Supreme Court Overturns 'Chevron Deference'—And That Might Be Good for Crypto

The crypto industry was quick to celebrate a Supreme Court ruling Friday that abolished “Chevron deference,” a move giving the federal courts more say in determining the scope of what administrative agencies can do.

The landmark 6-3 ruling overturned a 40-year-old Court doctrine that let administrative agencies under the President have the authority to interpret certain laws left vague by Congress. For conservatives skeptical of the Executive Branch’s role in regulating health or the environment, it represented a significant win.

While several legal scholars told Decrypt that the ruling could embolden embattled crypto firms, who face lawsuits from the Securities and Exchange Commission (SEC), the legal implications for crypto may be overblown—that's according to Lee Reiners, who teaches at Duke Law School.

The scope of the SEC’s authority in regulating crypto is still tied to questions around their classification as securities, he said in an interview.

“The core issue is, ‘Is crypto a security, or is it not?’” he said. “This doesn't really have any bearing on that. That question is a matter of a legal interpretation, not a matter of an agency overstepping its bounds.”

In SEC lawsuits against exchanges and issuers of digital assets, the dividing line between securities and commodities is still unclear. Yet the overturning of Chevron deference could give more discretion to conservative courts with crypto issues before them, he acknowledged.

“I don't think it'll have any sort of tangible implications in the near term,” Reiners continued. 

Still, statutory limits on the SEC’s authority to regulate crypto have been argued by crypto firms before. In an attempt to have an SEC-brought lawsuit tossed last year, the crypto exchange Coinbase argued that the SEC was violating the Major Questions Doctrine, which prohibits agencies from determining questions of “vast economic and political significance” without explicit authorization from Congress.

Coinbase’s argument was that Congress had not delegated the SEC authority to regulate crypto under the Securities and Exchange Act of 1933—because digital assets don’t fit within the agency’s framework for securities, known as the Howey Test. Ultimately, a federal judge in New York found that the SEC exercised “its Congressionally bestowed enforcement authority to regulate ‘virtually any instrument that might be sold as an investment.’”

"We appreciate the Supreme Court's recognition that the Administrative Procedure Act is a check on agencies,” a Coinbase spokesperson told Decrypt in a written statement. “Courts have found that the SEC violated the APA in many contexts, including its denial of a Bitcoin ETF, and we look forward to Courts further scrutinizing SEC overreach in crypto.”

Sheila Warren, CEO of the Crypto Council for Innovation, told Decrypt in a written statement that the ruling has direct implications for the crypto industry. “The role and firepower of regulators, like the SEC, is in question if courts have the ability to step in,” she wrote.

The ruling’s significance was echoed by Coinbase’s Chief Legal Officer Paul Grewal, who wrote on Twitter (aka X) that “the writing is on the wall,” pointing to a snippet from Friday’s decision, which stated that “agencies have no special competence in resolving statutory ambiguities.”

On Thursday, the conservative-leaning Supreme Court imposed new standards on the SEC in a more direct way. In another 6-3 ruling, the court held in SEC v. Jarkesy that in enforcement actions seeking monetary penalties, SEC targets have a right to a jury trial.

Overall, Friday’s ruling may bolster arguments that the SEC is overstepping its authority, Syracuse University College of Law Professor Jack Graves told Decrypt in an interview. At the same time, the SEC, alongside some federal courts, believe that the regulator’s application of the Howey Test is well within the law.

“The SEC is essentially just applying precedents and Howey,” he said of SEC enforcement actions against crypto firms. But Friday’s ruling strengthens the Major Questions argument, Graves said, adding that “the further the Supreme Court gets away from regulatory deference, the stronger that argument becomes.”

Edited by Andrew Hayward