In the past week, the Supreme Court of the United States (SCOTUS) has issued two opinions that could have long-term implications for how the U.S. Securities and Exchange Commission (SEC) handles enforcement actions against companies, including those in the crypto industry.
On June 27, the court’s majority opinion in SEC v. Jarksey, with a 6-3 decision, stated that defendants in an SEC civil case involving securities fraud are entitled to a jury trial rather than a strict adjudication by an administrative law judge. The conservative members of the court argued that “common law fraud principles” should be considered when interpreting federal securities law, essentially comparing an SEC civil case involving securities fraud to a criminal case involving fraud.
Following the SEC v. Jarksey decision, on June 28, the court issued an opinion in Loper Bright Enterprises v. Raimondo, overturning a 1984 ruling that established the Chevron deference doctrine. While not explicitly referring to the SEC, the court’s opinion would require lower courts to independently decide whether an agency has acted within its statutory authority, rather than deferring to federal agencies’ interpretation of the law.
Sheila Warren, CEO of the Crypto Council for Innovation, said, “This has direct implications for the crypto industry. The role and firepower of regulators, like the SEC, is in question if courts have the ability to step in.”
Justice Sonia Sotomayor, in her dissent over the SEC v. Jarksey decision, 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 result in an overwhelmed court system, according to Joseph Lynyak, a partner at the international law firm Dorsey & Whitney. He suggested that courts obeying SCOTUS’ overturning of the Chevron doctrine may be inundated with private parties litigating and relitigating an agency interpretation, potentially creating conflicting decisions by lower courts.
Representative Maxine Waters criticized the Supreme Court’s rulings, stating that they have not only upended important legal precedent but also made it easier for big corporations to benefit at the expense of ordinary people and escape civil penalties.
In another 6-3 ruling on July 1, the conservative-led Supreme Court stated that former President Donald Trump had “at least presumptive immunity from prosecution for all his official acts” while in office. This decision could have lasting implications for the SEC and the U.S. presidency, especially as Trump has been accused of using his position to subvert the results of the 2020 presidential election.
Both SCOTUS decisions came as the SEC filed an enforcement action against Consensys, the parent company of MetaMask, alleging that Consensys operated as an unregistered broker and engaged in the unregistered offer and sale of securities through MetaMask Swaps.