The Major Questions Doctrine and Crypto Regulation
As the regulation of cryptocurrencies continues to be a topic of discussion, some lawyers suggest that crypto companies may be able to use a Supreme Court doctrine to challenge the Securities and Exchange Commission (SEC). According to Jason Gottlieb, a partner at law firm Morrison Cohen LLP, crypto companies are likely to push back against the SEC’s increasingly broad view of what constitutes a “security” subject to its regulatory oversight.
The U.S. Supreme Court has a doctrine called the “major questions doctrine,” which holds that regulators cannot exceed their authority. The high court last used the doctrine in a 6-3 decision involving the Environmental Protection Agency on whether it had the authority to issue an emissions cap on greenhouse gases. In this decision, Chief Justice John Roberts wrote that administrative agencies are not allowed to take views that will affect major questions of the United States economy. Some lawyers argue that this doctrine could be used to push back against the SEC’s overly broad interpretation of what constitutes a security.
Cohen believes that Congress should set the law for crypto, not the SEC. While other jurisdictions such as the European Union, the U.K., Singapore, Japan, and the Cayman Islands are developing legal regimes that allow people to operate legally, the U.S. lacks a clear path for crypto companies to operate legally. This lack of regulatory clarity is leading some companies to consider moving offshore if the regulatory environment for the crypto industry does not become more clear.
However, not all crypto companies are considering moving offshore. Some are seeking legal ways to operate in the U.S., despite the regulatory ambiguities. Lawyers like Cohen are advising their clients on what the law requires and what regulators require, but sometimes, they have to tell their clients that it can’t happen in the U.S.
The Future of Crypto Companies in the U.S.
If crypto companies are successful in challenging the SEC’s interpretation of what constitutes a security, it could have significant implications for the regulation of cryptocurrencies in the U.S. The lack of regulatory clarity is leading some companies to consider moving offshore, but others are seeking ways to operate in the U.S. despite the regulatory ambiguities.
However, it’s important to note that there are many factors that influence the outcome of legal cases, and it’s impossible to predict with certainty how courts will rule. Nevertheless, the fact that some lawyers are exploring the possibility of using the major questions doctrine to challenge the SEC’s interpretation of what constitutes a security suggests that there may be some room for maneuvering in the regulatory landscape for cryptocurrencies.
