Thailand's 2006 military coup left its mark on the country in a lot of ways: Years of political instability and crippling street protests and violence, for a start. But some of the most insidious changes are only now revealing themselves, such as the effects of the very first law the junta's assembly passed after taking power, the Computer Crimes Act.

Last week three Thais were arrested under the act and charged with posting rumors online that threatened "national security"—specifically, rumors about the health of King Bhumibol Adulyadej, 81, who has been hospitalized since Sept. 19 (authorities say his health is improving). Police allege a link between the postings and a 7% drop in the Thai stock exchange Oct. 14 and 15.

This isn't the first time this law has been applied: the editor of a political Web site was arrested in March after a reader posted a comment critical of the monarchy. The editor has been released on bail and the case is still under investigation. In April, a blogger was convicted of violating the Computer Crimes Act and Lese Majeste laws—and sentenced to a decade in jail. The Thai Netizen Network, a Bangkok-based advocacy group, estimates around 10 Thais have been arrested under the Computer Crimes Act so far.

Proponents argue the act is necessary to combat online pornography and online crime, areas previously overlooked by Thai laws. But the law also punishes, with jail terms of up to five years, anyone who "inputs into a computer system false computer data in a manner that is likely to undermine national security or to cause a public panic."

Last week's arrests show what a broad net that clause casts over Internet users. One person arrested—a former bank executive—told reporters that she had translated a Bloomberg article about the market decline into Thai and posted it online. Another worked at a local securities firm, and the Stock Exchange of Thailand is currently investigating accounts linked to his clients.

We don't know whether any of these people violated Thai laws. But we do know that their arrest sends a powerful message to all Thais about the risks they face for posting information online. This is stifling not only to political discussion, but also detrimental to investors at home and abroad who rely on that information to make investment decisions.

Many analysts say that the stock market dip in October took place because of an information vacuum about the health of the King; in such an environment, rumors spread quickly. But the solution is to have more information, not less.