Crypto companies may use Supreme Court doctrine to push back against SEC: Lawyer

The US Supreme Court may give crypto companies a way to fight the Securities and Exchange Commission in court, according to Jason Gottlieb, a partner at law firm Morrison Cohen LLP.

At a time when the SEC is expanding its view of what it considers a “security” and thus subject to its regulatory oversight, “We’re going to see crypto companies trying to push back against the SEC,” Cohen told CoinDesk TV’s “First.” Mover” on Tuesday.

Cohen said crypto companies could try to fend off the SEC by using the US Supreme Court’s “grand question doctrine,” which holds that regulators cannot exceed their authority. The Supreme Court last used the doctrine in 2022 in a 6-3 decision involving the Environmental Protection Agency on whether it had the authority to issue an emission cap for greenhouse gases.

Chief Justice John Roberts, writing for the majority, said no, and that it was up to Congress to give the EPA clear authorization for such actions.

“What the Supreme Court has instructed is that administrative agencies, which are a branch of the executive branch, are not allowed to take views that would affect major issues in the United States economy,” Cohen said.

So when it comes to crypto, “It’s for Congress to set the law, not for the SEC to say ‘we think the law should be no crypto,'” he added.

The US approach to crypto – or lack thereof – is going to have a major effect on this country’s economic and financial competitiveness. Consider other jurisdictions, Cohen said, such as the European Union, the United Kingdom, Singapore, Japan and the Cayman Islands, which are “developing legal regimes that can allow people to operate legally.”

While these regimes may not be perfect, and are likely to have pros and cons, Cohen said that, unlike the United States, they all have “a clear path [for a crypto company] to operate legally.”

On Tuesday, during Fintech Week in London, CEO Brian Armstrong of Coinbase, the largest US-based crypto exchange, said the exchange may consider moving offshore if the regulatory environment for the crypto industry does not become clearer.

That’s not the approach all crypto companies take, Cohen said. His crypto clients are asking him what can be done to operate legally in the US, or as close to legal as possible given the ambiguities, he said.

“We try to tell our clients as best we can what the law requires [and] what regulators require,” he said. “And sometimes we have to tell you, sorry, that can’t happen here.”