The U.S. Securities and Exchange Commission (SEC) has asserted that its cryptocurrency enforcement campaign is not hindered by the U.S. Supreme Court’s “major questions doctrine,” countering arguments made by cryptocurrency exchange Coinbase. In a brief opposing Coinbase’s motion for a quick judgment against the SEC in the agency’s case accusing Coinbase of failing to register as a securities exchange, the SEC defended its enforcement power.
The major questions doctrine holds that federal agencies cannot regulate matters of significant economic and political importance without Congress’ express authorization. The cryptocurrency industry has argued that the SEC has exceeded the bounds of its power under this doctrine. However, the SEC maintained that the doctrine has never been applied to a federal agency’s exercise of enforcement power.
The SEC argued that the major questions doctrine only comes into play when an agency attempts a novel expansion of its power over matters of enormous economic and political significance. The agency stated that its case against Coinbase does not meet these criteria. The SEC pointed out that Congress has granted it broad and flexible power to enforce securities laws, and that the Coinbase case does not have the vast economic or political significance required for the major questions doctrine to be applicable.
The SEC’s reasoning effectively sidesteps a broader debate on the economic and political significance of cryptocurrencies. By focusing on the limited repercussions of any single case, the agency may have found a way to avoid a more extensive discussion on the matter. However, Coinbase chief legal officer Paul Grewal criticized the SEC’s argument, stating that unauthorized regulation through enforcement would be less constrained than unauthorized regulation through rulemaking.
It remains to be seen when or if the judge in the Coinbase case will address the major questions doctrine. Both sides consider the doctrine to be secondary to the fundamental issue of whether federal securities law applies to Coinbase’s conduct as a cryptocurrency exchange. The industry’s framing of the doctrine as federal agency overreach seems intended to eventually feature in a Supreme Court petition, while the SEC’s new brief appears to be an attempt to narrow the discussion of the major questions doctrine. The judge’s analysis of the issue, if it arises, could be significant.