--- title: The SEC Is at the Mercy of the Courts at a Perilous Moment description: A series of cases could challenge the SEC's authority to regulate and enforce a wide scope of American economic life. canonical: https://time.com/6556215/sec-courts-chevron/ author: Alexander Talel article:opinion: true article:content_tier: free article:published_time: 2024-01-17T11:00:00.000Z article:modified_time: 2026-08-04T07:50:37.567Z article:section: Ideas og:title: The SEC Is at the Mercy of the Courts at a Perilous Moment og:description: A series of cases could challenge the SEC's authority to regulate and enforce a wide scope of American economic life. og:url: https://time.com/6556215/sec-courts-chevron/ og:site_name: TIME og:image: https://static.time.com/v3/assets/bltea6093859af6183b/blt47627e1c8c4aaf78/698a43ecdb2987640a269b8f/GettyImages-1538379675.jpg?branch=production&width=1024&quality=75&auto=webp&crop=16:9 og:image:width: 1024 og:image:height: 576 og:image:alt: SEC Chair Gensler Speaks On AI At National Press Club og:type: article twitter:card: summary_large_image twitter:title: The SEC Is at the Mercy of the Courts at a Perilous Moment twitter:description: A series of cases could challenge the SEC's authority to regulate and enforce a wide scope of American economic life. twitter:image: https://static.time.com/v3/assets/bltea6093859af6183b/blt47627e1c8c4aaf78/698a43ecdb2987640a269b8f/GettyImages-1538379675.jpg?branch=production&width=1024&quality=75&auto=webp&crop=16:9 ---  # The SEC Is at the Mercy of the Courts at a Perilous Moment > Sponsored content. 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It explains how TIME's journalism is made, from the first pitch through the editorial decisions behind a finished story or cover. #### How can I read about how TIME chooses its covers? Inside TIME is the newsletter where TIME's Editor-in-Chief explains cover selection and the editorial reasoning behind major stories. It is free at time.com/newsletters. #### Who is the editor of TIME? Sam Jacobs is TIME's Editor-in-Chief. He writes Inside TIME, a twice-weekly newsletter about the newsroom's reporting and editorial decisions. #### Is Inside TIME free? Yes. Inside TIME is a free newsletter, available at time.com/newsletters. A paid TIME subscription is separate and available at time.com/subscribe-agent. ## Video: In Iowa, Ron DeSantis Takes His Loss as a Win [Watch (HLS stream): In Iowa, Ron DeSantis Takes His Loss as a Win](https://cdn.jwplayer.com/manifests/MR6xl402.m3u8) (1:23)  _Published 2024-01-16. Former President Donald Trump has won Iowa’s first-in-the-nation caucuses, with Florida Gov. Ron DeSantis called as the second-place finisher in the state, only slightly ahead of former Ambassador to the United Nations Nikki Haley._ by [Alexander Talel](https://time.com/author/alexander-talel/) ## Alexander Talel Jan 17, 2024 11:00 AM UTC  Gary Gensler, chairman of the US Securities and Exchange Commission (SEC), speaks during an event at the National Press Club in Washington, DC, US, on Monday, July 17, 2023\. Gensler said the proliferation of artificial intelligence means governments will probably have to overhaul regulations to maintain global financial stability. Gary Gensler, chairman of the US Securities and Exchange Commission (SEC), speaks during an event at the National Press Club in Washington, DC, US, on Monday, July 17, 2023\. Gensler said the proliferation of artificial intelligence means governments will probably have to overhaul regulations to maintain global financial stability. Nathan Howard-Bloomberg/Getty Images by [Alexander Talel](https://time.com/author/alexander-talel/) ## Alexander Talel Jan 17, 2024 11:00 AM UTC For nearly a century, the U.S. Securities and Exchange Commission (SEC) has wielded largely un-checked power over investment mechanics and capital formation. But federal courts are quietly poised to change that. While SEC Chairman Gary Gensler continues to try to [broaden](https://www.wsj.com/articles/secs-gary-gensler-had-crypto-in-his-sights-for-years-now-hes-suingbinance-and-coinbase-dbeb79eb) his agency's purview, pending federal cases—including two now before the Supreme Court—threaten to existentially diminish the SEC's power, just as the complexities of modern markets reach new heights. In November, the Supreme Court held oral argument in[_SEC v. Jarkesy_](https://www.scotusblog.com/case-files/cases/jarkesy-v-securities-and-exchange-commission/). The case deals with whether the agency's adjudication of fraud claims using its own administrative law judges deprives individuals of their Seventh Amendment right to a jury trial. The justices were all somewhat aligned in skepticism against the SEC’s in-house enforcement practice, with Chief Justice John Roberts coming close to questioning whether the very existence of the SEC enforcement tribunal serves to undermine the Seventh Amendment. That doesn’t bode well for the agency. A loss in _Jarkesy_ would force the SEC out of its own backyard and into federal court more frequently—a considerably more expensive, time-consuming, and uncertain enforcement process. And while _Jarkesy_ directly threatens the SEC’s authority to enforce, another case on the Court’s docket—set for oral argument on Wednesday—threatens the agency’s basic ability to function as it pleases. [_Loper Bright Enterprises v. Raimondo_](https://www.scotusblog.com/case-files/cases/loper-bright-enterprises-v-raimondo/) involves a 1976 law requiring fishing vessels to carry federal observers on board and, under certain conditions, pay those observers’ salaries. The National Marine Fisheries Service, a federal agency, decided in 2020 to interpret the law to require payment of those salaries even absent those conditions—an expansive interpretation that the D.C. Circuit Court of Appeals upheld as “reasonable” simply because the statute did not expressly preclude it. The D.C. Circuit relied on the Supreme Court’s [framework ](https://constitutioncenter.org/the-constitution/supreme-court-case-library/chevron-v-natural-resources-defense-council-inc)in _Chevron v. Natural Resources Defense Council_ (1984), which requires courts to give broad deference to an agency’s “reasonable” interpretation of an arguably ambiguous statute. In _Loper Bright_, the justices will decide whether to do away with so-called “_Chevron_ deference.” ### More From TIME The loss of _Chevron_ deference would limit an agency’s ability to enhance its regulatory and enforcement power through broadly self-serving interpretations of the congressional statutes that govern the extent of their authority—a mechanism that any federal agency chair would want to keep in their toolbox, particularly when it comes to new technologies that might not be explicitly covered by pre-existing statutes. That consideration is especially relevant for Gensler, who is deeply embroiled in a two-front battle to establish his agency’s control over cryptocurrency—a sector in urgent need of regulation, as [the FTX debacle demonstrated](https://www.theverge.com/2022/11/30/23484331/ftx-explained-cryptocurrency-sbf-sam-bankman-fried). While Gensler [contends](https://www.dlapiper.com/en/insights/publications/2023/01/the-cftc-and-a-congressional-framework-for-regulation-of-digital-assets) with the Commodity Futures Trading Commission for primary authority to regulate this giant swath of the synthetic asset market, the SEC is also fighting a corresponding battle through lower federal courts, where conflicting decisions threaten to undermine the agency’s position, if not place cryptocurrency out of the agency’s reach altogether. In July, the Manhattan federal district court [found ](https://www.reuters.com/legal/us-sec-cannot-appeal-ripple-labs-decision-judge-rules-2023-10-04/)that the crypto token at issue in _SEC v. Ripple Labs_ was not a security in and of itself—that it was a security at the time of its issuance to investors but was not when programmatically sold on exchanges or issued to executives via corporate grants. More recently, the district court denied the SEC’s motion to certify those findings for a speedy interlocutory appeal at the Second Circuit—an expedited appeal on key issues to be heard while the case remains before the district court. [Much to the delight of crypto firms](https://cryptorank.io/news/feed/4c72d-ripple-party-sec), it will therefore be some time before the Second Circuit weighs in on whether cryptocurrency is a traditional security theoretically susceptible to SEC regulation. One might expect that a ruling from the nation's most prominent federal trial court would hold sway over other courts faced with similar questions, increasing the likelihood of more decisions that come out against SEC regulation of crypto tokens. But in a [ruling](https://www.reuters.com/legal/terraform-labs-sold-unregistered-securities-us-judge-rules-sec-case-2023-12-28/) issued just before the New Year, another judge of the same court sided with the SEC on substantially the same issue, and without so much as referring to the _Ripple Labs_ decision. Regulation by litigation is, after all, an unpredictable strategy and likely an untenable one if the SEC hopes to continue to impose its administrative will. The SEC has reached its administrative peak under Gensler, [on track](https://www.sifma.org/resources/news/the-unprecedented-speed-and-volume-of-sec-rulemaking/#:~:text=As%20of%20September%2020%2C%202023%2C%20of%20the%2063,finalized%2C%20and%2014%20have%20not%20yet%20been%20proposed.) to finalize 63 new rules within his first four years as chair. Gensler’s previous two predecessors finalized a combined total of just 65\. And Gensler has allowed an average public comment period of just 46 days per rule—a substantial decline from those predecessors’ allowances. Founded as a response to the market crash of 1929, the SEC’s increasingly proactive approach is thus at odds with its reactionary constitutional origins—but not necessarily with the regulatory needs of modern market and investment dynamics. That existential tension is coming to a judicial head at a potentially perilous time. As Justice Neil Gorsuch remarked during November’s oral argument in _Jarkesy_, “this is not your grandfather’s SEC.” Indeed—_Jarkesy, Loper Bright_ and proliferating crypto cases might just be the three horsemen of the modern SEC apocalypse. At a minimum, by eliminating the SEC’s in-house enforcement mechanism, ending _Chevron_ deference, and complicating the agency’s cryptocurrency purview, federal courts would alter the course of the SEC’s regulatory regime. It remains to be seen whether that would be a good thing. ## Transcript They threw everything but the kitchen sink at us. Because of your support in spite of all of that. They throughout us everyone against us. We've got our ticket punched out of, Iowa. Want to have hope for this country's future and that's what we represent. We represent a chance to reverse the madness that we've seen in this country to reverse the decline of this country and they give this country a new birth of freedom and a restoration of Sanity. That's what we are going to do. We thank you for your effort. We thank you for your support. You helped us get a ticket punched out of the Hawkeye State. We have a lot of work to do but I can tell you this as the next president of the United States. I am going to get the job done for this country. I am not. I am not going to make any excuses and I guarantee you this I will not let you down. Thank you. All God bless you. Thank you so much. 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