Supreme Court Rulings Shake Up SEC’s Grip on Crypto Enforcement
The recent US Supreme Court (SCOTUS) term delivered two landmark decisions that could significantly impact the Securities and Exchange Commission’s (SEC) approach to enforcement actions, particularly against crypto firms.
On June 27th, a 6-3 majority opinion in the case of SEC v. Jarkesy established a defendant’s right to a jury trial in SEC civil cases involving securities fraud. Previously, such cases were adjudicated solely by administrative law judges within the SEC.
The court’s conservative majority argued that principles of common law fraud apply when interpreting federal securities law. This essentially equates an SEC civil case with a criminal case, granting defendants the right to a jury trial.
Following the Jarkesy decision, SCOTUS issued another ruling on June 28th. In Loper Bright Enterprises v. Raimondo, the court overturned the long-standing Chevron deference doctrine. This doctrine previously allowed courts to defer to federal agencies’ interpretations of the laws they enforce.
The new ruling mandates lower courts to exercise independent judgment in determining whether an agency has acted within its legal authority. This shift weakens the SEC’s authority and opens the door for legal challenges to its interpretations of regulations surrounding cryptocurrencies.
Impact on Crypto Industry:
Crypto industry advocates like Sheila Warren, CEO of the Crypto Council for Innovation, see these rulings as a positive development. She argues that the decisions limit regulatory overreach, which has stifled crypto innovation in the US.
The potential downside, as highlighted by Joseph Lynyak of Dorsey & Whitney, is an overburdened court system. With courts no longer obligated to defer to the SEC’s interpretations, an influx of litigation challenging agency actions could ensue.
The rulings have sparked dissent from liberal justices, with concerns regarding an imbalance favoring big corporations over ordinary citizens. Additionally, Representative Maxine Waters expresses worry that these decisions could make it harder to impose civil penalties on wrongdoers.
It’s important to note that the Supreme Court also issued a separate ruling granting former President Donald Trump a degree of immunity from prosecution for alleged actions taken while in office. This decision, however, is not directly related to the SEC’s authority over cryptocurrency.
SEC vs. Consensys
These court decisions come amidst the SEC’s ongoing enforcement action against Consensys, the parent company of the popular crypto wallet MetaMask. The SEC accuses Consensys of operating as an unregistered broker and offering unregistered securities through MetaMask Swaps.
The recent SCOTUS rulings might impact the outcome of this case and potentially influence future SEC actions against other crypto firms.