Last month’s ruling regarding the crypto industry’s relationship with the U.S. Securities and Exchange Commission (SEC) has ruffled more than a few feathers.
Crypto giants and their supporters are now challenging the SEC’s authority over their operations, all based on a theory rooted in the Supreme Court’s recent doctrines.
This move illustrates how the evolving landscape of cryptocurrency is clashing with traditional regulations, challenging the very fabric of how financial entities are governed.
Coinbase Challenges SEC’s Reach
Leading this charge is the renowned crypto exchange, Coinbase. They’ve been particularly vocal against the SEC’s efforts to regulate crypto issuers and exchanges.
In recent filings against the regulatory body, Coinbase and its allies have questioned the validity of an enforcement action targeting Terraform Labs and their founder, Do Kwon.
The foundation of this argument is the Supreme Court’s “major questions doctrine.” This doctrine essentially suggests that certain monumental economic and political issues require direct Congressional input, rather than being subject to regulation by agencies.
However, Jed Rakoff, a U.S. District Judge, deemed that this doctrine doesn’t apply to the SEC’s actions against Terraform Labs. He argued that the crypto sphere doesn’t have the vast economic and political implications to warrant such a consideration.
But Coinbase vehemently disagrees.
In a bold move, Coinbase’s lawyers highlighted the SEC’s overreaching actions as the exact type of issues the Supreme Court’s doctrine aimed to prevent.
Emphasizing the political storm surrounding crypto regulation, they pointed out that the SEC initiated its case against them just before a Congressional hearing on the agency’s jurisdiction over cryptocurrencies.
Coinbase further stressed that Congress is actively considering over 20 crypto-related bills, underlining the need for regulatory clarity.
The Economic Impact: A Closer Look
Comparing the cryptocurrency industry with established sectors like tobacco and energy, Coinbase drew attention to the Supreme Court’s decisions in two recent, significant cases: Biden v. Nebraska and Alabama Association of Realtors v. Department of Health and Human Resources.
These cases, they argue, showcased the Supreme Court’s perspective that billion-dollar decisions, impacting vast economic landscapes, must have clear Congressional authorization.
Highlighting the expansive economic implications of the crypto world, Coinbase noted the industry’s valuation at over a trillion dollars. With nearly a fifth of U.S. adults invested in some form of cryptocurrency and hundreds of millions globally trading on U.S. platforms, the scale is undeniable.
Coinbase isn’t alone in this battle. Renowned Supreme Court litigators, in amicus briefs, echoed the crypto giant’s sentiments.
Michael Dreeben, representing investment funds Adreessen Horowitz and Paradigm, pointed out inconsistencies between Rakoff’s ruling and Supreme Court decisions.
Paul Clement, another heavyweight in the legal community, argued that the Supreme Court’s doctrine wasn’t about comparing industries, but evaluating the massive economic and political consequences of regulatory decisions.
Yet, the SEC remains unmoved, maintaining that their actions align with mandates given decades ago, covering a broad spectrum of publicly offered investments. They emphasize that the Supreme Court’s doctrine was for new executive regulations, not individual enforcement actions.
As for the future? It’s a guessing game. The Supreme Court hasn’t yet decided if it will delve into the complex mesh of SEC’s authority over the crypto realm.
