Discover how the Supreme Court's decision in Loper Bright vs. Raimondo could reshape the regulatory landscape for Web3 and the crypto industry, shifting power dynamics and prompting legislative reforms.
The Supreme Court's Groundbreaking Decision on Web3 Regulation
The United States Supreme Court’s recent decision in Loper Bright vs. Raimondo is set to have a profound impact on the cryptocurrency industry and beyond. This landmark ruling challenges the long-standing principle that US courts must defer to federal agencies when interpreting ambiguous statutes—a precedent established in the 1984 Chevron USA Inc. vs. Natural Resources Defense Council case.
A Shift in Judicial-Executive Power Balance
On June 28, the Supreme Court declared, “Chevron is overruled.” This 6–3 decision marks a significant shift in the balance of power between the judicial and executive branches of the US government. By removing the requirement for courts to defer to federal agencies, this ruling opens the door for more rigorous judicial scrutiny of agency decisions.
Jim Lundy, securities enforcement and litigation partner at Foley & Lardner, and former senior regulatory counsel at the US Securities and Exchange Commission (SEC), stated, “The Supreme Court did the appropriate thing with this ruling because the Chevron deference had started to stretch too far for certain agencies.”
Implications for the Crypto and Blockchain Industry
Joshua Simmons, a partner at Wiley Rein and adjunct professor at the University of Virginia School of Law, described the ruling as a “game changer” for the crypto and blockchain sectors. “The decision takes away the deference that agencies had,” Simmons told Cointelegraph. Practically, this means more companies will challenge agency decisions, enjoying a more level playing field in the process.
Joanna Wasick, a litigation partner at BakerHostetler, noted that during the Supreme Court oral arguments, crypto was cited as an example of how the SEC oversteps its authority. “Loper Bright’s attorney, Paul Clement, pointed directly to crypto as an example of how the SEC [Securities and Exchange Commission] oversteps its authority,” she said.
This ruling should further motivate Congress to pass comprehensive crypto reform legislation and encourage crypto-related companies to file lawsuits. It also validates existing challenges against agencies, such as Coinbase vs. SEC, and may boost companies like Consensys in their struggles with the SEC.
Broader Impact Across Sectors
The scope of this decision extends beyond technology to finance, healthcare, and the environment, potentially affecting all administrative state activities. Lundy emphasized that while the ruling removes Chevron deference in ambiguous rulemaking, it does not eliminate the rulemaking capabilities of regulatory agencies.
European Perspective
Annabelle Rau, a lawyer at McDermott Will & Emery in Germany, highlighted the potential positive impact of Loper Bright on reducing regulatory barriers in the US, akin to Europe’s Markets in Crypto-Assets Regulation (MiCA) framework. MiCA aims to provide a clear regulatory framework that balances innovation with oversight.
“A similar reduction in regulatory barriers in the US post-Loper Bright could encourage innovation in digital asset tokenization,” said Rau, stressing the importance of a predictable regulatory landscape through consistent judicial rulings rather than variable agency interpretations.
Is Loper Bright a Game Changer?
While the ruling does not eliminate regulatory agencies' rulemaking capabilities, it ensures that courts have the final say on statutory interpretations, without deferring to agencies. This has significant implications for the SEC’s interpretation of “investment contracts,” a key issue for the crypto sector.
“Loper Bright confirms that courts have final say on what an ‘investment contract’ is, without tipping the scales in the SEC’s favor,” said Wasick. Though district court decisions that sided with the SEC's interpretations remain valid, the ruling signals that federal agencies may have overstepped their authority.
Future Challenges and Industry Reactions
Kathryn Haun, a prominent figure in the technology policy space, called the ruling “the most significant court case for technology policy in the U.S. in years.” Its effects on frontier tech industries like AI, biotech, crypto, and clean energy are significant, though not all-encompassing.
Simmons warned that the full impact of Loper Bright will take time to unfold, as agencies are unlikely to change their approach immediately. However, this decision will encourage more proactive challenges against agency rules in the crypto and blockchain industries.
Lundy concluded, “This new ruling will be studied by the defense bar for new and creative ways to challenge SEC and CFTC rulemakings for the cryptocurrency and blockchain industries.”
The Supreme Court’s decision in Loper Bright vs. Raimondo marks a pivotal moment for the regulatory landscape, potentially reshaping the future of Web3 and cryptocurrency regulation in the United States.
(ANDREW SINGER, COINTELEGRAPH, 2024)