US Supreme Court Curtails Agency Power: Implications for Fintech and Crypto

The 2023-2024 US Supreme Court session has concluded the term with a series of blockbuster opinions in the areas of administrative law and executive power, with consequential decisions overturning longstanding precedent and poised to reconfigure the balance of power between the executive and the judiciary. A trio of decisions (all decided 6-3) will reverberate for years to come and have important potential implications for the fintech and digital asset industries:

• On June 27, 2024, the Supreme Court handed down its decision in Securities and Exchange Commission v. Jarkesy, holding that the Seventh Amendment right to trial by jury applies whenever the Securities and Exchange Commission (SEC) seeks civil penalties against a defendant for securities fraud. This decision effectively eliminates the SEC’s ability to seek such civil penalties through its own in-house administrative proceedings,1 and may have ramifications for other federal agencies that impose similar financial penalties using administrative law judges.2
• On June 28, 2024, the Supreme Court handed down its decision in Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce. The Court overruled the longstanding Chevron3 doctrine, which required courts to defer to the interpretations of administrative agencies when resolving the meaning of ambiguous statutes, and held that courts must exercise their independent judgment in resolving questions of statutory interpretation and in deciding whether an agency has acted within its statutory authority (for more information, see this Latham Client Alert).
• On July 1, 2024, the Supreme Court ruled in Corner Post, Inc. v. Board of Governors of the Federal Reserve System that a claim under the Administrative Procedure Act (APA) challenging the statutory authority for agency action accrues for purposes of the six-year statute of limitations under 28 USC §2401(a) when the relevant plaintiff is injured by final agency action and has the right to assert a claim in court, and not upon publication of the relevant rulemaking.

We discuss each decision and the potential implications for the fintech and digital asset industries in more detail below.

Jarkesy

The majority in Jarkesy held that the Seventh Amendment right to trial by jury applies when the SEC seeks civil penalties against a defendant for securities fraud. As a result, such claims must be brought and resolved before a jury in an Article III court. That is, the SEC may not resolve such matters by using the SEC’s administrative law judges, which is a non-Article III administrative fora. In so ruling, the majority recognized the existence of the so-called “public rights” exception to the Seventh Amendment, which permits Congress to assign certain matters to an agency for decision without a jury. However, the majority determined that the act of the SEC seeking civil penalties for securities fraud was akin to bringing action against an individual under common law fraud, and thus constituted a matter of private and not public rights.

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