speech for the purposes of the First Amendment. CTS, Inc., 149 F.3d at 684.

The most typical form of commercial speech is advertising. See id. (noting that "[c]ommercial advertising constitutes paradigmatic commercial speech under the Supreme Court's standard because its fundamental purpose is to propose an economic transaction"); see also Central Hudson, 447 U.S. at 561, 100 S.Ct. 2343 (classifying "promotional advertising" as commercial speech); Zauderer v. Office of Disciplinary Counsel of the Supreme Court of Ohio, 471 U.S. 626, 637, 105 S.Ct. 2265, 85 L.Ed.2d 652 (1985) (noting that "[w]hatever else the category of commercial speech may encompass, it must include appellant's advertisements"). Although Central Hudson can be read to expand the definition of commercial speech beyond advertising, the Supreme Court has "not utilized the broader test [articulated in Central Hudson] in its recent commercial speech cases." CTS, Inc., 149 F.3d at 684 (citing Cincinnati v. Discovery Network Inc., 507 U.S. 410, 422, 113 S.Ct. 1505, 123 L.Ed.2d 99 (1993)). It is not necessary for this court to determine the intended breadth of the Supreme Court's definition of commercial speech, however, because under either a narrow or broad definition the court concludes that the plaintiffs' publications do not constitute commercial speech.

In CTS, Inc., the Seventh Circuit was faced with deciding whether or not the publications of a financial publishing corporation constituted commercial speech. According to the record before the court, CTS distributed

  a number of publications concerning the commodity
  futures markets. These publications c[a]me in the
  form of books, periodicals, updates by facsimile,
  voice recordings accessible by telephone, and
  materials that c[ould] be downloaded via the
  Internet. The content of CTS's publications . . .
  include[d] "securities and commodities market charts,
  market commentary, and educational publications
  concerning markets and trading." All of these
  publications furnish[ed] only impersonal advice; CTS
  d[id] not provide personalized financial planning
  services or trading advice tailored to the individual
  needs of any particular subscribers.

CTS, Inc., 149 F.3d at 682. The court concluded based on these facts that CTS's publications were "not commercial speech because they do not propose a commercial transaction between CTS and a specific customer." Id. at 686. Rather, they provided "information on commodity trading in general and le[ft] any actual trading to other parties." Id. at 685-86. The same is true in the instant case. The plaintiffs' publications in this case do not propose any commercial transaction between the plaintiffs and their customers and the publications are not related solely to the economic interests of the plaintiffs and their customers. Like the publications in CTS, Inc., the various publications distributed by the plaintiffs here provide impersonal information and provide the exact same advice and recommendations to all customers, regardless of any customer's individual circumstances.

It is true that portions of the plaintiffs' publications, particularly their Internet websites, include material that is appropriately classified as advertisements for their publications. The inclusion of such advertising material in an otherwise non-commercial publication, however, does not render that publication commercial speech. As the Seventh Circuit stated in CTS, Inc., "[a] speaker's publication does not lose its status as protected speech simply because the speaker advertises the publication. An advertisement is a separate publication and does not strip the promoted publication of its First Amendment protection." CTS, Inc., 149 F.3d at 685 (citing Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748, 760-61, 96 S.Ct. 1817, 48 L.Ed.2d 346 (1976)). In the instant case, the CFTC is seeking not to regulate the plaintiffs' advertisements, but rather to apply the CEA's registration requirement in such a way as to prevent the plaintiffs from publishing any of the information contained in their publications without first obtaining a license. The relevant inquiry, therefore, is not whether the plaintiffs' advertisements are commercial speech, but whether the substance of the plaintiffs' publications is commercial speech. For the reasons outlined above, the court concludes that it is not.

2. Prior Restraint as a Restriction on Speech

Having concluded that the plaintiffs' publications constitute fully protected speech, the court must next determine whether the restriction imposed upon the plaintiffs' speech by application of the CEA's registration requirement is permissible under the First Amendment. In this case, the restriction amounts to a licensing scheme that requires the plaintiffs to first register with the CFTC before they may engage in their publishing activities. Such licensing schemes have generally been classified as prior restraints on speech. See, e.g., Broadway Distributors, Inc. v. White, 307 F. Supp. 1180, 1184 (D.Mass. 1970) (concluding that city ordinance prohibiting unregistered persons from selling "adult" books was invalid "on its face and in all its parts" as a prior restraint on the plaintiffs' First Amendment rights).

A prior restraint "arises in those situations where the government limitation, expressed in statute, regulation, or otherwise, undertakes to prevent future publication or other communication without advance approval of an executive official." Times Film Corp. v. Chicago, 365 U.S. 43, 56, 81 S.Ct. 391, 5 L.Ed.2d 403 (1961) (Warren, C.J., dissenting) (quoting Thomas I. Emerson, The Doctrine of Prior Restraint, 20 Law & Contemp. Prob. 648, 655). While not all restrictions on speech are impermissible, a restriction that imposes a prior restraint on speech "comes to th[e] Court bearing a heavy presumption against its constitutional validity." New York Times Co. v. United States, 403 U.S. 713, 714, 91 S.Ct. 2140, 29 L.Ed.2d 822 (1971). Indeed, courts allow this "`most extraordinary remedy' only where the evil that would result from the [speech] is both great and certain and cannot be militated by less intrusive measures." CBS, Inc. v. Davis, 510 U.S. 1315, 1317, 114 S.Ct. 912, 127 L.Ed.2d 358 (1994) (quoting Nebraska Press Association v. Stuart, 427 U.S. 539, 562, 96 S.Ct. 2791, 49 L.Ed.2d 683 (1976)). In the instant case, the court concludes that the CEA's registration requirement, as applied to the plaintiffs by the CFTC, is an unconstitutional prior restraint on speech.

The Supreme Court alluded to the correctness of such a conclusion in Lowe when it interpreted an almost identical provision of the Investment Advisers Act to not include publishers of impersonal investment advice. The majority's reasoning for interpreting the language of the statute in such a way was, in part, based on its belief that "Congress, plainly sensitive to First Amendment concerns, wanted to make clear that it did not seek to regulate the press through the licensing of nonpersonalized publishing activities." Lowe, 472 U.S. at 204, 105 S.Ct. 2557. The Court then went on to discuss "two major First Amendment cases," Near v. Minnesota ex rel. Olson, 283 U.S. 697, 51 S.Ct. 625, 75 L.Ed. 1357 (1931) and Lovell v. City of Griffin, 303 U.S. 444, 58 S.Ct. 666, 82 L.Ed. 949 (1938), in which the Court struck down a state statute and a city ordinance, respectively, as unconstitutional prior restraints on publication. Lowe, 472 U.S. at 204-05, 105 S.Ct. 2557.

Unlike the majority, the concurring justices in Lowe directly concluded that the registration requirement of the Investment Advisers Act, as applied to publishers of impersonal investment advice, was an impermissible prior restraint. They stated:

  [T]he First Amendment permits restraints on speech
  only when they are narrowly tailored to advance a
  legitimate governmental interest. The interest here
  is certainly legitimate: the Government wants to
  prevent investors from falling into the hands of
  scoundrels and swindlers. The means chosen, however,
  is extreme. Based on petitioner's past misconduct,
  the Government fears that he may in the future
  publish advice that is fraudulent or misleading; and
  it therefore seeks to prevent him from publishing any
  advice, regardless of whether it is actually
  objectionable. Our commercial speech cases have
  consistently rejected the proposition that such
  drastic prohibitions on speech may be justified by a
  mere possibility that the prohibited speech will be
  fraudulent.

Lowe, 472 U.S. at 234-35, 105 S.Ct. 2557 (Jackson, J., concurring).

As in Lowe, the defendants in this case have imposed a drastic prohibition on speech based on the mere possibility that the prohibited speech will be fraudulent. As applied by the CFTC, the CEA imposes a ban on the plaintiffs' publishing of impersonal commodity futures trading advice unless they register with the CFTC. Moreover, the CFTC may, within its discretion, refuse to register any applicant for various reasons enumerated at 7 U.S.C. § 12a, including that the Commission believes the applicant has the "potential" to disregard the requirements of the CEA or has demonstrated "moral turpitude, or lack of honesty or financial responsibility." See 7 U.S.C. § 12a(2), 12a(3); 7 C.F.R. Part 3, App. A. This is no different than the regulation in Lowe in that it seeks to prevent individuals from publishing information based solely on a fear that someone may publish advice that is fraudulent or misleading, regardless or whether or not the information published actually is fraudulent or misleading. Such a prior restraint on fully protected speech cannot withstand the searching scrutiny of the First Amendment. Accordingly, the court concludes that the registration requirement of the CEA as applied to restrict the plaintiffs from engaging in their publishing activities constitutes an impermissible prior restraint upon the exercise of free speech and runs afoul of the First Amendment of the United States Constitution.

IV. Conclusion

For the foregoing reasons the court concludes that Section 6m(1) of Title 7 of the United States Code is unconstitutional as applied to the plaintiffs in this case and, accordingly, enters judgment in favor of the plaintiffs. An appropriate Order directing the parties in a fashion consistent with this Decision is separately and contemporaneously executed and issued this 21st day of June, 1999.

ORDER

Entering Judgment for the Plaintiffs

For the reasons stated in the court's Decision separately and contemporaneously executed and issued this 21st day of June, 1999, it is

ORDERED that judgment be and hereby is entered in the above-captioned case in favor of the plaintiffs.

SO ORDERED.


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