Crypto Companies May Use a Supreme Court Doctrine to Push Back Against SEC: Lawyer

The high court's "major questions doctrine" could be used to limit the regulator's actions against crypto, said Jason Gottlieb, a partner at Morrison Cohen LLP.

AccessTimeIconApr 18, 2023 at 7:02 p.m. UTC
Updated Apr 19, 2023 at 12:48 a.m. UTC

The U.S. Supreme Court might provide crypto companies with a way to fight the Securities and Exchange Commission in court, according to Jason Gottlieb, a partner at law firm Morrison Cohen LLP.

At a time when the SEC is widening its view of what it considers a "security" and thus subject to its regulatory oversight, “We’re going to see crypto companies trying to push back against the SEC,” Gottlieb told CoinDesk TV’s “First Mover” on Tuesday.

In March, the SEC charged crypto exchange Bittrex with violating federal laws. The exchange, which plans to close its U.S. platform on April 30, said it would take the regulator to court if the agency did not make a “reasonable settlement offer.”

Gottlieb said crypto companies may try to hold off the SEC using the U.S. Supreme Court’s "major questions doctrine," which holds that regulators can’t exceed their authority. The high court last used the doctrine in 2022 in a 6-3 decision involving the Environmental Protection Agency on whether it had the authority to issue an emissions cap on greenhouse gases.

Chief Justice John Roberts, writing for the majority, said no, and that it was up to Congress to provide EPA with clear authorization for such actions.

“What the Supreme Court has instructed is that administrative agencies, which are a branch of the executive department, are not allowed to take views that will affect major questions of the United States economy,” Gottlieb said.

So when it comes to crypto, “That’s for Congress to set the law, not for the SEC to say 'we believe the law should be no crypto,'” he added.

The U.S. approach to crypto – or lack thereof – is going to have a big effect on this country’s economic and financial competitiveness. Consider other jurisdictions, Gottlieb said, such as the European Union, the U.K., Singapore, Japan and the Cayman Islands, which “are developing legal regimes that can allow people to operate legally.”

While these regimes may not be perfect, and are likely to have advantages and disadvantages, Gottlieb said that, unlike the U.S., they all have “a clear path [for a crypto company] to operate legally.”

On Tuesday, during Fintech Week in London, CEO Brian Armstrong of Coinbase, the largest U.S.-based crypto exchange, said the exchange could consider moving offshore if the regulatory environment for the crypto industry does not become more clear.

That isn’t the approach all crypto companies are taking, Gottlieb said. Hs crypto clients are asking him what can be done to operate legally in the U.S., or as close as possible to legal given the ambiguities, he said.

“We try to tell our clients as best we can what the law requires [and] what regulators require,” he said. “And sometimes, we have to tell you, sorry, it can’t happen here.”

CORRECTION (April 19, 2023, 0:34 UTC): Changes multiple references from Cohen to Gottlieb.

Edited by Lawrence Lewitinn.


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Fran Velasquez

Fran is CoinDesk's TV writer and reporter.