US Coins

Hobby Protection Act subject to many interpretations

The Federal Trade Commission has invited comments on how to improve the Hobby Protection Act, and the deadline for comments was Sept. 19. I submitted comments on behalf of myself only, directed toward parts of the act I think need clarification. 

One of my complaints has always been the way the act has been interpreted by certain courts to require “COPY” to be incuse on coins that aren’t actual copies of anything, but are original designs.

Lawyers say, “Hard cases make bad law,” meaning cases presenting extreme facts might justify certain rulings, but those rulings are harsh when applied to more typical fact situations. Here’s part of what I’m suggesting to the FTC.

Original designs

Over the years, I have seen coins made for collectors and based on coin designs that were never employed for coins that actually circulated as money. For example, in an October 2001 Coin World column, I addressed private restrikes then being made of the exceedingly rare 1855 Kellogg & Co. $50 gold slug. My conclusion was that the Hobby Protection Act didn’t apply because the original Kellogg piece was a privately minted pattern design that never circulated, and of which only one example is known.

My opinion then was that Congress intended to regulate only replicas of original items that were once legal tender, or at least “used in exchange.” 

I reiterated that opinion a few years ago when examining a privately minted piece marketed in conjunction with the Smithsonian Institution, using George Morgan’s “$100 Union” pattern design (the design was rejected by the U.S. Mint, but a copy of it ended up in the Smithsonian’s archives). Similarly, I raised it again in connection with other proposed — but never used — coin designs, such as that for Confederate States of America coinage that was made privately by a firm in Philadelphia in 1861, but prevented by the outbreak of the war from ever being used anywhere.

Use of ‘COPY’

It seemed clear that because no “original” coins bearing the Confederate or $100 Union designs actually was used as a medium of exchange, the act could not require items using the same designs to be labeled “COPY.” The act and its regulations do not define “used in exchange,” but in the only FTC case brought under the act, In Re Gold Bullion International, both the administrative law judge and the commissioners on appeal adopted a definition that items were “used in exchange” if they were “actively traded in the marketplace and used as a means of payment,” even if the items were never formally legal tender of any governmental body. 

So it seems indisputable that coins made from designs that were never used previously must be exempt from the act. 

However, as I have explained above, the existing case law — most notably the DeMarco decision declaring the “Freedom Tower Silver Dollar” unlawful under the act even though it was a modern coin and not a copy of anything — unjustifiably expands the act’s scope and casts a shadow over legitimate efforts to sell items of historical interest, requiring “COPY” to be placed confusingly on items that clearly are original contemporary pieces and marketed as such.

I recommend adding in the definition of “original numismatic item” (sec. 304.1(f)) the following sentence: “An item has been used in exchange for purposes of the Act if it was once actively traded or used as a means of payment.” 

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