Could Idaho voters create a state-run electronic currency and 'private market exchange' through a 2010 ballot initiative?
Plain-English summary
The proposed Idaho Honest and Secure Money Act would have created a state-controlled electronic currency system tied to individual electronic cards, restricted to intrastate Idaho transactions. The system was to be administered through a "Private Market Exchange," an Idaho corporation in which the state would hold at least 50 percent economic interest, 50 percent of board representation, and 50 percent of voting rights. The state would invest up to $60 million from public funds.
Attorney General Lawrence Wasden's certificate concluded that the initiative would likely be struck down. The U.S. Constitution reserves the power to coin money and regulate currency to the federal government. Article I, § 8, cl. 5 grants Congress the power to "coin money, regulate the value thereof," and Article I, § 10 prohibits states from coining money or emitting bills of credit. Briscoe v. Bank of Commonwealth of Kentucky, 36 U.S. 257 (1837), held that this prohibition applies whether the state acts directly or "indirectly" through a state-controlled corporation. Because the proposed Private Market Exchange would be a state instrumentality (state-controlled board, state-funded), its currency issuance would face the same constitutional bar regardless of the electronic-card delivery mechanism. The AG also identified numerous drafting issues including missing words, undefined terms, and a hanging-conditional sentence beginning "If a part of this Act shall be submitted ..."
Currency note
This opinion was issued in 2010. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
Background and statutory framework
State-currency initiatives surfaced periodically in the 2008-2010 period, often connected to broader concerns about federal monetary policy or the dollar's stability. Most ran into the same constitutional analysis: states cannot issue currency, even electronically, even through a controlled corporation. The Coinage Clause is one of the clearer federal-supremacy provisions in the Constitution, and the case law extends back to the early 19th century.
The AG's structural argument has two parts. First, the constitutional prohibition reaches "bills of credit" issued by states, not just metal coins. Briscoe holds that a state cannot evade the prohibition by chartering a state-controlled corporation to issue notes. Second, an electronic-card-based monetary unit that must be accepted to discharge public or private debts qualifies as legal tender, which only the federal government may produce. The Private Market Exchange's status as a state instrumentality, with majority state ownership and voting control, brings it within the constitutional restriction.
Common questions
Q: Why doesn't this work even though the currency is electronic?
A: The Coinage Clause reaches the substance (creation of monetary instruments), not the form (paper bills versus electronic credits). The 1837 Briscoe decision and modern cases like Valley v. Rapides Parish School Board extend the prohibition to all forms of state-issued money or money-like instruments.
Q: Could a private company in Idaho do this without state involvement?
A: A pure private currency or barter system raises different questions. The constitutional restrictions on states do not directly limit private parties. But a private currency that is "tendered" as payment of public or private debts intersects with federal currency law in other ways. The AG's review focused on the proposal's specific structure as a state-controlled instrumentality.
Q: Did this initiative reach the ballot?
A: This certificate of review is the procedural starting point. The reader should consult Idaho Secretary of State election records to confirm whether this petition gathered signatures and appeared on a subsequent ballot.
Q: Why does it matter that the state would hold 50 percent of the corporation?
A: Under Briscoe, a state cannot use a chartered corporation as a workaround. The constitutional inquiry asks whether the entity is, in substance, an instrumentality of the state. With the state holding majority ownership and majority board control, plus public funding, the proposed exchange would clearly qualify as a state instrumentality.
Citations and references
Statutes and constitutional provisions:
- Idaho Code § 34-1809 (certificate of review)
- U.S. Const. art. I, § 8, cl. 5 (Coinage Clause)
- U.S. Const. art. I, § 10 (state-coinage prohibition)
Cases:
- Briscoe v. Bank of Commonwealth of Kentucky, 36 U.S. 257 (1837), state cannot coin money directly or indirectly
- Norman v. Baltimore & Ohio R.R. Co., 294 U.S. 240 (1935), federal authority over revenue, finance, and currency
Source
- Landing page: https://www.ag.idaho.gov/office-resources/opinions/
- Original PDF: https://ag.idaho.gov/content/uploads/2018/04/C021110.pdf
Original opinion text
STATE OF IDAHO
OFFICE OF THE ATTORNEY GENERAL
LAWRENCE G. WASDEN
February 11, 2010
The Honorable Ben Ysursa
Idaho Secretary of State
STATEHOUSE MAIL
Re:
Certificate of Review
Proposed Initiative Related to Idaho Honest and Secure Money Act
Dear Secretary of State Ysursa:
An initiative petition was filed with your office on January 19, 2010. Pursuant to Idaho Code § 34-1809, this office has reviewed the petition and has prepared the following advisory comments. Given the strict statutory timeframe within which this office must review the petition, our review can only isolate areas of concern and cannot provide in-depth analysis of each issue that may present problems. Further, under the review statute, the Attorney General's recommendations are "advisory only." The petitioners are free to "accept or reject them in whole or in part." The opinions expressed in this review are only those that may affect the legality of the initiative. This office offers no opinion with regard to the policy issues raised by the initiative.
BALLOT TITLES
Following the filing of the proposed initiative, this office will prepare short and long ballot titles. The ballot titles must impartially and succinctly state the purpose of the measure without being argumentative and without creating prejudice for or against the measure. While our office prepares titles for the initiative, petitioners may submit proposed titles for consideration. Any proposed titles should be consistent with the standard set forth above.
MATTERS OF SUBSTANTIVE IMPORT
A.
Introduction
Entitled "Idaho Honest and Secure Money Act," the initiative proposes to create a monetary system that would be restricted to intrastate transfers in Idaho. The proposed monetary system would be "tied to individual electronic cards issued to persons." Only "Idaho persons" could hold the contemplated accounts "unless otherwise authorized by the legislature of Idaho." The initiative contemplates a for-profit "Private Market Exchange" that would be incorporated under the laws of Idaho and would set the standards for private market currencies in Idaho, which would be backed at least 100% by tangible assets.
The initiative proposes that the "Private Market Exchange" be created with sixty million dollars from "[t]he state of Idaho or one of its agencies or [the] public." According to the proposed legislation, "[s]uch monies can be appropriated from any Idaho public fund for which such appropriation is both lawful and appropriate as determined by the governor or as required by legislative action."
Most of the provisions of the proposed laws would be struck down by a reviewing court as violating Article I, Section 8 of the U.S. Constitution, which gives the federal government the exclusive power to coin money and issue bills of credit.
B.
Article I, Section 8 of the U.S. Constitution Gives the Federal Government the Exclusive Power to Coin Money; States are Prohibited from Coining Money or Issuing Bills of Credit, Including Credit via "Electronic Cards"
Article I, Section 8 of the U.S. Constitution states, in relevant part:
[1.] The congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States;
[2.] To borrow money on the credit of the United States;
[3.] To regulate commerce with foreign nations, and among the several states, and with the Indian tribes;
[4.] To establish a uniform rule of naturalization, and uniform laws on the subject of bankruptcies throughout the United States;
[5.] To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures;
[6.] To provide for the punishment of counterfeiting the securities and current coin of the United States;
(Emphasis added.)
The United States Supreme Court has declared:
A state cannot do that which the federal constitution declares it shall not do; it cannot 'coin money.' Here is an act inhibited in terms so precise, that they cannot be mistaken; they are susceptible but of one construction. And it is certain, that a state cannot incorporate any number of individuals and authorize them to coin money; such an act would be as much a violation of the constitution, as if money were coined by an officer of the state, under its authority; the act being prohibited, cannot be done by a state, directly or indirectly. The same rule applies to bills of credit issued by a state.
Briscoe v. Bank of Commonwealth of Kentucky, 36 U.S. 257, 258-59 (1837).
In Norman v. Baltimore & Ohio Railroad Co., 294 U.S. 240, 303, 55 S. Ct. 407, 414, 79 L. Ed. 885 (1935), the Supreme Court stated that the broad and comprehensive national authority over the subjects of revenue, finance, and currency is derived from the aggregate of the powers granted to the Congress.
It does not matter that the sound monetary unit would be transferred electronically. If the monetary unit ("money") must be accepted to discharge public or private debts, as contemplated by this initiative, then the monetary unit qualifies as legal tender, which only the United States government may produce.
The United States Constitution's prohibition on states coining money would extend to the "Private Market Exchange" because the "Private Market Exchange" is an instrumentality of state government. As described in the initiative, the "Private Market Exchange" would be an "Idaho corporation with at least a 50% economic interest, 50% of the representatives on the board, and 50% of the voting rights controlled by the state of Idaho." The initiative specifies that "[t]he State of Idaho shall under no circumstances dilute its voting interest in the Private Market Exchange." The "Private Market Exchange" would be funded by state monies as well. Because the "Private Market Exchange" would be an instrumentality of state government, the monetary system and currency created by the Exchange would be in violation of Article 1, Section 8 of the U.S. Constitution.
MATTERS OF FORM
The certificate flagged numerous drafting issues, including missing prepositions in § 26-3805(12) and § 26-3803, an unclear "optionally" in § 26-3802, an undefined "the corporation" in § 26-3805(6), inconsistent capitalization of "Private Market Exchange," "probably cause" in § 26-3805(10) (should be "probable"), the typo "establishes" for "established" and the article "a" instead of "the" before "United States government" in § 26-3805(11), an undefined "Idaho persons," "effect" used as a verb instead of "affect" in § 26-3807(2), a hanging conditional beginning "If a part of this Act shall be submitted ..." in § 26-3808, and the use of "entropy" where "randomness" was likely intended in § 26-2805(3) and (4).
CONCLUSION
The power to coin money and issue bills of credit is reserved to the Federal Government. The proposed initiative, if passed, would likely be struck down by a reviewing court because it attempts to give the State of Idaho power that it does not have under Article I, Section 8 of the U.S. Constitution.
CERTIFICATION
I HEREBY CERTIFY that the enclosed measure has been reviewed for form, style, and matters of substantive import. The recommendations set forth above have been communicated to the Petitioner via a copy of the Certificate of Review, deposited in the U.S. Mail to Alanna Grimm, 2817 E. St. James Ave., Hayden, Idaho 83835-7544.
LAWRENCE G. WASDEN
Attorney General
Analysis by:
MELISSA MOODY
Deputy Attorney General