The Securities and Exchange Commission (SEC) is facing two lawsuits from cryptocurrency exchanges, Binance and Coinbase, who are challenging the agency’s authority to regulate the crypto industry, according to Bloomberg. The exchanges claim that the SEC is overreaching its jurisdiction and applying outdated laws to new and innovative technology.
The SEC has accused Binance and Coinbase of violating securities laws and engaging in various misconducts, such as facilitating trading of unregistered securities, manipulating prices, and failing to protect customers. The agency has filed lawsuits against both exchanges in federal courts in New York and Washington, D.C.
Binance and Coinbase have moved to dismiss the SEC’s suits, arguing that the agency has no legal basis to regulate crypto assets as securities. They have also raised constitutional issues, invoking the major questions doctrine, which limits the scope of administrative agencies to regulate matters of great economic and political significance without clear congressional authorization.
The exchanges have presented various arguments to support their positions, such as comparing crypto assets to collectibles like Beanie Babies and challenging the SEC’s interpretation of the term “investment contract”, which is used to define securities under the 1933 and 1934 Acts.
The judges presiding over the cases, Amy Berman Jackson and Katherine Polk Failla, have not been convinced by the exchanges’ use of the major questions doctrine. They have expressed doubts about the applicability and relevance of the doctrine, which originated from a 2022 Supreme Court case to the crypto cases.
If the judges can dismiss some of the SEC claims without reaching the MQD, as I think they will do, I think that would be their preference since they generally prefer to avoid constitutional issues if they can, Stein said.
Supreme Court’s Crypto Dilemma
The crypto cases come at a time when the Supreme Court is reviewing the extent of administrative power in the U.S. government. The court is considering whether to overturn Chevron deference, a 40-year-old precedent that grants agencies like the SEC the authority to interpret ambiguous statutes as long as their interpretation is reasonable.
Some experts believe that Chevron’s deference may be in jeopardy, as the court has shown signs of skepticism towards the doctrine. In a recent oral argument, attorney Paul Clement cited the SEC’s crypto cases as an example of how agencies can abuse their power and regulate new and complex issues without proper guidance from Congress.
The outcome of the Supreme Court’s decision could have significant implications for the crypto industry, as well as other sectors that are subject to administrative regulation. It could also affect the fate of the SEC’s suits against Binance and Coinbase, potentially setting a precedent for future crypto cases.
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