Former SEC Advisor Highlights Legal Doctrine That Could Halt Gensler's Crypto Crackdown

The Block reported that a former advisor to the U.S. Securities and Exchange Commission is shedding light on a legal doctrine that challenges regulatory agencies' authority and has the potential to halt SEC Chairman Gary Gensler's crackdown on cryptocurrencies.

J.W. Verret, an associate professor of law at George Mason University and former advisory committee member to Gensler and other SEC commissioners, discussed the significance of the major questions doctrine in a recent episode of The Scoop podcast. The conversation focused on the SEC's lawsuits against Binance and Coinbase for alleged violations of securities laws.

The major questions doctrine pertains to how courts assess the actions of executive agencies, particularly independent agencies, and determine the level of deference given to their actions, explained Verret. These agencies, including the SEC, receive broad mandates from Congress to regulate specific areas. However, the details are often left ambiguous, resulting in a substantial expansion of regulations through agency rulemaking over time.

Traditionally, the Chevron doctrine, which Verret considers a more deferential approach, provided a framework for courts to grant agencies broad discretion. However, the major questions doctrine, viewed as a competing doctrine, has gained support among judges with conservative and libertarian leanings, according to Verret. It argues that if an agency intends to regulate a matter without explicit authorization from Congress, particularly if it has national, economic, or political significance, it must first obtain explicit approval from Congress.

The major questions doctrine has significant implications for the SEC's regulation of cryptocurrencies. It requires clear congressional authorization for major regulatory decisions, challenging the SEC's reach in decentralized blockchain-based digital assets, according to Verret. This doctrine, similar to the Howey Test used to determine securities, questions the SEC's jurisdiction over cryptocurrencies on decentralized blockchains, and Coinbase and Binance may use it in their defense. However, discussions on the doctrine are not expected until the SEC's lawsuits against Coinbase and Binance.US reach the appellate courts, which could take a while.

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