In recent decisions, the Supreme Court of the United States (SCOTUS) issued rulings expected to significantly curb the regulatory powers of federal agencies like the Securities and Exchange Commission (SEC), particularly in their governance over cryptocurrency enterprises.
On June 27, in a landmark 6-3 ruling in Securities and Exchange Commission v. Jarkesy, the Supreme Court mandated that defendants in SEC civil cases have the right to a jury trial rather than being subject only to an administrative law judge’s decision. This decision aligns the treatment of SEC civil fraud cases more closely with criminal fraud proceedings, recognizing such allegations’ severity and potential consequences.
The next day, on June 28, SCOTUS delivered another significant opinion in Loper Bright Enterprises v. Raimondo, effectively overturning the 1984 Chevron deference doctrine. This long-standing rule had compelled courts to defer to federal agencies’ interpretations of ambiguous statutes relating to their jurisdiction. The new ruling empowers lower courts to use their judgment in determining whether an agency has acted within its legal boundaries without deferring to the agency’s interpretation.
Sheila Warren, CEO of the Crypto Council for Innovation, highlighted the profound implications of these rulings for the crypto industry, noting that they challenge the extent of regulatory authority and could foster more judicial intervention in agency decisions.
However, these judicial decisions have sparked controversy and concern among some justices and lawmakers. Justice Sonia Sotomayor, dissenting in the SEC v. Jarksey case, criticized the majority’s decision as an overreach into Congressional policymaking. Similarly, Justice Elena Kagan, dissenting in the Loper case, lamented that the court was discarding established legal precedents that had supported administrative law for decades.
The practical effect of these decisions is likely to be a more congested court system, as noted by Joseph Lynyak, partner at Dorsey & Whitney. He predicts a surge in litigation as parties may now challenge and rechallenge agency interpretations, potentially leading to inconsistent lower court decisions.
The rulings came at a critical time when the SEC had just initiated an enforcement action against Consensys, alleging that it operated as an unregistered broker and engaged in the unregistered offer and sale of securities through its MetaMask Swaps.
These decisions from a conservative-majority Supreme Court may reshape not only the regulatory landscape for crypto but also broader administrative law, potentially limiting federal oversight in favor of judicial and private sector scrutiny.
