Binance has “major questions.” Coinbase has “major questions.” Even President Joseph Biden had major questions. What exactly are these “major questions” that keep popping up across the crypto industry, and is it a “legal meme, ”like some people have suggested?
To make short work of it, the so-called “major questions doctrine” is a recently established legal precedent that is meant to curb government overreach. In particular, it’s the administrative theory that Congress writes the rules that agencies like the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) are meant to follow.
What that also means is that federal agencies are not supposed to wantonly assert “statutory authority” over uncertain domains — e.g. SEC Chair Gary Gensler stating “all of crypto” falls under his agency's remit — without explicit permission. U.S. courts have the ability to determine when such agencies have overstepped.
In other words, “Congress makes the laws and [the SEC] follows their lead. Congress makes laws and [the SEC] interprets and enforces them,” as Ron Hammond, tktk of the Blockchain Association, said. The doctrine is less of a law, and more of a legal framework used to interpret the law.
Given that industry participants have been calling for a clear regulatory framework for years, it makes sense that “major questions” arise in the context of crypto. Binance’s U.S. affiliate, for instance, has evoked the doctrine in an attempt to quash an SEC lawsuit that claims the exchange sold unregistered securities.
"The SEC recently brought several enforcement actions – including this action – premised on its new position that virtually all crypto assets, and virtually all cryptoasset transactions, are securities," a document filed in September reads.
“Indeed, since 2019, Congress has considered more than a dozen proposals that would provide a coherent and workable framework for crypto assets and their trading platforms," the filing said. "Critically, none of those proposals would confer sole regulatory jurisdiction over the crypto industry to the SEC,” it continued.
Coinbase, the largest U.S. crypto business, is arguing along the same lines. Like Binance, Coinbase argued that the SEC doesn’t have explicit permission to say whether it is an unlicensed securities exchange, and cited the “major questions” doctrine in a brief meant to quickly expel the SEC’s lawsuit.
Last week, the SEC fired back against Coinbase’s brief in what has been called both its “most expansive response to date to crypto industry arguments” the agency is exceeding its bounds and also something of a “novel” interpretation of the rules. In an Oct. 4 filing, the SEC argued “major questions” is nullified in that it has never been applied to a matter of “enforcement authority.”
Further, in a novel interpretation that has ruffled some feathers, the SEC said thus far the “major questions” doctrine has only applied to strike down “novel regulatory forays,” and most significantly, novel regulatory forays into areas of major “economic and political significance.” Coinbase, the SEC said, “does not have the vast economic or political significance.”
The reason the “major questions” defense is so disputed goes back to its history, and how the doctrine has been applied over the years. Major questions as a legal theory made an entrance, many jurists claim, in a 2000 Supreme Court decision barring the U.S. Food and Drug Administration, a federal executive agency, from imposing new rules around tobacco advertisements.
More to the point of the SEC’s case, in 2023, a New Hampshire court refused to apply the “major questions” doctrine to throw out FinCEN’s lawsuit of a man accused of several criiminal offenses in connection to operating a bitcoin services business. Ian Freeman, a libertarian activist and radio shock jock, was recently sentenced to eight years in prison for operating an unlicensed money transmitting business and conspiracy charges, after a judge discounted the idea that an earlier ruling defanged the Bank Secrecy Act, which was used to convict him.
“FinCEN's interpretation is consistent with the clear statement of regulatory authority Congress granted it and thus does not run afoul of the major questions doctrine,” District Judge Joseph N. Laplante wrote. Moreover, FinCEN’s indictment did not “seek to regulate” a significant economic activity and did not “seek to intrude” on a matter of state law. Bitcoins, too, can consider “funds” in the context of an unlicensed money transmitting business, Laplante said...
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– D.K.
@danielgkuhn
