FaceCash Founder Claims New Financial Regulation is Unconstitutional
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houseSYSTEM, with a social networking feature called the Face Book. According to Greenspan, Facebook CEO Mark Zuckerberg was an early user.
Months after the meeting, after several e-mails back and forth between Greenspan and the DFI, FaceCash was granted an exemption that allowed the company to keep its headquarters in California, if it kept its money transfer business out of state.
But Greenspan didn’t see this as a real solution. FaceCash would have no way of preventing legitimate customers in the states where it is licensed from traveling to California and using the service there—which might put him in violation again. “We’re in a new age, it doesn’t really matter where your computer is anymore,” Greenspan argues.
It also peeved Greenspan that the exemption only applied to FaceCash, not to any other money transfer companies located in California. One of his complaints is that plenty of other entities-from colleges to startups to major companies—seem to be operating money transfer businesses in blissful ignorance of the MTA. Only because he bothered to check with the DFI, from his point of view, did FaceCash get singled out
Greenspan continued to exchange e-mails with the DFI, at one point listing 34 institutions that he believed were operating without a California license, seemingly with no repercussions.
In November, Greenspan’s company, Think Computer Corporation, filed a civil suit against the State of California, alleging that the MTA violates Article 1 of the U. S. Constitution. According to Greenspan, the law has prevented him from operating FaceCash not just in California, but across the country.
“Interstate commerce cannot be in the domain of each state, it must be a federal function,” Greenspan says. “Just because the states have passed legislation, doesn’t mean they can fill the void.”
Greenspan filed an amended complaint on January 31, and the state has 14 days to respond. The state Department of Financial Institutions does not comment on pending litigation, a spokeswoman said.
Greenspan’s ultimate hope is not only that the MTA will be declared unconstitutional and that he will be able to restart FaceCash in the state, but that the issue of interstate commerce and mobile payments will be dealt with at the federal level. “The whole country needs a better system, whether it comes from my business or someone else’s, we’re in need of a better network,” he says. “Here were are in California where we’re bleeding cash and we’re saying you could use this thing and save so much money, it only it were legal.”
At present, states are allowed to regulate money transmitters as they see fit, and only four states—Massachusetts, Montana, New Mexico, and South Carolina—do not require licenses. In other states, net worth requirements to obtain a license can range from $5,000 to $1,000,000. (Click here for a white paper Greenspan penned about the need for federal regulation.)
“All these things need to get worked out and they’re complex issues, but the first step is getting rid of barriers to competition,” he says.