A decades-old legal doctrine has emerged as a potential game-changer in the ongoing crackdown spearheaded by the U.S. Securities and Exchange Commission (SEC). J.W. Verret, a former advisor to SEC Chairman Gary Gensler, revealed on The Scoop podcast that the major questions doctrine could influence the outcome of the agency’s lawsuits against two prominent global crypto companies, Binance and Coinbase.
The major questions doctrine scrutinizes the actions of executive agencies, such as the SEC, and questions the level of deference given to their regulatory decisions by the courts. It asserts that an agency must obtain explicit approval from Congress before attempting to regulate matters of national, economic, or political importance. While the Chevron doctrine has traditionally granted regulatory agencies broad discretion, the major questions doctrine poses a challenge by demanding explicit congressional approval.
Verret noted that the major questions doctrine is likely to come into play during the appellate stage of the Coinbase and Binance.US cases. This legal development looms over the ongoing lawsuits and adds a new dimension to the regulatory landscape surrounding cryptocurrencies. Verret’s statement suggests that both Coinbase and Binance will leverage this doctrine as part of their defense strategy.
Expressing his enthusiasm, Verret stated, “I think it’s an argument that Coinbase and Binance are going to run with.” This sentiment aligns with Coinbase CEO Brian Armstrong’s repeated calls for regulatory clarity from Congress, emphasizing the need to prevent the industry from moving offshore.
However, SEC Chairman Gary Gensler remains steadfast in his belief that existing securities laws are sufficient to govern the crypto industry. He categorizes the lawsuits against Binance and Coinbase as “straightforward securities cases” but within the context of cryptocurrencies. Gensler’s stance has drawn criticism from crypto-supportive members of Congress, including House Majority Whip Tom Emmer, who recently co-authored a bill seeking both SEC restructuring and Gensler’s removal from office.
While the Chevron doctrine has traditionally afforded regulatory agencies like the SEC significant leeway, the major questions doctrine introduces a legal battle over the extent of agency authority and the level of deference they receive from the courts. This development injects new dynamics into the ongoing legal proceedings and amplifies the importance of regulatory clarity within the cryptocurrency sphere.
Former SEC official John Reed Stark and billionaire investor Mark Cuban recently engaged in a heated clash on Twitter regarding the industry’s regulatory landscape. Stark, a former attorney for the SEC Enforcement Division, endorsed the SEC’s actions against Binance and Coinbase, asserting that crypto trading platforms lack essential oversight and compliance measures. He emphasized the need to eliminate bad actors and promote transparency within the largely unregulated sector.
In contrast, billionaire Mark Cuban criticized SEC Chair Gary Gensler for what he perceives as a “regulation via litigation” approach, which he believes hinders the crypto market’s growth. Cuban advocated for clearer guidelines to foster innovation and urged against imposing the burden of hiring securities lawyers on small crypto businesses from the outset. He argued that tokens could be treated similarly to other securities, urging the SEC to propose unambiguous guidelines.
This clash between Stark and Cuban highlights the broader debate surrounding the regulation of cryptocurrencies. While Stark advocates for a distinct regulatory framework tailored to the unique characteristics of crypto assets, Cuban suggests treating them similarly to traditional securities. The need for clearer guidelines and a balanced approach to regulation becomes apparent, with both sides offering differing perspectives.
The ongoing legal battles, coupled with the emergence of the major questions doctrine and the contrasting views within the industry, underscore the crucial need for regulatory clarity in the United States crypto sector. The outcome of the Coinbase and Binance lawsuits will undoubtedly shape the future of the industry, as it awaits a resolution that balances investor protection, innovation, and transparency.