Committee for Justice president Curt Levey writes at the Federalist Society Blog that if Congress doesn’t address the regulatory confusion surrounding cryptocurrency, that job may fall to the Supreme Court:
August 1, 2022
With the rapid growth of cryptocurrencies have come increasing calls for its regulation and both uncertainty and overreach concerning the applicability of existing rules. If Congress doesn’t address the regulatory confusion, that job may fall to the Supreme Court.
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Rather than admitting the shoe doesn’t fit, the SEC has awkwardly tried to shoehorn crypto into the Howey test by suing companies whose tokens differ subtly from the familiar Bitcoin model. On top of that, the agency has provided no rules and few clues about what token characteristics will draw SEC scrutiny.
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What is ideally needed is a clear regulatory framework for cryptocurrency. Federal agencies can only interpret statutes and court rulings, so this should come from Congress. As an example, Senators Cynthia Lummis and Kirsten Gillibrand have introduced a bill that would deem most cryptocurrencies to be commodities. However, in a Congress that has trouble agreeing on anything, no one is holding their breath waiting for such a bill to pass.
A solution may well have to come from the courts. One or more of the SEC’s crypto lawsuits could reach the Supreme Court, which is uniquely situated to say what relevance, if any, its Howey test and the underlying statutes have to cryptocurrency. SEC v. Ripple is perhaps the most likely, given that clarification of Howey is a central issue in the case and the company has chosen to fight rather than settle.
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