Cryptic Conundrum: Addressing Compounded Cryptocurrency Regulation Challenges Post-Loper Bright

David Shumunov[*]

Table of Contents

I. Introduction

II. Background

A. What is Cryptocurrency?

B. Cryptocurrency Fraud

C. American Cryptocurrency Regulatory Agencies

D. SEC Enforcement Actions

III. Impact of Administrative Law on Cryptocurrency Regulation

A. Recent Supreme Court Jurisprudence and the End of the Chevron Doctrine

B. Current Deference Standard: Skidmore

C. The Major Questions Doctrine

IV. Current Challenges in Regulating Cryptocurrency

A. Challenges in Response to the SEC’s Enforcement Actions

B. Other Doctrinal Administrative Law Difficulties

1. Challenges Posed by the Major Questions Doctrine

2. Loper Bright and Other Recent Decisions’ Impact on SEC Regulation

V. Potential Solutions

A. Amending the Exchange Act

1. Codifying the Howey Test

2. Designating Cryptocurrency as a Security

B. Emulating the European Union’s Approach: A New Agency

VI. Conclusion

Introduction

Cryptocurrency (“crypto”)[1] is an emerging resource in the global economy and continues to hold the spotlight of financial news headlines as it expands. Boasting a wide range of applicable use, cryptocurrency has come to hold an influential presence in various industry sectors. As of 2024, 27% of adults in the United States reportedly own some form of cryptocurrency.[2] Surprisingly, cryptocurrency regulations fall short of completion in the United States[3] while many peer countries,[4] as well as the European Union,[5] have remained flexible with this developing technology and regulate its use accordingly. This seemingly obvious oversight leaves many legal scholars and market participants to beg the question: why is the American government not regulating cryptocurrency? The answer is complicated. While federal administrative agencies, such as the Commodity Futures Trading Commission (“CFTC”) and Securities Exchange Commission (“SEC”) attempt to regulate cryptocurrency, difficulties such as disputes between regulatory agencies on their classifications of cryptocurrency [6] impede the ability of the legislature to effectively promulgate regulations. These pre-existing issues make regulating cryptocurrency an arduous task. To make matters worse, recent Supreme Court jurisprudence[7] only serves to increase the difficulty of regulation.

This note examines the challenges that the SEC and other administrative agencies face post-Loper Bright Ent. v. Raimondo in regulating cryptocurrency and argues for an urgent Congressional response. Part II provides a background on cryptocurrency, crypto fraud, the current landscape of American crypto regulations, and relevant administrative law doctrines. Part III outlines the challenges posed by administrative law, including the Supreme Court’s decision in Loper Bright and the major questions doctrine. Part IV discusses the issues that regulatory agencies are facing in their efforts to regulate crypto. Part V examines potential solutions to these issues, including changes to existing federal security laws, and in the alternative, the adoption of a new regulatory agency.

Background

What is Cryptocurrency?

Put simply, cryptocurrency is a digital means of exchange.[8] More specifically, it is “decentralized digital money that’s based on blockchain technology.”[9] Individuals can use crypto to facilitate purchases and make payments. However, over the years, cryptocurrencies have also become traded similarly to commodities and securities, and not only used for their intended purpose of serving as an alternative to fiat currencies[10] such as the United States dollar or the EU’s euro.[11] Ostensibly, cryptocurrency appears to just be another one of these fiat currencies. However, what distinguishes crypto from its traditional counterparts is its decentralized nature. Customarily, currencies are controlled by some “central” authority, such as a bank or a government.[12] These authorities are typically in charge of various functions, such as verifying transactions and maintaining value.[13] By contrast, many digital assets are decentralized—meaning, they are not managed by a central authority.[14] Instead, these assets rely on blockchain technology for security and verification purposes.[15] Essentially, a blockchain operates as a ledger, spread globally across many computers, tracking transactions digitally.[16] These transactions are grouped into “blocks” connected in a way that reflects the history of crypto transactions, such as when a change of ownership occurs.[17] Since each participant has their own copy of the ledger, they can ensure that transaction records are ensured to be consistent and synchronized in real time, even as new transactions take place.[18] In this chain of blocks, each additional block builds on the previous, which provides additional security by making the blockchain tamper-evident, absent a hacker.[19] Since “[n]o one, not even a system administrator, can delete a transaction,”[20] and all transactions are “immutable because they are recorded permanently”[21] blockchain transactions assure security by providing a consistent record of transactions – something that other, more traditional financial institutions recognize as valuable, and are working to implement.[22]

Importantly, though not always, cryptocurrencies allow for an element of anonymity.[23] In traditional banking infrastructure, parties’ identities are often tied to the transactions they engage in.[24] By contrast, crypto transactions are recorded through digital wallet addresses or keys without the element of personal identification.[25] Certain coins, such as Bitcoin, are notorious for this anonymity, with parties’ identities remaining unrecorded within Bitcoin itself, and only the history of the transaction being available on the blockchain.[26]

Cryptocurrency Fraud

Crypto fraud is becoming increasingly prevalent, with the Federal Bureau of Investigation (“FBI”) estimating $5.6 billion in consumer losses in 2023, a 45% increase from the preceding year.[27] What is more troubling is that investment scams, which the SEC has authority over, made up about 71% of these losses, and the rate of their occurrence increased by 53% since 2022.[28] The assistant director of the FBI’s Criminal Investigation Division cited the “decentralized nature of cryptocurrency, the speed of irreversible transactions, and the ability to transfer value around the world” as catalysts for attracting fraud in digital asset transactions.[29] Typically, fraudsters take advantage of retail investors—often vulnerable persons, such as the elderly[30] —for the purpose of engaging in “relationship scams.”[31] In these scams, dubbed “pig butchering scams,”[32] fraudsters use social media platforms to approach and catfish their victims to develop a phony relationship with them, aiming to eventually influence them into dumping their savings into a “bogus cryptocurrency investment platform.”[33] Boasting significant returns with minimal risk, the fraudsters reportedly take advantage of the crypto boom by manipulating uninformed and susceptible victims and exploiting their “fear of missing out” on what they perceive as an exciting new technology.[34]

American Cryptocurrency Regulatory Agencies

In America, due to varying interpretations of crypto’s legal asset designation, several administrative agencies regulate it. For example, the Internal Revenue Service (“IRS”) interprets crypto to be property,[35] thus enabling itself to charge crypto owners capital gains taxes.[36] The CFTC classifies certain decentralized cryptocurrencies such as Bitcoin as commodities,[37] similar to oil and gold, which it accomplishes by analyzing the asset under the Commodity Exchange Act.[38]

The SEC has statutory supervisory authority over broker-dealers, securities markets, and investor fraud.[39] Given the scope of its authority, in order to regulate, the SEC classifies certain crypto assets as securities, in the same category as traditional securities like shares of a corporation’s stock.[40] The SEC has not yet successfully engaged in rulemaking—or promulgating any new regulations—that are specific to cryptocurrencies, despite efforts to the contrary.[41] While under president-elect Trump’s administration this may soon be changing, this note examines the current administrative state of crypto regulations.[42] Instead, the agency applies existing federal securities statutes to bring enforcement actions when it finds that an asset is a security.[43] To determine whether an asset can be classified as a security, the SEC employs the Howey test, originating in SEC v. W.J. Howey Co.[44] Under that test, a transaction is considered an investment contract—and thus a security—if it meets the following elements: (1) an investment of money; (2) participation in a common enterprise; and (3) the expectation of gains from the labors of others.[45] The SEC has successfully established jurisdiction over certain cryptocurrencies by using this test.[46] For example, when a digital asset undergoes an initial coin offering (ICO), it becomes open to investors, enabling the SEC to use the Howey test to classify the coin as a security and apply existing laws.

The agency brings crypto enforcement actions under the authority granted by the Securities Act of 1933 (“’33 Act”) and the Securities Exchange Act of 1934 (“’34 Act”).[47] It also relies on these laws to pursue fraud actions.[48] For example, Rule 10b-5,[49] published under Section 10(b) of the ’34 Act, allows the SEC to prosecute fraud in securities transactions. The rule strictly forbids any action or inaction leading to fraud or deceit in acquisitions or sales of securities.[50] This rule is one of the agency’s most commonly employed tools for combating fraud.[51]

Many of the inconsistencies in regulation have occurred due to lack of a definitive classification of cryptocurrency.[52] For the immediate purposes of regulation, cryptoassets fall into the category of either commodities or securities.[53] Cryptoassets that fail the Howey test are, by definition, not securities.[54] However, that does not mean they can escape regulation. Instead, non-securities tokens should theoretically be designated as another asset class and thus regulated by the appropriate agency. For example, even though Bitcoin is a cryptocurrency, the CFTC claimed, and the SEC conceded that it is not a security.[55] As such, the CFTC has designated it a commodity under the Commodity Exchange Act and bears regulatory authority over the asset.[56]

SEC Enforcement Actions

The SEC’s brought successful action against cryptocurrency developers in the well-reported SEC v. Ripple Labs Inc.[57] In that case, the SEC claimed that Ripple’s issuance of XRP coins amounted to an unregistered securities offering under Section 5 of the ’33 Act.[58] Currently, in SEC v. Consensys Software Inc.,[59] and SEC v. Coinbase, Inc.,[60] the agency brought suits for companies’ failure to register as crypto assets securities brokers, in violation of the Securities Act of 1933 and Securities Exchange Act of 1934. In both of these cases, the SEC applied the Howey test to assets traded on the platforms, classified them as securities, and is alleging violations of the ’33 and ’34 Acts for the platforms’ failures to register as brokers.[61]

As previously stated, cryptocurrency fraud is becoming increasingly rampant in America.[62] The SEC, for its part, has shown concern with this dangerous and rising trend.[63] The agency issued an Investor Alert[64] about pig butchering scams and took legal action against entities and individuals for engaging in these kinds of practices.[65] In SEC v. NanoBit Ltd., the SEC alleged that defendants fraudulently solicited funds, from their victims via WhatsApp, a social media messaging network, capitalizing on the trust its operatives cultivated.[66] The agency is pursuing the action for alleged violation of federal securities laws.[67] In an action filed on the same day, SEC v. CoinW6, the SEC is pursuing charges against CoinW6 for similar fraudulent practices.[68]

Another example of the SEC’s fraud policing is presented in the agency’s actions against BitConnect.[69] BitConnect, a crypto lending platform, enticed crypto investors by claiming to have a proprietary trading algorithm.[70] In reality, the company operated as a Ponzi scheme, using new investors’ funds to pay earlier participants while claiming to be profitable.[71] In a press release, the SEC revealed that the scheme resulted in BitConnect defrauding investors for over $2 billion USD.[72] In January 2018, the platform shut down amid increasing regulatory scrutiny, including a cease-and-desist order from the Texas Securities Board.[73] In 2021, the SEC filed charges alleging that the company engaged in securities fraud, amongst other violations of federal securities laws’ registration requirements.[74]

As to the fraud claims, the agency alleged that BitConnect’s “lending program” was in fact an investment contract under the Howey test.[75] Thus, under Section 10(b) of the ’34 Act, the SEC argued that the program constituted an offer and sale of unregistered securities.[76] The action succeeded, and while it shows the SEC’s ability to regulate crypto under traditional securities laws, it also highlights some troubling shortcomings.[77] The founder of BitConnect still remains at large.[78]

Impact of Administrative Law on Cryptocurrency Regulation

Recent Supreme Court Jurisprudence and the End of the Chevron Doctrine

On June 28, 2024, the Supreme Court issued a ruling that transformed the sphere of administrative law in Loper Bright Enterprises v. Raimondo.[79] In that case, the Supreme Court overturned a controversial legal doctrine known as “Chevron deference.”[80] The doctrine, named after the 1984 case from which it originated, Chevron v. Natural Resources Defense Council, enabled administrative agencies to enjoy significant deference in light of plaintiffs’ challenges to agency regulations promulgated under a vague or ambiguous organic statute.[81] The deference that agency decision making enjoyed is no longer good law after Loper Bright,[82] adding another layer of uncertainty for the future of cryptocurrency regulations.

The Chevron doctrine and the two-part judicial test that it created first inquired whether the organic statute, under which the agency promulgated the challenged regulation, was ambiguous or silent on the specific conduct that the agency sought to regulate.[83] If a court reviewing a regulation (“reviewing court”) determined that the statute was ambiguous or silent on that issue, the doctrine then pointed it to the second part of the inquiry.[84] This second step of the Chevron test examined whether the agency’s interpretation of the organic statute was reasonable in light of the regulation.[85] If, in a court’s view, the agency’s interpretation was reasonable, the challenged agency action survived judicial review and was allowed to persist, regardless of its own interpretation or any other that the court would have found more persuasive.[86]

The Loper Bright Court majority, speaking through Chief Justice Roberts, decided in a 6-3 vote that the Chevron doctrine is a violation of Section 706[87] of the Administrative Procedure Act (“APA”).[88] Section 706 requires courts reviewing a challenge to a regulation to “‘decide all relevant questions of law’ and ‘interpret … statutory provisions.’”[89] Under its reading of Section 706, the Court decided that reviewing courts may not be mandated, as they were under Chevron, to defer to agencies’ statutory interpretations.[90] Indeed, in the Court’s view, it is not only that deference cannot be mandated, but more expansively that reviewing courts, under the APA, may not defer to agencies “simply because a statute is ambiguous.”[91] Instead, the Loper Bright majority held that reviewing courts are required by the APA to “exercise their independent judgment” when determining whether the agency regulated within the bounds of an enabling statute at issue.[92] Each court that would review this sort of regulation would be tasked with synthesizing its own understanding of the “best meaning” of the enabling statute, which the Loper Bright majority insists is ascertainable in each vague statute.[93]

Another recent Supreme Court decision is likely to have a severe impact on agencies’ regulatory power. Though Chief Justice Roberts was careful to specify in Loper Bright that the impact of Chevron’s overruling was prospective, and not retrospective,[94] a subsequent decision arguably contradicted this sentiment. In Corner Post, Inc. v. Bd. of Governors of Fed. Rsrv. Sys., decided just days after Loper Bright, the Supreme Court opened floodgates across the nation for litigants to challenge well-established agency regulations.[95] The decision reset the clock on the timeline during which entities can challenge regulations (including those that received deference under the Chevron standard) for violating the APA[96] – the same statute that served as grounds for overturning Chevron in Loper Bright.[97] The relevant statute of limitations required facial challenges to agency regulations to be brought “within six years after the right of action first accrues.”[98] Prior to this decision, the six-year statute of limitations for APA claims against agencies was understood to begin to run (or “accrue”) when the agency action was “final.”[99] Traditionally, this meant that litigants could not challenge a rule on its face after six years had passed since it was promulgated and given legal effect.[100] In Corner Post, however, the Court found that this statute of limitations instead begins to run when a plaintiff “has a ‘complete and present cause of action,’ which is when she has the right to ‘file suit and obtain relief.’”[101] Put simply, the Court found that the statute begins to run when an entity is subject to a regulation—and thus injured—and not when the regulation was originally promulgated.[102] Indeed, since an entity that did not exist during the statutory six-year period could not be injured by the regulation (at least, not until after it was formed), a newly-formed entity could challenge even decades-old rules.[103] This suggests that in essence, if a business lost an initial challenge to a regulation from the Chevron era and wanted to capitalize on the Loper Bright and Corner Post developments to challenge on different grounds, the entity need only form a new entity or secure the help of a recently-formed business to bring that suit.[104]

Finally, Securities Exchange Commission v. Jarkesy, decided the day before Loper Bright, further limited the SEC’s regulatory authority.[105] In that case, the Supreme Court held that the SEC cannot pursue civil penalties for securities fraud enforcement actions may not be brought before the administrative law judges (“ALJs”) that the agency traditionally brought cases before.[106] The Court based this finding in the Seventh Amendment’s right to a jury trial requires the SEC to pursue civil penalties before Article III courts, and not the Article I courts and their ALJs.[107]

Current Deference Standard: Skidmore

Loper Bright commanded a return to the pre-Chevron standard of judicial deference to agencies,[108] which originated in the Supreme Court’s 1944 decision in Skidmore v. Swift & Co.[109] In the past, courts would differentiate between the applicability of the Chevron and Skidmore standards by using the guides from United States v. Mead.[110] Under the returned and current standard of “Skidmore deference,” a court reviewing agency action will consider the agency’s interpretation of the statute under which the action was taken, but is not obligated to defer to it entirely.[111] In determining how much deference an agency’s interpretation merits, the reviewing court will consider “the thoroughness evident in its [the agency’s] consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.”[112] After considering these factors, reviewing courts decide how much or little deference the agency interpretation warrants – in some cases applying no deference at all.[113] Importantly, the practical distinction between the Chevron and Skidmore deference standards is that under the former, a reviewing court’s discretion is limited to determining if the agency interpretation is reasonable, by which it is bound in the event that it is.[114] Conversely, under the latter, reviewing courts have much more discretion in deciding the persuasiveness of an agency interpretation, and an agency’s expertise is at best persuasive, but not binding.[115] For these reasons, some have referred to this standard Skidmore “respect.”[116]

The Major Questions Doctrine

Generally, Congress is authorized to delegate some of its power to regulatory agencies.[117] However, one exception to this Congressional ability applies when the issue delegated to agencies for regulation is one of major importance for the entire nation.[118] In such an instance, any agency action must be clearly authorized by the statute under which the agency is regulating. This inquiry and limitation on Congress’s ability to delegate its power to agencies is known as the major questions doctrine.[119] Courts have applied the major questions doctrine when regulatory actions involve vast economic and political implications.[120] This doctrine is almost the opposite of Chevron deference and holds that courts should not defer to agency interpretations of ambiguous statutory provisions when the regulatory action addresses issues of “major” national significance.[121] Instead, courts require clear congressional authorization for such actions.[122] The SEC’s attempts to regulate cryptocurrencies—an emerging industry with significant financial and technological implications—are likely to trigger similar scrutiny under the major questions doctrine.

West Virginia v. Environmental Protection Agency illustrates the Court’s implementation of this principle.[123] In that case, the Supreme Court overturned the EPA’s Clean Power Plan—a regulation promulgated under the Clean Air Act seeking to curb power plants’ carbon emissions. The Court found that the EPA’s attempt to regulate had major, nation-wide implications, since it would effectively restructure the national energy market. The Court reasoned that when an agency asserts control over an issue of “vast economic and political significance,” Congress must explicitly grant the agency such power.[124]

Current Challenges in Regulating Cryptocurrency

Agencies’ cryptocurrency regulation efforts vary in their levels of success.[125] Each agency bears only the jurisdiction to regulate the asset type that its organic statute (the statute that created the agency) authorized for it, and no agency currently exists that is solely dedicated to regulating crypto.[126] With the rise and spread of crypto assets, the discussion over which agency should govern cryptocurrencies became even more rigorous.[127]

Challenges in Response to the SEC’s Enforcement Actions

The SEC appears poised to move more affirmatively into the crypto space.[128] While this is a necessary and urgent undertaking, for the SEC, it has proven problematic.[129] Cryptocurrency is a unique asset type, posing the SEC with unprecedented challenges in regulation.

As previously stated, the SEC is authorized by the ’33 Securities Act and ’34 Exchange Act to bring enforcement actions for violations.[130] Since crypto does not readily meet any other statutory definitions of securities, the agency uses the Howey test to determine whether a specific crypto asset qualifies as an investment contract.[131] The SEC discussed its strategy for applying Howey to crypto, noting that the brunt of any challenges to regulation typically lies in the third prong: “reasonable expectation of profits from efforts of others.”[132] This element itself begs a two-pronged inquiry: 1) whether there is a reliance on the efforts of others, and 2) whether there is a reasonable expectation of profits.[133] The “efforts of others” determination is made based on whether a purchaser of an asset depends on the active participant, such as a “promoter, sponsor, or other third party (or affiliated group of third parties)”[134] to conduct tasks that are “undeniably significant,” including “those essential managerial efforts which affect the failure or success of the enterprise.”[135] In short, this speaks to the very nature of securities. The purchaser is not simply investing in the asset for its intrinsic value, such as one would invest into oil or gold, but instead relies on the asset’s active participants to make the asset valuable. The difficulty with this prong of Howey is shown, and acknowledged by the SEC, when a crypto operates on a decentralized network.[136] This is because when an asset operates on such a network, there is not a single active participant, or even an identifiable group of them. Instead, there is an “unaffiliated, dispersed community of network users”[137] that do not actively participate in developing the asset to the level that rises to finding them engaged in decision-making or central roles. To restate the point, it would not be logical—or legal, under the current Howey standards—to hold individuals purchasing decentralized crypto to the same standards as those carrying out the essential tasks that actively develop the value of an asset. This renders any regulatory actions the SEC may seek to bring against decentralized cryptos easily defensible, as they will likely fail at the outset for not having proved the third prong of the Howey test.

The other part of the third Howey prong begs an inquiry into a “reasonable expectation of profits.” In so inquiring, the SEC considers, inter alia, whether the asset: grants profit-sharing rights; is traded on a secondary market or platform; “is offered broadly to potential purchasers;” is marketed as an investment,[138] along with various other factors.[139] Nonetheless, when a crypto is decentralized – without an identifiable active participant – the Howey test won’t empower the SEC’s jurisdiction over it. As such, the agency’s strategy of pursuing cryptos as investment contracts runs into significant difficulties and leaves regulatory gaps, causing uncertainty for the agency and market participants.

Despite the agency succeeding[140] in some actions, applying existing anti-fraud and other provisions of securities laws to decentralized cryptocurrency is more complicated than applying them to other asset types. Since many cryptocurrencies operate on decentralized networks, fraudsters often choose – strategically, – to operate from anonymous or international locations.[141] The decentralized nature of cryptocurrency frustrates any enforcement actions the agency may bring because of the difficulty in determining the asset’s controlling party.[142] Crypto opportunists in decentralized finance (“DeFi”) projects have long realized this Achilles heel – that they can evade liability by using self-executing smart contract systems instead of centralized promoters or companies.[143] The SEC’s Director of Corporation Finance underscored this issue, stating that in the case of decentralized assets “purchasers would no longer reasonably expect a person or group to carry out essential managerial or entrepreneurial efforts,”[144] – thus failing the requisite characterization of the asset as an investment contract.[145]

Moreover, Jarkesy limits the scope of the SEC’s ability to pursue enforcement actions and adds another layer of difficulty to pursuing penalties against industry participants. A 2017 report revealed that out of all of the SEC’s enforcement actions, 90% of those brought before its in-house ALJs were successful.[146] Conversely, only 69% of the matters litigations before a District Court were successful, which can be best attributed to the additional procedural requirements and protections of the Article III courts.[147] For example, discovery requirements vary significantly between Article I and Article III courts, with the former only requiring the SEC to provide “material exculpatory evidence,” and the latter giving defendants much broader discovery rights.[148] Moreover, the Federal Rules of Evidence apply in Article III courts, opening the SEC enforcement division’s testimony to cross-examination.[149] Another significant difference, as emphasized by the Jarkesy court, is the availability of a jury in an Article III court.[150] Taken together, these procedural hurdles impede the SEC’s enforcement action power and give potential bad actors in the cryptocurrency space additional opportunities to escape consequences.

With this kind of evolving technology progressing faster than existing legislation, the SEC needs additional empowerment to curb its reliance on Howey to proceed with enforcement actions against decentralized assets. Despite the SEC extending its purview to include some components of the currently-vague legislation, the speed at which crypto and related technologies are developing makes it difficult to oversee the cryptocurrency market thoroughly.[151] As discussed later in this Part, the Loper Bright decision adds more questions about the agency’s ability to adjust to these novel challenges in the absence of further Congressional action.

Other Doctrinal Administrative Law Difficulties

Enforcement actions, as described above, are one method through which the SEC has decided to pursue crypto regulation.[152] Another method, if exercised, could be the rulemaking process that most agencies engage in to promulgate regulations of broad applicability.[153] Though, as previously stated, the SEC has not yet engaged in crypto-specific rulemaking, its ability to do so is severely impaired by recent Supreme Court jurisprudence.[154] Specifically, Loper Bright indicates a significant shift in courts’ approach to agency statutory interpretation. This shift is part of a broader trend in the Supreme Court’s decision-making, which appears poised to limit administrative agencies’ power.[155] One such limitation is clear from the departure from Chevron deference. Additionally, the major questions doctrine will likely impose additional difficulties. Though these doctrines operated independently, the combined effect on the SEC’s ability to regulate cryptocurrency efficiently will likely make regulation more difficult.

Challenges Posed by the Major Questions Doctrine

The West Virginia v. EPA ruling is critical to understanding how the Court is likely to view the SEC’s regulation of cryptocurrency. Like the EPA’s regulation attempt, any rulemaking attempts by the SEC would likely meet similar outcomes. With estimated market capitalizations exceeding $3 trillion USD,[156] cryptocurrency has become a significant economic instrumentality. As such, any rulemaking regulation by the SEC for cryptocurrency would likely involve broad economic ramifications, including oversight of a market that is becoming integral to global finance. Thus, cryptocurrency markets, like the energy markets of West Virginia v. EPA,[157] represent a sector of major economic importance, implying that courts may require clear congressional authorization to the SEC rather than allowing the agency to rely on its interpretation of existing statutes.

FDA v. Brown & Williamson Tobacco Corp.[158] involved a similar issue. In that case, the Supreme Court upheld a challenge to a Food and Drug Administration (FDA) attempt to regulate tobacco products under the Food, Drug, and Cosmetic Act.[159] Having found insufficient congressional authorization in the statute, the Court emphasized the nationwide economic and public health significance of regulating tobacco.[160] Similarly, in the case of cryptocurrency regulation, the SEC would likely be found in excess of its existing statutory authority if it attempted to regulate crypto without explicit congressional approval. The Court’s reasoning in Brown & Williamson suggests that the SEC’s interpretation of “securities” as encompassing cryptocurrencies could face significant resistance under the major questions doctrine, especially since Congress has yet to break silence on whether digital assets fall under securities laws.

In Utility Air Regulatory Group v. EPA,[161] the Supreme Court invalidated an EPA regulation under the Clean Air Act that sought to control greenhouse gas emissions. The Court determined that such a broad regulatory measure, which would impact millions of enterprises, could not advance without explicit legislative approval.[162] The Court’s implementation of the major questions doctrine in this case emphasizes that extensive regulatory measures that impact significant portions of the economy need specific legislative authorization. Regulating the cryptocurrency market, which impacts financial institutions, retail investors, and international transactions, will likely require a definitive congressional mandate as it influences a significant and fast-expanding segment of the global economy.

Given the Court’s decisions in West Virginia v. EPA,[163] Brown & Williamson,[164] and Utility Air,[165] it is likely that cryptocurrency regulation by the SEC will be challenged as a major question. Crypto companies and potential fraudsters will likely take advantage of the breakdown in legislation and use these decisions to challenge any regulatory effort by the SEC. Cryptocurrencies represent a major asset class, and as such, have significant implications for investor protection, fraud prevention, and the stability of financial markets. Additionally, cryptocurrency markets are inherently cross-border and technologically complex, implicating issues of international law and cybersecurity—further expanding the economic and political stakes.[166]

As in the energy and tobacco cases, courts are likely to find that regulating such a vast and novel industry cannot proceed without explicit congressional authorization. Congress has yet to pass comprehensive legislation explicitly granting the SEC authority over cryptocurrencies, despite several bills being introduced.[167] Without such legislation, the SEC’s regulatory efforts would likely be viewed by courts as an overreach under the major questions doctrine especially since the SEC would be regulating not just traditional financial instruments but also decentralized digital assets that fall outside the traditional understandings of “securities.”

Loper Bright and Other Recent Decisions’ Impact on SEC Regulation

In addition to the major questions doctrine, Loper Bright and Corner Post further limit agency power. The Corner Post decision opens the courthouse doors for litigants to challenge any rule promulgated with Chevron deference.[168] As discussed in Section III, Corner Post has the practical effect of allowing well-established businesses that lost challenges to agency rules in the past to simply form new entities and challenge regulations under the APA.[169] As such, even decades-old rules are vulnerable to being overturned[170] – emphasizing the difficult situation that the SEC finds itself in.

Without Chevron deference, the SEC must rely on being sufficiently persuasive to a reviewing court under the Skidmore standard, or otherwise on unambiguous statutory mandates to regulate cryptocurrency markets, making it more difficult to stretch existing securities laws to cover digital assets.

One reason why a standard that is less deferential towards agency interpretations of statutes makes regulation more difficult is that the Howey test itself involves interpretation of statutory language.[171] Courts may now be less inclined to defer to the SEC’s interpretation of what constitutes an “investment contract” under the Howey test, particularly when applied to assets like cryptocurrencies. This means that any regulatory action by the SEC involving digital assets is more likely to face legal challenges and thus slow the agency’s ability to respond to emerging risks and frauds in the crypto space. Without Chevron deference, courts are more likely to respond to these challenges by interpreting the statutory scope of the SEC’s jurisdiction narrowly. This, in turn, would have direct consequences for the regulation of cryptocurrencies, where statutory language fails to keep up with technological advancements. For example, while the ’34 Act gives the SEC authority to regulate securities exchanges and broker-dealers, it is unclear whether this authority extends to decentralized platforms or intermediaries that facilitate cryptocurrency transactions.[172] If courts were to adopt a narrow interpretation of the SEC’s jurisdiction, the agency’s ability to regulate fraud or ensure investor protection in the crypto space may be severely limited. This is a significant shortcoming, leaving a regulatory gap that could be exploited by bad-faith opportunists. Nevertheless, this may be a secondary concern for the SEC’s regulatory efforts of crypto. Since the Howey test is a “judicial construction,” and not merely a tool fashioned by the SEC, it may survive as an effective means of gaining jurisdiction over digital assets as securities.[173] The implications of Loper Bright for future SEC rulemaking, on the other hand, are far more significant.[174]

The Skidmore standard is less-than-favorable, to say the least, for the SEC in regulating an asset as new and complicated as crypto. To prevail under the Skidmore standard, an agency is tasked with convincing the reviewing court via the factors that its’ expertise warrants deference.[175] This comes with difficulties. For one, it might be harder to convince a court of an agency’s expertise if the reviewing judge herself does not fully appreciate the agency’s expertise – that is to say, she is not herself a crypto expert. Specifically, reviewing judges consider, among other factors, the agency’s consistency in prior regulatory actions to consider whether respect is warranted.[176] In the crypto space, however, this is a significant hurdle. For example, when arguing that a given cryptoasset is indeed a security, a judge might by dissuaded or otherwise impeded in agreeing with the SEC due to the fact that other cryptos, such as Bitcoin and Ethereum, are not securities. As crypto technologies continue to develop, more inconsistencies regarding designation as a security are all but guaranteed to arise. This is only one example highlighting that reaching for Skidmore respect invites uncertainty as to when such respect is warranted, into an already-complicated field. As Justice Kagan pointed out in her dissenting opinion in Loper Bright, “If the majority thinks that the same judges who argue today about where ‘ambiguity’ resides … are not going to argue tomorrow about what ‘respect’ requires, I fear it will be gravely disappointed.”[177] Justice Kagan’s statement perfectly captures the hurdle that the SEC and other agencies will have to overcome in their regulation efforts – particularly crypto. The Skidmore standard puts a stick in the wheels of the agency and opens the door for numerous challenges across the nation involving a myriad of individual judicial determinations on how much respect to grant an agency.

In fact, Loper Bright is already posing a threat to SEC rulemaking efforts in the crypto space, and market participants are aware of this. Less than two weeks after the decision, Uniswap, a crypto exchange platform that utilizes the aforementioned smart contracts, sent the SEC a letter regarding the agency’s proposed amendment to the ’34 Exchange Act.[178] In the letter, Uniswap stated that “for better or worse–the Commission will not be able to claim the benefit of Chevron deference to defend its aggressive and atextual interpretation of its statutory authority.”[179] The SEC’s proposed amendment would refine the definition of “exchange” under Section 3(a)(1) of the ’34 Act to expand the Commission’s statutory authority in requiring trading platforms to “becom[e] subject to the Exchange Act’s registration requirements,”[180] thus bringing decentralized exchange platforms within its regulatory scope.[181] This highlights the adverse effects of Loper Bright on the SEC as market opportunism in light of the decision quickly rears its head.

Ultimately, the shortcomings of the Howey test, along with the combined effect of the major questions doctrine, Corner Post’s enabling of retroactive regulation challenges, and the loss of Chevron deference, the SEC’s regulatory power is severely impaired. The agency is thus left with a significant gap in its regulatory arsenal. Decentralized cryptos remain insulated by the agency’s inability to gain Howey jurisdiction, and crypto more generally has become much more difficult to rulemake for.

Potential Solutions

As of November 2024,[182] due to the absence of updated federal legislation clearly authorizing the SEC to regulate in the space,[183] crypto’s decentralized and anonymous nature, and difficulties posed by Loper Bright,[184] the SEC’s path forward remains uncertain. Many of these issues could be resolved by amending the ’34 Exchange Act to expressly delegate to the SEC authority to regulate cryptocurrency. Another potential way to remedy this crisis involves re-thinking the current administrative state and introducing a new agency, similarly to how our European Union peers[185] have. Either way, enabling effective regulation inevitably requires Congress to grant the SEC the power to engage in and enforce rulemaking and/or enforcement actions.

Amending the Exchange Act

As introduced in Part II, the SEC consistently faces backlash for designating crypto as a security under the Howey test.[186] Thus, when an enforcement action is challenged, the SEC must prove that a crypto asset qualifies as a security under each of the four Howey criterion.[187] While it is unclear whether the less-favorable “deference” standard will impact Howey analysis, even prior to Loper Bright, courts have had “different interpretations and ways of applying the Howey test, leading to variations in how the criteria are read and applied.”[188] It should come as no surprise that the 78-year-old language of Howey is not completely compatible with rapidly evolving financial technologies. Resolving this issue in light of the aforementioned difficulties has a common requirement: Congress must tell the courts what a security is. This can be accomplished in two ways.

Codifying the Howey Test

The first of these is a codification of the Howey test in an amendment to the ’34 Exchange Act, with modifications that would allow it to apply to decentralized cryptocurrencies. The first two elements have not met much friction in face of the SEC’s enforcement actions, and can likely be codified as they appear in the opinion.[189] The third, more litigated prong, should include language that counters the decentralized nature of cryptocurrency by modifying the active participant requirement[190] to also include coins relying on mass investments for their value, as opposed to the current, more rigid requisite finding. Additionally, codifying the test would enable the SEC to remain fluid with developing technologies without “stretching” traditional definitions, as it has been accused[191] of doing.

Legal scholars have already noted the need for a uniform Howey test,[192] albeit not considering the crypto context in the discussion. In fact, a similar idea has been suggested by the National Conference of Commissioners on Uniform State Laws[193] to supplement the ’34 Act for securities that are not already regulated by the SEC.[194] In Section 102(28)(D) of its’ updated Uniform Securities Act, it derived its interpretation of what constitutes a security from the Howey test.

[A]n investment in a common enterprise with the expectation of profits to be derived primarily from the efforts of a person other than the investor and a “common enterprise” means an enterprise in which the fortunes of the investor are interwoven with those of either the person offering the investment, a third party, or other investors.[195]

This language derives its first part essentially from the Howey language itself, but leaves room for some types of securities that would not traditionally fit under different circuits’ interpretations to conform to the Uniform Act.[196] This has been a relatively popular formulation, as twenty states and the US Virgin Islands have enacted the updated version excerpted above, and six others enacted prior versions.[197] The fact that over half of the United States’ jurisdictions have adopted the Uniform Act serves to further highlight the urgent demand for supplementation of the ’34 Act via legislation or amendment. Indeed, concerns of uncertainty posed by ad hoc applications of Howey to developing investment vehicles such as crypto are not novel, as the jurisdictions that adopted the 2002 Uniform Act have left the language derived from Howey to identify an investment contract largely untouched.[198] The Uniform Act additionally provides definitions and exclusions of institutions and other terminology,[199] and in doing so provides a workable framework for an updated version Congress may use to describe the currencies that have eluded regulation. For example, a modified version of the Uniform Act may require that an active participant be necessarily the individual or entity that created the currency, and not one that undertakes the managerial tasks discussed earlier. It also may instead require that an active participant be named and registered for any cryptocurrency that purports to be traded on intermediaries available to Americans. It may also forego an active participant requirement altogether. Ultimately, the creation and adoption of a Uniform Securities Act analogue on the federal level would grant the SEC much more leeway and less judicial scrutiny for precise statutory language.

Designating Cryptocurrency as a Security

While codifying Howey would essentially be a Congressional update to the federal definition of an investment contract, this would be a long-winded method of achieving the same result as a related, yet simpler solution. This easier approach would involve amending the ’34 Act to include digital assets among its list of securities. While this may strip jurisdiction from the CFTC over commodity-like cryptos such as Bitcoin and Ethereum, a blanket designation of crypto as a security would remove the confusion and “turf war” elements from regulation of digital assets. This grant of exclusive regulatory jurisdiction to the SEC is likely the better move than the proverbial hair-splitting that causes division in the administrative state, since the SEC is likely better equipped than the SEC to regulate. Indeed, Christy Goldsmith Romero, one of the CFTC commissioners, conceded in 2023 that “[t]here’s just no way we can police all the fraud….”[200] Indeed, the SEC has greater resources than the CFTC, nearly doubling the unit that would oversee digital asset regulation and enforcement in 2022.[201]

Codifying crypto as a security would also provide insulation from plaintiffs’ major questions doctrine challenges. Current major questions jurisprudence suggests courts would be likely to find cryptocurrency regulation as a major question and not fit for regulation without express Congressional authorization.[202] While pre-Loper Bright the SEC had the protection of Chevron deference to justify regulating against nationwide implications, the agency is now far more vulnerable to successful challenges. If a federal statute were to designate crypto as a security, however, the SEC would have express Congressional authority to promulgate regulations.

Emulating the European Union’s Approach: A New Agency

Another course of action can achieve the same effect without any particular favor to an existing administrative agency. This can be done by following the European Union’s approach to regulation. In 2023, the European Parliament developed a unified regulatory framework for digital assets under Markets in Crypto-Assets Regulation (“MiCA”).[203] The majority of these rules were scheduled to take force on December 30, 2024.[204] Prior to MiCA, each of the member-states was left to promulgate their own regulations for digital assets.[205] However, under MiCA, there is now a universal regulatory framework governing many of the crypto issues that were not already subject to regulation.[206] MiCA aims to supplement existing EU legislation without displacing it.[207] This regulatory scheme governs the assets themselves, their issuers, and “service providers” such as intermediaries.[208] Among the assets within its purview, the regulation encompasses asset-referenced tokens (“ARTs”), electronic money tokens (“EMTs” or “e-money tokens”), and utility tokens.[209] ARTs and EMTs are typically stablecoins[210]—digital currencies with values “‘pegged’ (meaning tied) to another asset—often a traditional fiat currency like the US dollar.”[211] The “utility tokens” term is essentially an all-encompassing term that refers to all other digital assets for the purpose of the regulation.[212]

The US need not emulate this approach entirely. Instead, a politically and economically prudent course of action could be to develop the requisite designations of cryptocurrency as a unique and novel asset type in a new statute and authorize an altogether new agency to regulate. MiCA’s system of differentiating between crypto asset types, however, would work well for the US. In the US, stablecoins like Bitcoin are designated as commodities[213] while others are in a gray area. Creating a separate asset type in cryptocurrency, and differentiating between the different types of cryptocurrencies, is a much cleaner and more coherent manner of operating without clashing interpretations by various different agencies looking to assert regulatory jurisdiction. Above all else, if this type of new regulatory framework were passed by Congress specifically designating cryptocurrency as its own asset, with its own agency, the regulations would be more likely to be insulated from major questions doctrine challenges while also obviating the need for an exceptional deference standard.

Conclusion

In light of Loper Bright and evolving crypto technology landscape, a new legislative framework is essential to effective regulation by agencies. This note highlighted how current jurisdictional gaps and clashes between agencies, Supreme Court jurisprudence, and a lack of responsiveness from Congress has contributed to significant hurdles for agencies to overcome. As crypto’s influence expands, Congress has an ever-growing and urgent need to respond, whether it is with amendments to existing laws or new legislation altogether. Considering the rapidly growing rates of crypto fraud[214] and the asset type’s expansion and prevalence in American households[215] and across American and international businesses, the need for legislative intervention is compounded daily.

  • J.D. Candidate, 2026, Brooklyn Law School.↑
  1. Cryptocurrency is referred to by various terms including: crypto, digital asset, cryptoasset, digital currency, and “coin(s).” ↑
  2. Tom Blackstone, 2024 Cryptocurrency Adoption and Sentiment Report, Security.org (Sept. 26, 2024), https://www.security.org/digital-security/cryptocurrency-annual-consumer-report/2024/. ↑
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  6. See Taylor A. Moffett, CFTC & SEC: The Wild West of Cryptocurrency Regulation, 57 U. Rich. L. Rev. 713 (2023). ↑
  7. The jurisprudence to be discussed is the United States Supreme Court’s decisions in Loper Bright Ent. v. Raimondo, Corner Post, Inc. v. Board of Governors, and West Virginia v. Environmental Protection Agency. For purposes of this Note, “recent jurisprudence” will refer to these cases. ↑
  8. Kate Ashford, What Is Cryptocurrency?, Forbes Advisor (Oct. 8, 2024), https://www.forbes.com/advisor/ca/investing/cryptocurrency/what-is-cryptocurrency/. ↑
  9. Id. ↑
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  14. Id. ↑
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  19. Id. ↑
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  21. Id. ↑
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  24. Id. ↑
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  26. Id. ↑
  27. Fed. Bureau of Investigation, Internet Crime Complaint Ctr., 2023 Cryptocurrency Fraud Report 4 (2023). ↑
  28. Id. at 3, 12. ↑
  29. Id. at 3. ↑
  30. Persons aged 60 years old or older made up the highest demographic of reported investment scam complaints, totaling $1.6 billion. See id. at 5. ↑
  31. Press Release, SEC Charges Multiple Individuals and Entities in Relationship Investment Scams (Sept. 17, 2024), https://www.sec.gov/newsroom/press-releases/2024-134. ↑
  32. Kevin Collier, Crypto scams stole $5.6 billion from Americans last year, mostly from older people, NBC News (Sept. 10, 2024), https://www.nbcnews.com/tech/security/crypto-scams-stole-56-billion-americans-last-year-mostly-older-people-rcna170410. ↑
  33. Id. ↑
  34. Internet Crime Complaint Ctr., supra note 27, at 12. ↑
  35. Digital assets, IRS, https://www.irs.gov/businesses/small-businesses-self-employed/digital-assets#:~:text=For%20U.S.%20tax%20purposes%2C%20digital,%2C%20owned%2C%20transferred%20or%20traded. (last visited Oct. 10, 2024). ↑
  36. Peter Gratton, SEC Crypto Regulations: What Financial Advisors Need to Know, Investopedia (Oct. 9, 2024, 12:46 PM), https://www.investopedia.com/crypto-regulations-for-financial-advisors-8402046. ↑
  37. Id. ↑
  38. Id. ↑
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  40. See id. ↑
  41. See id.; see also Amendments Regarding the Definition of “Exchange” and Alternative Trading Systems (ATSs) That Trade U.S. Treasury and Agency Securities, National Market System (NMS) Stocks, and Other Securities, SEC, https://www.sec.gov/files/rules/proposed/2022/34-94062.pdf (last visited Nov. 10, 2024). ↑
  42. Matthew Goldstein & David Yaffe-Bellany, Trump Picks Paul Atkins to Run the S.E.C., N.Y. Times, Dec. 4, 2024. ↑
  43. Jay Clayton, Statement on Cryptocurrencies and Initial Coin Offerings, SEC (Oct. 10, 2024, 12:47 PM), https://www.sec.gov/newsroom/speeches-statements/statement-clayton-2017-12-11. ↑
  44. Nathan Reiff, Howey Test Definition: What It Means and Implications for Cryptocurrency, Investopedia (Sept. 28, 2024, 1:28 PM), https://www.investopedia.com/terms/h/Howey-test.asp#:~:text=Howey%20Test%20and%20Cryptocurrencies,-Digital%20currencies%20such&text=According%20to%20the%20SEC%2C%20the,test%20is%20also%20easily%20met. ↑
  45. SEC v. W.J. Howey Co., 328 U.S. 293, 301 (1946). ↑
  46. Crypto Assets, SEC, https://www.sec.gov/securities-topics/crypto-assets (last visited Oct. 10, 2024). ↑
  47. Clayton, supra note 43. ↑
  48. Donald C. Langevoort, Rule 10b-5 as an Adaptive Organism, 61 Fordham L. Rev. S7, S8 (1993). ↑
  49. 17 C.F.R. § 240.10b-5 (2025). ↑
  50. Id. ↑
  51. Langevoort, supra note 48, at S8. ↑
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  53. Michael Bromberg, Commodity vs. Security: What’s the Difference?, Investopedia (July 31, 2024), https://www.investopedia.com/commodity-vs-security-7509422. ↑
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  57. SEC v. Ripple Labs, Inc., No. 20 Civ. 10832, 2021 WL 1814771 (S.D.N.Y. May 6, 2021). ↑
  58. Id. ↑
  59. SEC Litig. Release No. 26277 (July 1, 2024). ↑
  60. SEC v. Coinbase, Inc., 726 F. Supp. 3d 260 (S.D.N.Y. 2024). ↑
  61. SEC Litig. Release No. 26277 (July 1, 2024); see also SEC v. Coinbase, Inc., 726 F. Supp. 3d 260 (S.D.N.Y. 2024). ↑
  62. Kevin Collier, Crypto scams stole $5.6 billion from Americans last year, mostly from older people, NBC News (Sept. 10, 2024), https://www.nbcnews.com/tech/security/crypto-scams-stole-56-billion-americans-last-year-mostly-older-people-rcna170410. ↑
  63. Press Release, SEC Charges Multiple Individuals and Entities in Relationship Investment Scams (Sept. 17, 2024), https://www.sec.gov/newsroom/press-releases/2024-134. ↑
  64. Id. ↑
  65. Id. ↑
  66. SEC v. NanoBit Limited, No. 2:24-cv-06517 (E.D.N.Y. filed Sept. 17, 2024). ↑
  67. Id. ↑
  68. SEC v. CoinW6, No. 2:24-cv-07924 (C.D. Cal. filed Sept. 17, 2024) ↑
  69. SEC v. BitConnect, No. 1:21-cv-07349 (S.D.N.Y. filed Sept. 1, 2021). ↑
  70. Id. ↑
  71. Id. ↑
  72. Press Release, SEC Charges Global Crypto Lending Platform and Top Executives in $2 Billion Fraud (Sept. 1, 2024), https://www.sec.gov/newsroom/press-releases/2021-172. ↑
  73. SEC v. BitConnect, No. 1:21-cv-07349 (S.D.N.Y. filed Sept. 1, 2021). ↑
  74. Id. ↑
  75. SEC v. BitConnect, No. 1:21-cv-07349 (S.D.N.Y. filed Sept. 1, 2021). ↑
  76. Id. ↑
  77. Id. ↑
  78. Steve Kaaru, $56m in seized digital currencies will go towards BitConnect fraud victims, Coingeek (Oct. 10, 2024, 2:54 PM), https://coingeek.com/56m-in-seized-digital-currencies-will-go-towards-bitconnect-fraud-victims/. ↑
  79. Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024). ↑
  80. Id. ↑
  81. Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984), overruled by Loper Bright Enter., Inc. v. Raimondo, 603 U.S. 369 (2024). ↑
  82. Id. ↑
  83. Dan Farber, Everything You Always Wanted to Know about the Chevron Doctrine, LegalPlanet (Oct. 11, 2024, 1:52 PM), https://legal-planet.org/2017/10/23/everything-you-always-wanted-to-know-about-the-chevron-doctrine/. ↑
  84. Id. ↑
  85. Id. ↑
  86. Id. ↑
  87. 5 U.S.C.A. § 706 (West). ↑
  88. Loper Bright Enter., Inc. v. Raimondo, 603 U.S. 369 (2024). ↑
  89. Id. at 406–07. ↑
  90. Id. at 413. ↑
  91. Id. ↑
  92. Id. at 412. ↑
  93. Id. at 400. ↑
  94. Id. at 412. ↑
  95. Corner Post, Inc. v. Bd. of Governors of Fed. Rsrv. Sys., 603 U.S. 799 (2024). ↑
  96. 28 U.S.C.A. § 2401 (West). ↑
  97. Loper Bright, 603 U.S. at 396. ↑
  98. 28 U.S.C. § 2401(a). ↑
  99. Corner Post, 603 U.S. at 809. ↑
  100. Cong. Rsch. Serv. Legal Sidebar No. 11197, Corner Post and the statute of Limitations for Administrative Procedure Act Claims (Oct. 24, 2024). ↑
  101. Corner Post, Inc. v. Bd. of Governors of Fed. Rsrv. Sys., 603 U.S. 799, 800 (2024). ↑
  102. Id. at 809. ↑
  103. Wendy E. Parmet, Loper Bright and the Death of Deference in the Administration of Health Policy, Health Aff. (July 18, 2024), https://www.healthaffairs.org/content/forefront/loper-bright-and-death-deference-administration-health-policy. ↑
  104. Todd H. Baker, Big Business Take Note: Rule by Judiciary Isn’t the Boon You May Think It Is, CLS Blue Sky Blog (July 8, 2024), https://clsbluesky.law.columbia.edu/2024/07/08/big-business-take-note-rule-by-judiciary-isnt-the-boon-you-may-think-it-is. ↑
  105. SEC v. Jarkesy, 603 U.S. 109 (2024). ↑
  106. Id. ↑
  107. Id. at 110. ↑
  108. Richard Pierce, Loper Bright Enterprises v. Raimondo, Geo. Wash. L. Rev. on the Docket (July 8, 2024), https://www.gwlr.org/loper-bright-enterprises-v-raimondo-chevron-is-dead-long-live-skidmore. ↑
  109. Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944). ↑
  110. United States v. Mead, 533 U.S. 218 (2001); see also Carpenter et al., Litigation, Professional Perspective – The Potential Fall of the Chevron Doctrine & Its Implications for SEC Rulemaking, Bloomberg L. (June 2024), https://www.bloomberglaw.com/document/X6SNTHRK000000. ↑
  111. See Skidmore v. Swift & Co., 323 U.S. at 140 (“We consider that the rulings, interpretations . . . [are] not controlling upon the courts by reason of their authority . . . .”). ↑
  112. Id. ↑
  113. See Mark Seidenfeld, A Syncopated Chevron: Emphasizing Reasoned Decisionmaking in Reviewing Agency Interpretations of Statutes, 73 Tex. L. Rev. 83, 88 (1994) (“In many instances, courts chose to decipher statutes without any attention to, let alone deference to, prior agency interpretations.”). ↑
  114. Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 844 (1984), overruled by Loper Bright Enter., Inc. v. Raimondo, 603 U.S. 369 (2024). ↑
  115. Eric R. Womack, Into the Third Era of Administrative Law: An Empirical Study of the Supreme Court’s Retreat from Chevron Principles in United States v. Mead, 107 Dick. L. Rev. 289, 293 (2002); see also Skidmore Deference: Agency Actions Without the Force of Law, Litig. Prac. Guidance, Bloomberg Law (June 28, 2004), https://www.bloomberglaw.com/document/X7RFJ404000000. ↑
  116. See e.g., Joseph I. Liebman, A Panel Discussion: Judicial Deference Under Mead: Where Do You Draw the Line?, 12 Fed. Cir. B.J. 239, 254 (2002); see also Marie Sapirie, Chevron Is Dead. Long Live Skidmore and the APA?, Taxnotes (July 15, 2024), https://www.taxnotes.com/featured-analysis/chevron-dead-long-live-skidmore-and-apa/2024/07/12/7kgn1. ↑
  117. Jordan T. Smith, The Mechanics of the Major Questions Doctrine, Nev. Law., Jan. 2023, at 8. ↑
  118. Id. ↑
  119. Id. ↑
  120. Id. ↑
  121. Id. at 9. ↑
  122. Id. ↑
  123. West Virginia v. EPA, 597 U.S. 697, 700 (2022). ↑
  124. Id. ↑
  125. See Thomas Kinglsey, Who Regulates Crypto?, American Action Forum (Aug. 9, 2022), https://www.americanactionforum.org/insight/who-regulates-crypto/. ↑
  126. Id. ↑
  127. Clayton, supra note 43. ↑
  128. Adam Hayes, How SEC Regs Will Change Cryptocurrency Markets, Investopedia (Oct. 10, 2024, 12:35 PM), https://www.investopedia.com/news/how-sec-regs-will-change-cryptocurrency-markets/. ↑
  129. Id. ↑
  130. Id. ↑
  131. Nathan Reiff, Howey Test Definition: What It Means and Implications for Cryptocurrency, Investopedia (Sept. 28, 2024, 1:28 PM), https://www.investopedia.com/terms/h/Howeytest.asp#:~:text=Howey%20Test%20and%20Cryptocurrencies,-Digital%20currencies%20such&text=According%20to%20the%20SEC%2C%20the,test%20is%20also%20easily%20met. ↑
  132. Framework for “Investment Contract” Analysis of Digital Assets, SEC (Nov. 25, 2024), https://www.sec.gov/about/divisions-offices/division-corporation finance/framework-investment-contract-analysis-digital-assets. ↑
  133. Id. ↑
  134. Id. ↑
  135. Id. ↑
  136. Id. ↑
  137. Id. ↑
  138. Id. ↑
  139. Id. ↑
  140. Crypto Assets, SEC, https://www.sec.gov/securities-topics/crypto-assets (last visited Oct. 10, 2024). ↑
  141. Sari Harrar, What to Know About Cryptocurrency ATMs and Why Criminals Love Them, AARP (Oct. 9, 2024, 2:37 PM), https://www.aarp.org/money/scams-fraud/info-2024/crypto-atm.html. ↑
  142. SEC, supra note 132. ↑
  143. Arianna Trozze et al., Detecting DeFi securities violations from token smart contract code., 10 Fin. Innovation 1 (2024). ↑
  144. William Hinman, Digital Asset Transactions: When Howey Met Gary (Plastic), SEC (Nov. 26, 2024), https://www.sec.gov/newsroom/speeches-statements/speech-hinman-061418#:~:text=If%20the%20network%20on%20which%20the%20token%20or%20coin%20is,not%20represent%20an%20investment%20contract. ↑
  145. Carol R. Goforth, Using Cybersecurity Failures to Critique the Sec’s Approach to Crypto Regulation, 65 S.D. L. Rev. 433, 455 (2020). ↑
  146. Brian North et al., SEC v. Jarkesy: Why Curtailing the Use of ALJs Will Help SEC Targets, Buchanan (July 24, 2024), https://www.bipc.com/sec-v.-jarkesy-why-curtailing-the-use-of-aljs-will-help-sec-targets. ↑
  147. Id. ↑
  148. Id. ↑
  149. Id. ↑
  150. Id. ↑
  151. Kevin Werbach, Trust, But Verify: Why the Blockchain Needs the Law, 33 Berkley Tech. L. J. 489 (Aug. 1, 2017). ↑
  152. Crypto Assets, SEC, https://www.sec.gov/securities-topics/crypto-assets (last visited Oct. 10, 2024). ↑
  153. Jay A. Dubow et al., Proposed SEC Rule Would Place Cryptocurrency Trading Platforms Under SEC Jurisdiction, Troutman Pepper LLP, Articles + Publications (May 4, 2023), https://www.troutman.com/insights/proposed-sec-rule-would-place-cryptocurrency-trading-platforms-under-sec-jurisdiction.html#:~:text=The%20SEC’s%20proposal%20would%20further,makes%20available%20established%2C%20non%2Ddiscretionary. ↑
  154. Id. ↑
  155. Kaye Pestaina et al., Supreme Court Decision Limiting the Authority of Federal Agencies Could Have Far-Reaching Impacts for Health Policy, KFF (Oct. 29, 2024, 10:37 AM), https://www.kff.org/private-insurance/issue-brief/supreme-court-decision-limiting-the-authority-of-federal-agencies-could-have-far-reaching-impacts-for-health-policy/. ↑
  156. Global Cryptocurrency Market Cap Charts, CoinGecko, https://www.coingecko.com/en/global-charts (last visited Nov. 15, 2024). ↑
  157. West Virginia v. EPA, 597 U.S. 697, 706 (2022). ↑
  158. FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120 (2000). ↑
  159. Id. ↑
  160. Id. ↑
  161. Util. Air Regul. Grp. v. EPA, 573 U.S. 302 (2014). ↑
  162. Id. ↑
  163. West Virginia v. EPA, 597 U.S. 697 (2022). ↑
  164. FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120 (2000). ↑
  165. Util. Air Regul. Grp., 573 U.S. 302. ↑
  166. Nicholas Anthony, Money Across Borders: How Cryptocurrency Has Opened Global Exchange, Cato Inst. (Nov. 7, 2023), https://www.cato.org/publications/money-across-borders-how-cryptocurrency-has-opened-global-exchange. ↑
  167. Elizabeth Caires & Eric Forni, Digital assets regulation in 2023: Is a new regulatory framework finally emerging?, DLA Piper (Feb. 2, 2023), https://www.dlapiper.com/en/insights/publications/2023/01/the-cftc-and-a-congressional-framework-for-regulation-of-digital-assets. ↑
  168. Corner Post, Inc. v. Bd. of Governors of the Fed. Rsrv. Sys., 603 U.S. 799 (2024). ↑
  169. Todd H. Baker, Big Business Take Note: Rule by Judiciary Isn’t the Boon You May Think It Is, CLS Blue Sky Blog (July 8, 2024), https://clsbluesky.law.columbia.edu/2024/07/08/big-business-take-note-rule-by-judiciary-isnt-the-boon-you-may-think-it-is. ↑
  170. Corner Post, 603 U.S. at 799. ↑
  171. Miriam R. Albert, The Howey Test Turns 64: Are the Courts Grading this Test on a Curve?, 2 Wm. & Mary Bus. L. Rev. 1 (2011). ↑
  172. Carol L. Goroth, Critiquing the SEC’s Ongoing Efforts to Regulate Crypto Exchanges, 14 Wm. & Mary Bus. L. Rev. 305 (2023). ↑
  173. Jenny Cieplak et al., US Supreme Court Curtails Agency Power: Implications for Fintech and Crypto, Latham & Watkins (July 12, 2024), https://www.fintechanddigitalassets.com/2024/07/us-supreme-court-curtails-agency-power-implications-for-fintech-and-crypto/. ↑
  174. Id. ↑
  175. Loper Bright Enter., Inc. v. Raimondo, 603 U.S. 369 (2024). ↑
  176. Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944). ↑
  177. Loper Bright, 603 U.S. at 472. ↑
  178. Letter from Donald B. Verilli, Jr., Munger, Tolles & Olson LLP, on behalf of Uniswap Labs to Vanessa Countryman, Sec’y, SEC (July 9, 2024) (on file with author). ↑
  179. Id. ↑
  180. Jay A. Dubow et al., Proposed SEC Rule Would Place Cryptocurrency Trading Platforms Under SEC Jurisdiction, Troutman Pepper LLP, Articles + Publications (May 4, 2023), https://www.troutman.com/insights/proposed-sec-rule-would-place-cryptocurrency-trading-platforms-under-sec-jurisdiction.html#:~:text=The%20SEC’s%20proposal%20would%20further,makes%20available%20established%2C%20non%2Ddiscretionary. ↑
  181. Stephen Graves, Uniswap Says SEC Should Drop Proposed DeFi Rules, Citing Chevron Decision, Decrypt.co (July 10, 2024), https://decrypt.co/239238/uniswap-sec-defi-rules-dropped-chevron. ↑
  182. With the election of President Trump in 2024, many changes have been announced and rumored, including a regime change in the SEC which will likely be paired with a change in the regulatory strategy and trajectory. ↑
  183. While there are some regulations, there is no federal legislation or Congressional authorization that would counter any potential major questions doctrine challenges. ↑
  184. Causing rulemaking to be more difficult. ↑
  185. Crypto-assets: how the EU is regulating markets, Council of the Euro.Union, (Sept. 27, 2024), https://www.consilium.europa.eu/en/policies/crypto-assets-how-the-eu-is-regulating-markets/#:~:text=Under%20the%20regulation%2C%20crypto%2Dasset,lose%20investors’%20crypto%2Dassets. ↑
  186. Adam Hayes, Does Crypto Pass the Howey Test?, Investopedia (June 23, 2024) https://www.investopedia.com/does-crypto-pass-the-howey-test-8385183. ↑
  187. Id. ↑
  188. Id. ↑
  189. Albert, supra note 171, at 16. ↑
  190. Framework for “Investment Contract” Analysis of Digital Assets, SEC (Nov. 25, 2024), https://www.sec.gov/about/divisions-offices/division-corporation-finance/framework-investment-contract-analysis-digital-assets. ↑
  191. Crypto.com Has Filed Suit Against the SEC to Protect the Future of Crypto in the U.S., Crypto.com, https://crypto.com/company-news/complaint, (last visited Oct. 29, 2024). ↑
  192. Albert, supra note 171, at 9. ↑
  193. Id. at 32. ↑
  194. Securities Act, Unif. L. Comm’n., https://www.uniformlaws.org/committees/community-home?communitykey=8c3c2581-0fea-4e91-8a50-27eee58da1cf. (Dec. 25, 2024). ↑
  195. Unif. Securities Act § 102(28)(D) (2002). ↑
  196. Albert, supra note 171, at 32. ↑
  197. Securities Act, Unif. L. Comm’n., https://www.uniformlaws.org/committees/community-home?communitykey=8c3c2581-0fea-4e91-8a50-27eee58da1cf. (Dec. 25, 2024) (click “Enactment History”). ↑
  198. Albert, supra note 171, at 32–33. ↑
  199. Unif. Securities Act § 102(28)(D) (2002). ↑
  200. Luc Cohen, No way to police all cryptocurrency fraud, CFTC commissioner says, Reuters (May 24, 2023), https://www.reuters.com/technology/no-way-police-all-cryptocurrency-fraud-cftc-commissioner-says-2023-05-23/. ↑
  201. SEC Nearly Doubles Size of Enforcement’s Crypto Assets and Cyber Unit, SEC (May 3, 2022), https://www.sec.gov/newsroom/press-releases/2022-78. ↑
  202. See, e.g., Jordan T. Smith, The Mechanics of the Major Questions Doctrine, Nev. Law., Jan. 2023, at 8. ↑
  203. Crypto-assets: how the EU is regulating markets, Council of the Euro.Union, (Sept. 27, 2024), https://www.consilium.europa.eu/en/policies/crypto-assets-how-the-eu-is-regulating-markets/#:~:text=Under%20the%20regulation%2C%20crypto%2Dasset,lose%20investors’%20crypto%2Dassets. ↑
  204. Pietro Caliceti et al., New Rules for Crypto-Assets in Europe, Greenberg Traurig, https://www.gtlaw.com/en/insights/2024/9/new-rules-for-crypto-assets-in-europe (last visited Dec. 24, 2024). ↑
  205. Id. ↑
  206. Crypto-assets: how the EU is regulating markets, Council of the Euro.Union, (Sept. 27, 2024), https://www.consilium.europa.eu/en/policies/crypto-assets-how-the-eu-is-regulating-markets/#:~:text=Under%20the%20regulation%2C%20crypto%2Dasset,lose%20investors’%20crypto%2Dassets. ↑
  207. Id. ↑
  208. Id. ↑
  209. Id. ↑
  210. Joseph Jasperse & Sarah Hammer, The State of Stablecoin Regulation and Emergence of Global Principles, A.B.A. Bus. L. Section (Sept. 20, 2024), https://businesslawtoday.org/2024/09/state-of-stablecoin-regulation-emergence-of-global-principles/. ↑
  211. What is a stablecoin?, Fidelity Invs., https://www.fidelity.com/learning-center/trading-investing/what-is-a-stablecoin (last visited Dec. 24, 2024). ↑
  212. Caliceti et al., supra note 204. ↑
  213. Peter Gratton, SEC Crypto Regulations: What Financial Advisors Need to Know, Investopedia (Oct. 9, 2024, 12:46 PM), https://www.investopedia.com/crypto-regulations-for-financial-advisors-8402046. ↑
  214. Fed. Bureau of Investigation, supra note 27. ↑
  215. Tom Blackstone, 2024 Cryptocurrency Adoption and Sentiment Report, Security.org (Sept. 26, 2024), https://www.security.org/digital-security/cryptocurrency-annual-consumer-report/#:~:text=Cryptocurrency%20awareness%20and%20ownership%20rates,cryptocurrency%20over%20the%20next%20year. ↑