This week’s Supreme Court ruling limiting the Environmental Protection Agency's authority may have a surprising beneficiary: cryptocurrency investors who want to avoid federal regulation.
The case before the court was about climate-change regulations from the EPA, but lawyers and lobbyists representing unrelated industries were watching it closely to see what broader statements the justices might make about the powers of an expanding bureaucracy — especially for new industries like crypto.
Because bitcoin and similar digital currencies are so new, there’s no specific federal law governing them. In that absence, two regulatory agencies, the Securities and Exchange Commission and the Commodity Futures Trading Commission, have taken significant steps toward oversight of crypto.
“The EPA decision signals that the Supreme Court won’t take kindly to regulatory agencies like the SEC attempting to redraw their own jurisdictional boundaries beyond what Congress clearly intended,” Jake Chervinsky, head of policy for the Blockchain Association, a crypto trade group, said in a statement. He said that based on the decision, he believes the Supreme Court would strike down proposed SEC rules for the crypto market.
Perianne Boring, founder and CEO of the Chamber of Digital Commerce, a separate trade group for the blockchain and crypto industry, said she’s also encouraged by the ruling, which found that the federal Clean Air Act does not give the EPA broad authority to regulate greenhouse gas emissions.
“Today’s decision in West Virginia v. EPA at the very least should give regulators pause in attempting to set policies that exceed their congressionally mandated roles, particularly so with emerging innovations with great economic potential,” she said in a statement Thursday.
In ruling against the EPA, Chief Justice John Roberts wrote for a 6-3 majority that when a government agency seeks to regulate an area of major significance, it needs to point to “clear congressional authorization.”
Crypto investors and startups have been in a state of suspense for a couple of years as they wait to see how the U.S. government will approach regulating digital currency, which has grown from almost nothing into a trillion-dollar industry over a few years, largely without government oversight.
A third industry representative, Sheila Warren, CEO of the Crypto Council for Innovation, said the implications for crypto aren’t clear.
“The trend from this SCOTUS is towards eroding the power of administrative agencies to create and enforce broad rules at the federal level,” she said in a statement, using the acronym for the Supreme Court of the United States.
“That being said, it’s hard to know how various agencies will respond,” she said. “I don’t think federal agency rulemaking is off the table in the digital assets space, but I do think this ruling is an indicator that SCOTUS will be a barrier to agencies that are trying to establish broadscale federal policies, especially in areas that states have expressed interest in.”
James Cox, a Duke University law professor and expert in securities regulation, said he thinks Thursday’s ruling “will indeed become the lever to move many regulations off their tracks,” including rules for novel financial products such as virtual currencies and coin offerings.
But the SEC may get the benefit of the doubt from federal courts because of federal laws that give the commission broad authority over “investment contracts,” said Carol Goforth, a law professor at the University of Arkansas and another expert in securities regulation.
“I don’t see the Court (or most federal court judges for that matter) being overly concerned that the SEC is operating too broadly, especially given various headlines about crypto fraud being rampant,” she said in an email.
The CFTC and the SEC did not immediately respond to requests for comment.