ICTA Passes Major Reform Legislation in Minnesota
Three years ago, Minnesota passed legislation that could have been devastating for coin dealers, collectors, and investors across the country. Despite its name, the Minnesota Bullion Coin Dealer Law reached far beyond bullion coin dealers. The law covered all dealers of coins with a precious-metal content of 1% or more, including numismatic coins dating back to the ancients.
Worse, the law included coin sales and purchases that occurred entirely outside Minnesota, and its definition of “Minnesota consumers” was impossible for dealers to determine without interrogating every one of their customers. As a result, dealers were at risk of violating the law even when they made good-faith efforts to avoid doing business with Minnesota consumers.
The law included many other burdensome requirements, some of which were impossible for most dealers to implement. Failure to comply with the law carried the risk of fines up to $10,000 per violation, and even criminal penalties. Many dealers simply withdrew from the state. Collectors and investors suffered from the loss of choice and competition among dealers, and many found they could no longer do business with trusted dealers they had known for years.
If other states adopted the Minnesota law, a very real possibility, our business and hobby would be threatened.
While this law was a response to business practices that were clearly illegal and unethical, it was passed by legislators who had received virtually no input from dealers and who had no knowledge of the business. As a result, reputable dealers were caught in the crossfire.
The Industry Council for Tangible Assets, the association representing the interests of dealers, collectors, and investors, faced a choice. We could mount a court challenge to the law that would cost millions of dollars. A decision would be several years in coming, and while our case was strong, winning was not certain. If we lost we’d have stirred up a hornets’ nest in Minnesota and spent all that money for naught. We chose, instead, to develop relationships with state regulators and legislators and try to change the law.
After a year and a half and many hundreds of hours of work by ICTA staff and uncompensated work by ICTA board members, we succeeded in enacting legislation that reformed many of the worst aspects of the old law. In particular, we:
FALSE: Our bill increases the number of dealers who are subject to the law.
In fact, we reduced the number of dealers who must register—especially smaller Minnesota dealers —and we reduced the burden of registering. We did this by the following means:
FALSE: Our bill increases the number of dealers who must register, by including palladium and other precious-metal products regardless of how much precious metal they contain.
This claim is also untrue. Palladium and all other precious metals were already included in the old law, along with any product that contains more than 1% precious metal.
Moreover, any dealer who also bought or sold any coin containing more than 1% of precious metal already had to register under the old law, just as they do under the new one, unless they qualified for one of the exemptions that are described below. The only dealers who were formerly excluded but now must register are those who transact business ONLY in products containing 1% or less of precious metals, including rounds, bars, and ingots.
FALSE: Our bill reduces the number of small dealers who qualify under the “coin-show exemption.”
In fact, we have greatly expanded the exemption. The old law exempted only those dealers who conduct transactions at “occasional” coin shows. No one knew what “occasional” meant, so many dealers (especially those from out of state) stopped going to Minnesota shows. Minnesota enforcement officials suggested at various times that “occasional” meant two, or up to six, shows. The new law expands the definition by:
In other words, the $25,000 threshold does not apply if you transact business at no more than 12 Minnesota shows per year (and through other exempt activities), as long as you do not also transact business with Minnesota consumers through non-exempt means (e.g., online, by telephone or postal mail, or at a physical location other than in Minnesota).
The ICTA legislation made many other revisions to the old law. I won’t review them here, but if you want a more detailed description, click here.
Our bill is not perfect, but it’s a vast improvement over the old law. We’ve developed a good working relationship with Minnesota regulators, who now have a better understanding of our business. This will benefit honest dealers in the future.
ICTA invested more than $160,000 in passing this legislation. Many dealers who benefit have not yet contributed to this effort. I urge you to do so, now, and to join ICTA.
Philip Diehl is vice chairman of the Industry Council for Tangible Assets. He is a former director of the United States Mint and chief of staff of the U.S. Treasury.
Worse, the law included coin sales and purchases that occurred entirely outside Minnesota, and its definition of “Minnesota consumers” was impossible for dealers to determine without interrogating every one of their customers. As a result, dealers were at risk of violating the law even when they made good-faith efforts to avoid doing business with Minnesota consumers.
The law included many other burdensome requirements, some of which were impossible for most dealers to implement. Failure to comply with the law carried the risk of fines up to $10,000 per violation, and even criminal penalties. Many dealers simply withdrew from the state. Collectors and investors suffered from the loss of choice and competition among dealers, and many found they could no longer do business with trusted dealers they had known for years.
If other states adopted the Minnesota law, a very real possibility, our business and hobby would be threatened.
While this law was a response to business practices that were clearly illegal and unethical, it was passed by legislators who had received virtually no input from dealers and who had no knowledge of the business. As a result, reputable dealers were caught in the crossfire.
The Industry Council for Tangible Assets, the association representing the interests of dealers, collectors, and investors, faced a choice. We could mount a court challenge to the law that would cost millions of dollars. A decision would be several years in coming, and while our case was strong, winning was not certain. If we lost we’d have stirred up a hornets’ nest in Minnesota and spent all that money for naught. We chose, instead, to develop relationships with state regulators and legislators and try to change the law.
After a year and a half and many hundreds of hours of work by ICTA staff and uncompensated work by ICTA board members, we succeeded in enacting legislation that reformed many of the worst aspects of the old law. In particular, we:
- eliminated provisions that regulate transactions taking place entirely outside Minnesota,
- substituted a common-sense definition of who a Minnesota consumer is, and
- greatly reduced the number of small dealers subject to the law.
FALSE: Our bill increases the number of dealers who are subject to the law.
In fact, we reduced the number of dealers who must register—especially smaller Minnesota dealers —and we reduced the burden of registering. We did this by the following means:
- Raising the annual registration threshold for sales and purchases from $5,000 to $25,000.
- Limiting the transactions covered by the law to those that (1) occur in the state and (2) occur with consumers who use a Minnesota address. The old law covered transactions with anyone “domiciled, residing, or otherwise located” in Minnesota, even temporarily. No one knew how to identify these customers under this definition.
- Excluding Minnesota-consumer transactions that take place outside the state (for example, at a coin show), unless a party to the transaction ships the product to (or sends a payment to) a Minnesota address.
- Excluding from the $25,000 threshold all transactions with non-Minnesota consumers.
- Excluding from background-check and registration requirements employees who deal with customers solely for administrative purposes and salespeople who deal exclusively with out-of-state customers.
- Setting the time period for calculating the $25,000 threshold to extend from July 1 to June 30 of any year, instead of “any 12-month period.”
FALSE: Our bill increases the number of dealers who must register, by including palladium and other precious-metal products regardless of how much precious metal they contain.
This claim is also untrue. Palladium and all other precious metals were already included in the old law, along with any product that contains more than 1% precious metal.
Moreover, any dealer who also bought or sold any coin containing more than 1% of precious metal already had to register under the old law, just as they do under the new one, unless they qualified for one of the exemptions that are described below. The only dealers who were formerly excluded but now must register are those who transact business ONLY in products containing 1% or less of precious metals, including rounds, bars, and ingots.
FALSE: Our bill reduces the number of small dealers who qualify under the “coin-show exemption.”
In fact, we have greatly expanded the exemption. The old law exempted only those dealers who conduct transactions at “occasional” coin shows. No one knew what “occasional” meant, so many dealers (especially those from out of state) stopped going to Minnesota shows. Minnesota enforcement officials suggested at various times that “occasional” meant two, or up to six, shows. The new law expands the definition by:
- Raising the number of exempted shows to 12 per year.
- Limiting the 12-show count to Minnesota coin shows, while excluding out-of-state shows from the count.
- Limiting the count to shows that take place between July 1 and June 30 of any year, instead of any rolling 12-month period.
- Extending the exemption to any dealer who transacts business with out-of-state customers by any means (e.g., online, by telephone or postal mail, at a physical location other than a coin show, or at an out-of-state location) but conduct business with Minnesota consumers exclusively at coin shows, limited to no more than 12 shows per year.
In other words, the $25,000 threshold does not apply if you transact business at no more than 12 Minnesota shows per year (and through other exempt activities), as long as you do not also transact business with Minnesota consumers through non-exempt means (e.g., online, by telephone or postal mail, or at a physical location other than in Minnesota).
The ICTA legislation made many other revisions to the old law. I won’t review them here, but if you want a more detailed description, click here.
Our bill is not perfect, but it’s a vast improvement over the old law. We’ve developed a good working relationship with Minnesota regulators, who now have a better understanding of our business. This will benefit honest dealers in the future.
ICTA invested more than $160,000 in passing this legislation. Many dealers who benefit have not yet contributed to this effort. I urge you to do so, now, and to join ICTA.
Philip Diehl is vice chairman of the Industry Council for Tangible Assets. He is a former director of the United States Mint and chief of staff of the U.S. Treasury.