Crypto companies in the U.S. may have a fighting chance against the Securities and Exchange Commission (SEC) in court, thanks to the “major questions doctrine” of the U.S. Supreme Court, according to Jason Gottlieb, a partner at law firm Morrison Cohen LLP. The SEC has widened its definition of what it considers a “security,” making it subject to its regulatory oversight. The SEC charged crypto exchange Bittrex with federal law violations in March, prompting the exchange to threaten legal action if the regulator did not offer a “reasonable settlement.” Crypto companies may use the “major questions doctrine” to hold off the SEC, which prevents regulators from exceeding their authority. The doctrine was last used 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. The high court ruled that it was up to Congress to provide the agency with clear authorization for such actions, and not for administrative agencies to take views that would affect major questions of the U.S. economy. Cohen said that Congress should set the law for crypto, not the SEC.
The U.S. approach to crypto will have a significant impact on the country’s economic and financial competitiveness, according to Cohen. Other jurisdictions, such as the European Union, the U.K., Singapore, Japan, and the Cayman Islands, are developing legal regimes that allow people to operate legally. While these regimes may not be perfect, and are likely to have advantages and disadvantages, they all have a clear path for a crypto company to operate legally. Unlike the U.S., which lacks a clear regulatory framework for crypto, these jurisdictions are creating legal regimes that are conducive to innovation and development in the crypto industry.
During Fintech Week in London, CEO Brian Armstrong of Coinbase, the largest U.S.-based crypto exchange, said that the exchange could consider moving offshore if the regulatory environment for the crypto industry does not become more clear. However, not all crypto companies are taking this approach. According to Cohen, his 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 that they try to inform their clients about what the law requires and what regulators require, but sometimes they have to tell them that it can’t happen in the U.S.
The lack of regulatory clarity for crypto in the U.S. has been a long-standing issue. The SEC has been slow to provide guidance, and its approach to crypto has been inconsistent. The agency has taken a hardline stance on some issues, such as initial coin offerings (ICOs), while being more lenient on others, such as Bitcoin and Ethereum. The lack of clarity has created uncertainty for businesses and investors, making it difficult for them to make informed decisions.
The U.S. needs to create a clear regulatory framework for crypto that balances innovation and development with investor protection. The lack of clarity has driven some crypto companies offshore, which is not good for the U.S. economy. The U.S. risks losing its position as a global leader in innovation and development if it does not create a clear regulatory framework for crypto.
In conclusion, the U.S. approach to crypto needs to change. The SEC needs to provide clear guidance and create a regulatory framework that balances innovation and development with investor protection. The “major questions doctrine” of the U.S. Supreme Court may provide crypto companies with a way to fight the SEC in court, but it is not a long-term solution. The U.S. needs to create a clear regulatory framework for crypto that allows businesses and investors to make informed decisions while promoting innovation and development in the crypto industry.