The U.S. Supreme Court made a significant 6-3 ruling on Friday that greatly restricts the power of federal regulators, overturning a long-standing legal precedent established in the 1984 case of Chevron v. National Resources Defense Council. This ruling, commonly known as the Chevron doctrine, granted regulatory agencies the flexibility to interpret ambiguous laws they are responsible for enforcing.
The decision in Chevron v. NRDC allowed courts to defer to the expertise and decisions of regulators when statutes’ language was unclear, enabling agencies to take action on pressing matters while waiting for Congress to pass new legislation. The rationale behind this doctrine was that agencies possess the necessary knowledge and expertise to interpret laws more effectively than the courts.
In a majority opinion delivered by Chief Justice John Roberts, he deemed the Chevron doctrine “unworkable,” stating that it permits agencies to change direction even when Congress has not given them the authority to do so. Roberts emphasized that this approach leads to significant legal instability and perpetual uncertainty for those impacted by agency actions.
The ruling effectively puts an end to the Chevron deference, requiring courts to independently assess whether an agency has acted within its statutory authority, as mandated by the Administrative Procedure Act. While acknowledging the value of considering the Executive Branch’s judgment, courts are no longer compelled to defer to agency interpretations solely due to statutory ambiguity.
Implications and Criticisms
Conservative activists have long criticized the Chevron deference, arguing that it grants excessive power to unelected federal regulators and absolves Congress of the responsibility to draft clearer laws. The decision to overturn Chevron has been hailed by conservatives who seek to rebalance the relationship between regulatory agencies and the judiciary.
However, Associate Justice Elena Kagan dissented, cautioning that this ruling would thrust courts into a predominant role in federal regulation, a function not explicitly designated by Congress. Kagan raised concerns about the disruptive effects of this decision, emphasizing that the majority’s critique of Chevron does not justify such a fundamental shift in administrative law.
SEC Enforcement and Crypto Industry
The Supreme Court’s decision to overturn Chevron could have immediate repercussions for federal agencies like the U.S. Securities and Exchange Commission (SEC). Under Chairman Gary Gensler, the SEC has pursued an assertive enforcement agenda in the cryptocurrency sector, where legal and regulatory clarity has been lacking.
The SEC’s legal battles with prominent crypto companies such as Coinbase, Ripple, Binance, and Kraken, over the classification of digital assets as securities, may face increased scrutiny following the court’s ruling. These companies have contested the SEC’s claims, arguing that the assets in question do not meet the criteria for securities and that the regulator is overstepping its bounds.
Recent Supreme Court Decisions
Notably, the Supreme Court also recently ruled 6-3 to limit the SEC’s use of in-house administrative judges for civil fraud lawsuits. This decision was based on the argument that such proceedings infringe on the constitutional right to a jury trial, further highlighting the court’s efforts to curtail the powers of federal regulators.