The cryptocurrency industry was quick to celebrate the Supreme Court’s ruling on Friday that struck down “Chevron deference,” a move that gives federal courts more say in determining the scope of what administrative agencies can do.
THE historic ruling 6-3 It overturned a 40-year-old Court doctrine that left administrative agencies under the President the authority to interpret certain laws left vague by Congress. For conservatives skeptical of the Executive’s role in regulating health or the environment, it was a significant victory.
While several legal scholars have recounted Decipher While the ruling may give heart to struggling cryptocurrency firms facing lawsuits from the Securities and Exchange Commission (SEC), the legal implications for cryptocurrencies may be overblown, according to Lee Reiners, a professor at Duke Law School.
The scope of the SEC’s authority in regulating cryptocurrencies is still tied to questions related to their classification as securities, he said in an interview.
“The main issue is, ‘Is cryptocurrency a security or not?’” he said. “That really has nothing to do with that. That question is a matter of legal interpretation, not a matter of an agency overstepping its bounds.”
In SEC lawsuits against exchanges and issuers of digital assets, the line between securities and commodities is still unclear. However, he acknowledged, reversing Chevron’s deference could give more discretion to conservative courts hearing cryptocurrency issues.
“I don’t think it’s going to have any kind of tangible implications in the short term,” Reiners continued.
However, statutory limits on the SEC’s authority to regulate cryptocurrencies have been discussed previously by cryptocurrency firms. In an attempt to have a lawsuit filed by the SEC dismissed last year, cryptocurrency exchange Coinbase argued that the SEC was violating the Major Matters Doctrinewhich prohibits agencies from determining matters of “broad economic and political importance” without express authorization from Congress.
Coinbase’s argument was that Congress had not delegated the SEC’s authority to regulate cryptocurrencies under the Securities and Exchange Act of 1933, because digital assets do not fall under the securities agency’s framework, known as Howey’s test. Ultimately, a federal judge in New York found that the SEC exercised “the executive authority granted to it by Congress to regulate ‘virtually any instrument that could be sold as an investment.'”
“We appreciate the Supreme Court’s recognition that the Administrative Procedure Act is a check on agencies,” a Coinbase spokesperson said Decipher in a written statement. “The courts have found that the SEC violated the APA in many contexts, including the rejection of a Bitcoin ETF, and we look forward to the courts further examining the SEC’s overreach in the cryptocurrency industry.”
Sheila Warren, CEO of the Crypto Council for Innovation, said Decipher in a written statement that the ruling has direct implications for the cryptocurrency industry. “The role and firepower of regulators, such as the SEC, are in question if the courts have the ability to intervene,” he wrote.
The significance of the ruling was reiterated by Coinbase Chief Legal Officer Paul Grewal, who he wrote on Twitter (a.k.a.
On Thursday, the conservative-leaning Supreme Court imposed new standards on the SEC more directly. In another 6-3 ruling, the court ruled in SEC v. Jarkesy that in enforcement actions seeking monetary penalties, SEC targets are entitled to a jury trial.
Overall, Friday’s ruling could strengthen arguments that the SEC is overstepping its authority, said Jack Graves, a professor at Syracuse University College of Law Decipher in an interview. At the same time, the SEC, along with some federal courts, believes that the regulator’s application of the Howey test is well within the law.
“The SEC is essentially just enforcing precedent and Howey,” he said of the SEC’s enforcement actions against cryptocurrency firms. But Friday’s ruling strengthens the Major Questions argument, Graves said, adding that “the further the Supreme Court moves away from regulatory deference, the stronger that argument becomes.”
By Andrea Hayward
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