Act regulates business in response to constitutionally-protected advertising, and prohibits legitimate purchases of gold and silver
Columbus, OH – A federal court late yesterday ruled that Ohio’s regulatory scheme governing those purchasing gold, silver, and other precious metals – the Precious Metals Dealers Act- violates the First Amendment.
The ruling, made by Judge Watson of the Columbus division of the Southern District of Ohio, paves the way for Ohio businesses, most prominently coin dealers, to resume purchases of items containing gold and silver content, and in particular, to resume advertising their interest in purchasing inventory consisting of precious metals, free from concern over confiscatory prosecution, fines and regulations.
The 1851 Center for Constitutional Law took up the coin dealers’ case and challenged the state law after the Ohio Department of Commerce threatened to shut down Liberty Coins, of Delaware, Ohio, if it refused to pay considerable fines and obtain a government license to advertise its business.
The lawsuit had sought recognition that the First Amendment applies to and protects “commercial speech,” such as coin dealers’ advertising, and that the Act’s prohibition of advertising by coin dealers was not a means of reducing gold and silver-related theft.
The lawsuit had also made claims asserting that requirements that business owners demonstrate that they have “good character,” “sufficient reputation,” “sufficient financial responsibility,” and “sufficient experience” prior to being permitted to run their businesses were unconstitutionally vague; and that the Act’s authorization of warrantless searches of business owners’ property and records at any time without notice violated their Fourth Amendment rights.
In his 28 page decision, Judge Watson, explaining that “the Act only prohibits the unlicensed buying of precious metals when commercial speech is involved,” emphasized that “a broad injunction completely prohibiting enforcement of the licensing provision is warranted.”
The order, an across-the-board rebuke to Ohio’s regulations and the cavalier enforcement tactics the Ohio Department of Commerce has against Ohio’s small businesses over the past year, concluded as follows:
- The Department of Commerce failed to show “how holding one’s self out as willing to purchase precious metals contributed to the evils the State seeks to prevent. Moreover, Defendants have not shown how requiring a license only for purchasers of precious metals who engage in commercial speech directly and materially advance those interests.”
- “[The state] has not shown that forcing those who engage in commercial speech to obtain a license is reasonable,” and “the restriction on commercial speech is more extensive than necessary.”
- The Department of Commerce “incorrectly” asserts “that the law prevents fraud, money laundering, theft and terrorism by requiring those who wish to engage in the business of buying from the public gold, silver, and other precious metals to be licensed.”
- “The breadth and number of exemptions undercuts the Defendants’ argument that the licensing scheme is narrowly tailored to protect against theft, fraud, or terrorism.”
The Court added that the Department of Commerce’s aggressive reading of the regulations was “nonsensical,” and that Ohio coin dealers and others “are unable to actually purchase precious metals without facing prosecution due to Defendants’ incorrect interpretation of the Act.”
“We are just trying to make it safe for small businesses to operate in Ohio – - a mission that we wish our state government would share, rather than thwart,” said Maurice Thompson, Executive Director of the 1851 Center. “This Act and those enforcing it treat small businesses who make gold and silver available as public utilities at best, and criminals at worst, irrespective of whether they have done harm.”
Heightened enforcement of the PMDA by the Department of Commerce, under the control of the Kasich Administration, comes in response to accelerated lobbying and financial contributions to candidates by the pawn brokers industry, which is exempt from the regulations, and a direct competitor of those who are subject to the Act. The enforcement, which would have put many coin dealers out of business, also comes at a time of rising precious metals prices, where an increasing number of Ohioans seek to use gold and silver to protect their savings against potential inflation caused by federal government increases in the money supply.
Thompson added “the state misguidedly seeks to advance its mission of ‘preventing theft and resale of precious metals’ through gag orders, warrantless searches, and criminalization of innocent small businesses. Fortunately, the First Amendment allows us to protect Ohioans’ rights to engage in truthful promotion of their businesses.”
Read the Court’s Order Granting Liberty Coins’ Motion for Preliminary Injunction HERE.
December 7, 2012: Bloomberg Businessweek: Ohio gold, silver dealers’ law blocked by judge
December 7, 2012: Ohio Watchdog: OH: Judge blocks catch-22 in state law that threatened entire industry
December 6, 2012: WYTV 33 News: Ohio gold, silver dealers’ law blocked by judge