In the last seven days, the Supreme Court of the United States (SCOTUS) has released two opinions that could have lasting implications for how the U.S. Securities and Exchange Commission handles enforcement actions against companies, including crypto firms.
In a 6-3 decision released on June 27 in SEC v. Jarksey, the court’s majority opinion held that defendants in an SEC civil case concerning securities fraud are entitled to a jury trial rather than strictly adjudication by an administrative law judge. The court’s conservative members said it considered “common law fraud principles when interpreting federal securities law common law fraud” — seemingly equating an SEC civil case involving securities fraud to a criminal case involving fraud.
SCOTUS followed the SEC v. Jarksey decision with a June 28 opinion — Loper Bright Enterprises v. Raimondo — overturning a 1984 ruling that established the Chevron deference, or doctrine. Though not explicitly referring to the SEC, the court’s opinion would require lower courts “to exercise their independent judgment in deciding whether an agency has acted within its statutory authority” and not defer to federal agencies’ interpretation of the law.
“This has direct implications for the crypto industry,” Crypto Council for Innovation CEO Sheila Warren told Cointelegraph. “The role and firepower of regulators, like the SEC, is in question if courts have the ability to step in.”
Warren 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.”
In her dissent over the SEC v. Jarksey decision, Justice Sonia Sotomayor referred to the majority opinion as a “power grab” over policymaking in the U.S. Congress. Justice Elena Kagan wrote a dissent in the Loper decision, saying that the majority had a pattern of reversing “settled law” and “overhaul[ed] a cornerstone of administrative law.”
The impact of these decisions on the SEC filing enforcement actions against crypto firms could mean an overwhelmed court system. According to Joseph Lynyak, a partner at the international law firm Dorsey & Whitney, courts obeying SCOTUS’ overturning 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.”
“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,” said Representative Maxine Waters on June 28 in response to the SCOTUS opinions.
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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. On July 1, in a 6-3 ruling, the justices said 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 has already been the first candidate with a criminal conviction, allegedly used his position to subvert the results of the 2020 presidential election.
Both SCOTUS decisions came amid the SEC filing an enforcement action against Consensys, the parent company of MetaMask. The regulator alleged Consensys operated as an unregistered broker and engaged in the unregistered offer and sale of securities through MetaMask Swaps.
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