US SEC Takes Major Blow In Chevron Howey Test Case, Implication For Crypto

A new ruling on an old Chevron case has set a major precedent that might make the SEC relaxed in its crypto enforcement efforts
By Godfrey Benjamin
June 28, 2024
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US SEC Takes Major Blow In Chevron Howey Test Case, Implication For Crypto

Highlights

  • The US Supreme Court has placed a dent on the SEC's basis for Howey Test interpretation
  • The apex court said deference to the old Chevron ruling is no longer tenable
  • This ruling might impact how the SEC cracks down on crypto firms

The outcome of the high-profile Chevron lawsuit might end the long-drawn crackdown from the United States Securities and Exchange Commission (SEC) in securities cases.

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Court Decision Marks the End of Regulators’ Tyranny

On Friday, the Supreme Court overturned a decision that has given federal authorities broad regulatory power for many years.

The 1984 decision in Chevron v. National Resources Defense Council gave agencies like the SEC the leverage to make regulatory changes without the consent of Congress. The case established that courts should defer to the decisions and expertise of regulators when the language of statutes is ambiguous. These regulatory agencies were known for interpreting the laws they are tasked with enforcing.

Armed with such deference, regulators kept taking action on time-sensitive issues while they wait for Congress to pass new laws. Chief Justice John Robert finally came to the conclusion that the Chevron deference rule was no more workable.  He stated the fact that the doctrine gives agencies the allowance to change course even without receiving authorization from Congress.

On the other hand, the Biden administration is arguing against the Supreme Court ruling, asking it to leave Chevron deference intact. The administration called it a “bedrock principle of administrative law.”

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SEC Crackdown on Crypto Firms

The SEC has constantly cracked down on the operations of several cryptocurrency exchanges  including some of the key industry players. The agency strengthened its crackdown based on the existence of this Chevron deference rule. The Commission kept pointing to Howey Test as a basis for shutting down crypto activities on exchanges.

Coinbase, Binance and Kraken are some of the many exchanges that were ostracized by the Commission on accusation of offering registered securities for sale. Even Ripple have a three-year long case with securities regulator on the same matter as the SEC kept referring to XRP as security. Therefore, the decision of the Supreme Court has set a precedent for every pending crypto case.

The Commission currently has a pending lawsuit with Coinbase over denial of Freedom of Information Act (FOIA) request. This case also involves the Federal Deposit Insurance Corporation (FDIC) and the cryptocurrency exchange has asked the court to compel both agencies to release the requested information.

Noteworthy, this new development comes barely a day after the Supreme Court limited the power of the SEC by ruling that defendants in fraud cases have a right to a jury trial in federal court.

Read More: 21Shares Submits Application For Solana ETF

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Godfrey Benjamin
Benjamin Godfrey is a blockchain enthusiast and journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture. Follow him on X, Linkedin
Disclaimer: The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.