Stop using occupational licensing to silence speech

Private investigators visit crime scenes, handle firearms, and conduct surveillance. Oceanside resident David Knott does none of this. Yet regulators 2,000 miles away in Illinois accused him of unlicensed detective work and shut him down.

United Asset Recovery, the Carlsbad, California-based company that Knott started in 2005, does most of its work on a keyboard using public databases available to anyone. The firm has only one mission: Reconnect property owners with unclaimed funds held by government custodians nationwide.

Many people have no idea this money exists. Sometimes, they misplace checks and fail to cash them. Other times they forget about bank deposits and move without providing forwarding addresses. Businesses also lose track of assets.

When this happens, banks turn over unclaimed property to the state, which holds onto the funds until an owner steps forward. The process works like a lost-and-found closet at school, except the inventory includes financial assets instead of lunchboxes and coats.

Currently, the Illinois State Treasurer's Office has more than $5 billion waiting for pick-up.

This is where Knott steps in. He alerts property owners, files claims on their behalf, and takes a commission after each job is done. Prior to 2021, he helped his Illinois clients recover $600,000 of their own money.

Everyone was happy. Except the Illinois government

State law allows the treasurer to divert unclaimed property to the State Pensions Fund, creating a perverse financial incentive that federal courts have acknowledged in cases out of Indiana and New Jersey. The rule is simple: the more money a state returns, the less it keeps for itself.

Stopping Knott proved tricky, however, because he was not doing anything wrong. He was just earning an honest living. So, Illinois had to get creative.

The state's answer was an occupational licensing requirement, which regulators imposed on Knott in 2021. They did not care about the lack of relevance to Knott's work. Public safety was not the point. The state just wanted him to stay in California.

Knott was stuck. Getting a private detective's license in Illinois requires three years of experience under a licensed professional or law enforcement agency — or a combination of on-the-job training and college.

The price was too steep for Knott, who did not need or want a private detective license, so he pulled out of Illinois and focused his services elsewhere. He also fought back with a constitutional lawsuit against the state, which he filed on March 14. Our public interest law firm, the Institute for Justice, represents him.

The case highlights a nationwide problem with occupational licensing boards, which already control more than one-fourth of all U.S. jobs. Some states add to the burden by creating new licenses. But other states allow regulators to create new definitions instead, altering what it means to do certain jobs. Licensing boards can expand their authority by manipulating the dictionary without waiting for legislative permission.

California regulators attempted this type of power grab when they required end-oflife doulas Akhila Murphy and Donna Peizer to get a funeral director license to talk to people about death. California also required Los Angeles entrepreneur Ryan Crownholm to get a land surveyor license to draw site plans for clients using publicly available data from Google Maps and other mapping platforms. Elsewhere, Pennsylvania tried to require vacation property manager Sally Ladd to get a real estate license to help her clients use Airbnb.

Examples of the mission creep abound. To engineering boards, everything looks like engineering. To cosmetology boards, everything looks like cosmetology. And to states trying to impose barriers to recovery of unclaimed property, searching a database looks like private investigation.

Besides violating the Fourteenth Amendment Due Process Clause, which protects a person's right to earn a living without unreasonable government interference, stretching occupational licensing laws to criminalize speech also tramples on the First Amendment.

People like Knott have a right to gather publicly available information. They have a right to talk truthfully to clients. And they have a right to petition the government on behalf of their clients. Everything Knott does is covered by the First Amendment.

A person does not need to be a licensed detective to figure out that occupational licensing boards are overreaching. Stifling entrepreneurship and stifling speech are obvious abuses of power.

James T. Knight II is an attorney and Daryl James is a writer at the Institute for Justice in Arlington, Virginia.