Supreme Court Rules to Overturn the Chevron Doctrine, Curbing Federal Agencies’ Power

• The U.S. Supreme Court has overturned a 40-year-old case that allowed federal regulators to enforce their interpretation of ambiguous laws.

• Without the so-called Chevron doctrine, the SEC could have a harder time pursuing an enforcement agenda in the near-vacuum of legal and regulatory clarity for the crypto industry.

The U.S. Supreme Court ruled 6-3 on Friday to drastically curb the authority of federal regulators, overturning a 40-year-old legal precedent that gave regulatory agencies leeway to interpret the laws they are tasked with enforcing.

The 1984 case, Chevron v. National Resources Defense Council, established that courts should defer to the decisions and expertise of regulators when the language of statutes is ambiguous, essentially giving federal regulators authority to enforce their interpretations of the law.

Since the original ruling was handed down, the so-called “Chevron deference” has allowed regulators to take action on time-sensitive issues while they wait for Congress to pass new laws. The rationale behind the decision was that agencies are more likely to have the knowledge and expertise required to interpret the laws they enforce than courts would.

In his majority opinion on Friday, Chief Justice John Roberts called the Chevron doctrine “unworkable,” adding that it “allows agencies to change course even when Congress has given them no power to do so. By its sheer breadth, Chevron fosters unwarranted instability in the law, leaving those attempting to plan around agency action in an eternal fog of uncertainty.”

“Chevron is overruled,” Roberts concluded. “Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the [Administrative Procedure Act] requires. Careful attention to the judgment of the Executive Branch may help inform that inquiry. And when a particular statute delegates authority to an agency consistent with constitutional limits, courts must respect the delegation, while ensuring that the agency acts within it. But courts need not and under the APA may not defer to an agency interpretation of the law simply because a statute is ambiguous.”

Too much power

The case has long been a target for conservative activists, who have argued that the Chevron deference gives too much power to unelected federal regulators, and doesn’t hold Congress accountable for writing clearer laws.

Associate Justice Elena Kagen dissented, writing: “In every sphere of current or future federal regulation, expect courts from now on to play a commanding role. It is not a role Congress has given to them, in the APA or any other statute. It is a role this Court has now claimed for itself, as well as for other judges.”

“Given Chevron’s pervasiveness, the decision to do so is likely to produce large-scale disruption. All that backs today’s decision is the majority’s belief that Chevron was wrong—that it gave agencies too much power and courts not enough,” Kagen added. “But shifting views about the worth of regulatory actors and their work do not justify overhauling a cornerstone of administrative law. In that sense too, today’s majority has lost sight of its proper role.”

SEC tackles crypto

Overturning Chevron could have immediate impacts on federal regulators including the U.S. Securities and Exchange Commission (SEC) which, under Chairman Gary Gensler, has pursued an aggressive and expansive enforcement agenda in the near-vacuum of legal and regulatory clarity for the crypto industry. The SEC filed suit against a number of crypto companies, asserting they violated federal securities laws by offering purchase and trading services for cryptocurrencies the regulator believes are unregistered securities.

These crypto companies, which include Coinbase, Ripple, Binance and Kraken, among others, have said in their various defenses that the digital assets in question are not securities, and that the SEC is overstepping its authority by alleging that the assets do meet those requirements.

The decision comes just a day after the Supreme Court dealt another blow to the powers of federal regulators. On Thursday, the court ruled 6-3 to curtail the SEC’s use of in-house administrative judges to settle civil fraud lawsuits, arguing that such proceedings are a violation of the constitutional right to a jury trial.