Why The Supreme Court’s Attack On Federal Agencies Is A Boon For Crypto

Forbes

A trifecta of recent decisions could hobble the SEC and help crypto banks win key rights.  Read the full story on Forbes: https://www.forbes.com/sites/emilymason/2024/07/24/why-the-supreme-courts-attack-on-federal-agencies-is-a-boon-for-crypto/#:~:text=The%20new%20limit%20on%20administrative,SEC's%20enforcement%20resources%20and%20style.  Subscribe to FORBES: https://www.youtube.com/user/Forbes?sub_confirmation=1  Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:  https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript  Stay Connected Forbes newsletters: https://newsletters.editorial.forbes.com Forbes on Facebook: http://fb.com/forbes Forbes Video on Twitter: http://www.twitter.com/forbes Forbes Video on Instagram: http://instagram.com/forbes More From Forbes:  http://forbes.com  Forbes covers the intersection of entrepreneurship, wealth, technology, business and lifestyle with a focus on people and success.

Transcript

00:00Today on Forbes, why the Supreme Court's attack on federal agencies is a boon for crypto.

00:08As the biggest names in crypto remain embroiled in years-long legal battles with federal regulators,

00:14the Supreme Court has delivered them a gift—three landmark decisions weakening the powers of

00:19those same federal agencies.

00:22That, plus the possibility of a crypto-friendly second Trump administration and movement in

00:27Congress on pro-crypto legislation, are providing tailwinds for the industry.

00:32First, on June 27, in a 6-3 decision, the conservative majority of the Supreme Court

00:38decided in Securities and Exchange Commission v. Jarkessi that when the SEC seeks to fine

00:44organizations for fraud without pursuing criminal charges, it must do so in federal courts instead

00:50of relying on its own administrative law judges.

00:54Under Chairman Gary Gensler, the SEC has made cracking down on the crypto industry a priority.

01:00According to an analysis by Cornerstone Research, the SEC brought a record 46 enforcement actions

01:05against digital asset firms in 2023, with 20 of them—up from six in 2022—resolved

01:12as administrative proceedings.

01:15Most of the litigations—20 of 26—alleged fraud, but so did six of the crypto administrative

01:21cases, according to the analysis.

01:24The new limit on administrative law judges doesn't directly affect SEC cases against

01:29such high-profile players as asset exchanges Coinbase and Kraken—developer of XRP blockchain

01:35Ripple—and decentralized protocol Uniswap.

01:39They're already in federal court.

01:41But it does cramp the SEC's enforcement resources and style.

01:46A day later, on June 28th, in Loper Bright Enterprises v. Raimondo, the same 6-3 Supreme

01:53Court majority overturned so-called Chevron deference, a 40-year-old legal precedent holding

02:00that courts should defer to federal agencies' reasonable interpretations of ambiguous language

02:05in the laws Congress has passed.

02:07In its new ruling, the court held that the Administrative Procedure Act requires judges

02:12themselves to independently interpret the meaning of ambiguous wording, rather than

02:17deferring to agency officials.

02:20And finally, on July 1st, in Corner Post, Inc. v. Board of Governors of the Federal

02:25Reserve System, the court's conservatives extended the timeframe during which businesses

02:30can challenge an agency's rules, opening up the door for decades-old regulations to

02:35be called into question by new businesses.

02:38And what are crypto businesses, if not new?

02:41Beyond the impact on any single case, the decisions, taken together, sent an unmistakable

02:47message.

02:48The legal tide has turned against the regulators, including those intent on holding crypto back.

02:55Paul Gruau, chief legal officer for crypto exchange Coinbase, said of the decisions,

03:00quote,

03:01What we're seeing is a culmination of deep skepticism of agency overreach that's been

03:05building over not just the last couple of terms, but really over the last couple of

03:09decades.

03:10The best example of that is Loper Bright, where you've seen a complete reconceptualization

03:15of the role of agencies in interpreting congressional mandates.

03:20The Loper Bright decision is quite a consequential overturning of precedent, and could eventually

03:24come to play a role in a convoluted, but potentially significant crypto industry court fight.

03:30Custodia Bank's lawsuit against the Federal Reserve Bank of Kansas City and the Federal

03:35Reserve Board seeking to gain a coveted, quote, master account.

03:41Both crypto and fintech startups have been frustrated in their quest to get these master

03:44accounts, which provide direct access to the so-called payment rails banks use to move

03:50money to other banks on behalf of their customers.

03:53The systems include Fedwire, which handles one-time wire transfers, and the recently

03:59launched FedNow real-time payment system, which could eventually give businesses and

04:03consumers near-instant access to payments, including paychecks, and money moving between

04:09financial accounts.

04:11If fintech and crypto firms can't get master accounts, they'll have to go through traditional

04:16bank partners to move money, potentially stifling innovation, or at least their profits, since

04:22they'll have to kick back part of their fees to traditional banks.

04:26In the worst case for newcomers, regulators could pressure traditional banks not to work

04:30with them, denying the upstarts even indirect access to the nation's payment system, a

04:35barrier Custodia says it has run into.

04:38The business stakes and opportunities here are substantial, because two of the biggest

04:42U.S. banks who serviced crypto clients, Silvergate Bank and Signature Bank, failed during the

04:48March 2023 regional banking crisis.

04:51Hardly any banks have stepped up since to fill the void.

04:56For full coverage, check out Emily Mason's piece on Forbes.com.

05:02This is Kieran Meadows from Forbes.

05:04Thanks for tuning in.

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