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OH: Judge blocks catch-22 in state law that threatened entire industry

By   /   December 7, 2012  /   News  /   1 Comment

By Jon Cassidy | Ohio Watchdog

GOLD RULE: A sign like this could get you felony charges under a state law that’s just been blocked in federal court.

COLUMBUS — It’s perfectly legal to buy and sell gold and other precious metals without a license in Ohio.

But the moment you tell anyone that’s what you do, you’re a criminal under an Ohio law a federal judge just blocked.

At the least, you’re a criminal according to the Ohio Department of Commerce, whose sudden enforcement of a law on the books since 1983 is threatening an entire industry.

On Wednesday, U.S. District Court Judge Michael H. Watson blocked enforcement of the Ohio Precious Metals Dealers Act on free-speech grounds, after the state was unable to produce any evidence the law served a purpose.

Maurice Thompson, executive director of the 1851 Center for Constitutional Law, said he filed suit after several coin dealers told him they were being run out of business by officials threatening six-figure fines.

In September alone, the state Department of Commerce took at least 19 different enforcement actions against precious metals dealers around the state.

“The Department of Commerce was really coming out of nowhere with these Draconian regulations and enforcement actions against them, which were really precipitated by the political power of the pawnbrokers, because they’re competing businesses and the pawnbrokers are not subject to this act,” Thompson said. “I would say it’s an abuse of authority by the Legislature to pass the law in the first place, and then by the Department of Commerce to do the bidding of other private competitors.”

Plaintiff Mike Tomaso, who owns Liberty Coins in Delaware, Ohio, said he didn’t know whether the pawnbrokers were behind the recent enforcement push.

“In my mind, when one group in the prison yard sees favoritism in the prison yard, then they resent them, and I’m not playing that game,” he said. “As far as I’m concerned, these pawn dealers have been beaten on for a long time, but they should turn their resentment to the state that’s been beating them and not me.”

After the ruling, the Commerce Department said in a statement the decision “is about the constitutionality of the law and not the enforcement of it by the Ohio Department of Commerce. The State of Ohio has regulated the purchase of precious metals since 1921.”

In issuing a preliminary injunction, Judge Watson said  the state’s main contention was “factually incorrect,” and that Tomaso was likely to win on free-speech grounds, as the law only requires a license from dealers who exercise their free-speech rights by advertising.

Laws that restrict commercial speech need to be carefully tailored to directly advance a substantial government interest.

In that regard, the state’s “sole argument” was that licensing advertisers somehow contributed to fighting “theft, fraud, money laundering, fencing, and even terrorism,” Watson wrote.

But when pressed, nobody on the state’s side was “aware of any crime statistics maintained by the Department of Commerce related to precious metals dealers, and no one testified as to how commercial speech, as opposed to dealing in precious metals, contributes to theft, money laundering, terrorism, or affects any other State interest.”

Thompson said that Commerce “really didn’t have” a reason for what it’s doing.

The ostensible purpose, he said, “is that the advertising is dangerous to society because it causes people to burglarize homes for gold and silver or jewelry or otherwise, knowing that they have a place to sell it.

Yet Commerce was imposing “fees and fines that could be as much as $150,000 before you are eligible to get a license because the law was on the book for 30 years but never enforced,” he said.

Without a license, Tomaso risked multiple felony charges for things like a “We Buy Gold” sign in a shop window, advertisements, or even talking to a reporter for the Delaware Gazette.

Contact Jon Cassidy at [email protected]


Jon Cassidy was a former Houston-based reporter for Watchdog.org.

  • What about the licensed car dealers? The state only allows individuals five car sales a year. The lobbyist for the car dealers are trying to keep the entreprenuer starting out from becoming a car dealer. The coin dealer in Delaware,Ohio stood up and said no and really did something. No doubt the pawn brokers were trying to have an exclusive arrangement on buying gold to the detriment of the coin dealer.