In the past week, the Supreme Court of the United States (SCOTUS) has issued two landmark opinions that may profoundly influence how the U.S. Securities and Exchange Commission (SEC) enforces regulations against companies, particularly those in the cryptocurrency industry.
On June 27, in a 6-3 decision in SEC v. Jarksey, the Supreme Court ruled that defendants in an SEC civil case concerning securities fraud are entitled to a jury trial, rather than solely adjudication by an administrative law judge. The court’s majority opinion, written by its conservative members, emphasized the importance of “common law fraud principles when interpreting federal securities law,” equating an SEC civil case involving securities fraud to a criminal fraud case.
Overturning the Chevron Deference: Loper Bright Enterprises v. Raimondo
The following day, SCOTUS released another critical opinion in Loper Bright Enterprises v. Raimondo, overturning the 1984 Chevron deference doctrine. This doctrine had previously mandated that courts defer to federal agencies’ interpretations of ambiguous laws. The new ruling requires lower courts to use their independent judgment to determine whether an agency has acted within its statutory authority.
The recent rulings have significant implications for the crypto industry. Sheila Warren, CEO of the Crypto Council for Innovation, told Cointelegraph, “This has direct implications for the crypto industry. The role and firepower of regulators, like the SEC, is in question if courts have the ability to step in.” She further added, “Make no mistake, [the] Supreme Court decision imposes clear limits on the regulatory overreach that has hampered innovation in crypto in the United States.”
Dissenting Opinions
In her dissent regarding the SEC v. Jarksey decision, Justice Sonia Sotomayor criticized the majority opinion as a “power grab” over policymaking, which should reside with the U.S. Congress. Justice Elena Kagan, dissenting in the Loper decision, noted that the majority had a trend of reversing “settled law” and “overhauling a cornerstone of administrative law.”
The impact of these decisions may result in an overwhelmed court system. Joseph Lynyak, a partner at the international law firm Dorsey & Whitney, expressed concerns that courts, following SCOTUS’ overturning of the Chevron doctrine, “may be inundated with private parties who may now litigate and relitigate an agency interpretation, including creating conflicting decisions by lower courts.”
Representative Maxine Waters reacted strongly to the SCOTUS opinions, stating on June 28, “With these rulings, the Supreme Court has not only succeeded in upending half a century of important legal precedent, known as the Chevron doctrine, but has also made it much easier for big, wealthy corporations to benefit at the expense of ordinary people and escape civil penalties.”
The conservative-led Supreme Court filed several opinions near the end of its term that could have lasting implications for the SEC and the U.S. presidency. For instance, on July 1, in a 6-3 ruling, the justices stated that former President Donald Trump had “at least presumptive immunity from prosecution for all his official acts” while in office. Trump, who is running for reelection in 2024 and is the first candidate with a criminal conviction, allegedly used his position to subvert the results of the 2020 presidential election.
Current SEC Enforcement Actions
Both SCOTUS decisions came amid the SEC filing an enforcement action against Consensys, the parent company of MetaMask. The SEC alleged that Consensys operated as an unregistered broker and engaged in the unregistered offer and sale of securities through MetaMask Swaps.
| Case | Decision Date | Majority Opinion Summary | Implications |
|---|---|---|---|
| SEC v. Jarksey | June 27 | Defendants entitled to jury trials in SEC civil cases | Increased judicial scrutiny on SEC cases |
| Loper Bright Enterprises v. Raimondo | June 28 | Overturned Chevron deference; courts must use independent judgment | Reduced deference to federal agencies’ interpretations |
The recent SCOTUS decisions mark a significant shift in how regulatory enforcement may proceed, particularly affecting the SEC’s ability to regulate the crypto industry. These changes may lead to increased litigation and challenges in court, potentially reshaping the landscape of financial regulation in the United States.
Featured image credit: Wally Gobetz via Flickr