Crypto companies can use Supreme Court doctrine to fend off SEC: lawyer

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The U.S. Supreme Court could provide crypto companies with a way to fight the Securities and Exchange Commission in court, according to Jason Gottlieb, a partner at law firm Morrison Cohen LLP.

At a time when the SEC is expanding its view of what it considers “security” and therefore subject to its regulatory oversight, we were going to see crypto companies trying to fend off the SEC, Cohen told CoinDesk TVs First Mover on Tuesday.

Cohen said crypto firms could try to restrain the SEC using the U.S. Supreme Court’s “major issues doctrine,” which says regulators cannot override their authority. The High Court last used the doctrine in 2022 in a 6-3 decision involving the Environmental Protection Agency over whether it had the power to issue a gas emissions cap to greenhouse effect.

Chief Justice John Roberts, writing for the majority, said no and that it was up to Congress to provide the EPA with clear authorization for such actions.

What the Supreme Court has ordered is that administrative agencies, which are a branch of the executive department, are not allowed to adopt opinions that will affect major issues in the US economy, Cohen said.

So when it comes to crypto, it’s up to Congress to set the law, not the SEC to say “we think the law shouldn’t be crypto,” he added.

The US approach to crypto or lack thereof is going to have a significant effect on the economic and financial competitiveness of this country. Consider other jurisdictions, Cohen said, such as the European Union, the United Kingdom, Singapore, Japan and the Cayman Islands, which are developing legal regimes that can allow people to operate legally.

While these diets may not be perfect and likely have pros and cons, Cohen said that unlike the United States, they all have a clear path. [for a crypto company] to operate legally.

During Fintech Week in London on Tuesday, CEO Brian Armstrong of Coinbase, the largest US-based crypto exchange, said the exchange may consider moving overseas if the regulatory environment in the crypto industry doesn’t get any clearer.

This is not the approach that all crypto companies take, Cohen said. Hs crypto customers ask him what can be done to operate legally in the United States, or as close to legal as possible given the ambiguities, he said.

We try to tell our customers as best we can what the law requires [and] what regulators require, he said. And sometimes we have to tell you, sorry, that can’t happen here.

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