June 27, 2024 marks one of the most consequential days in the intersection of cryptocurrency and U.S. regulatory law. In two separate but related developments, the U.S. Supreme Court delivered a landmark ruling stripping the Securities and Exchange Commission of its ability to use in-house judges for enforcement actions, while Coinbase filed lawsuits against both the SEC and the FDIC for failing to comply with Freedom of Information Act requests. Together, these events signal a dramatic shift in the balance of power between federal regulators and the crypto industry.
TL;DR
- The U.S. Supreme Court rules 6-3 that the SEC cannot use in-house administrative judges to impose civil penalties
- Coinbase files separate lawsuits against the SEC and FDIC over unfulfilled FOIA requests related to crypto regulation
- The Supreme Court decision affects multiple federal agencies beyond just the SEC, including the NLRB
- Chief Justice Roberts writes that in-house tribunals violate the constitutional right to a jury trial
- The rulings reshape the enforcement landscape for crypto companies facing regulatory action
Supreme Court Delivers Blow to SEC Enforcement Powers
In a 6-3 decision announced Thursday, the Supreme Court ruled that the SEC’s practice of adjudicating civil securities fraud cases through internal administrative law judges — rather than in federal court before a jury — violates the Seventh Amendment right to a jury trial. Chief Justice John Roberts delivered the majority opinion, writing that “a defendant facing a fraud suit has the right to be tried by a jury of his peers before a neutral adjudicator.”
The SEC’s authority to handle enforcement internally was granted by the Dodd-Frank Act of 2010, passed in response to the 2008 global financial crisis. For over a decade, the agency has used this power to pursue civil fraud cases without the burden of federal court proceedings. The Supreme Court’s decision now forces the SEC to rely solely on federal trial courts when seeking financial penalties, significantly raising the procedural bar for enforcement actions.
“Rather than recognize that right, the dissent would permit Congress to concentrate the roles of prosecutor, judge and jury in the hands of the Executive Branch,” Roberts wrote. “That is the very opposite of the separation of powers that the Constitution demands.”
Broader Implications for Federal Agencies
The ruling extends well beyond the SEC. Andrew Pincus, a partner at international law firm Mayer Brown, noted that many other federal agencies bring enforcement actions based on statutory standards that closely resemble fraud claims. “All of those actions will now have to be tried before an independent federal judge and a jury — eliminating the ‘home court advantage’ that has benefited many agencies for decades,” Pincus explained.
The National Labor Relations Board (NLRB) faces a similar challenge to its enforcement procedures, and Thursday’s decision sets a clear precedent that could invalidate in-house tribunals across the federal government. For the crypto industry, the ruling is particularly significant because the SEC has used administrative proceedings in several high-profile crypto enforcement cases, including its 2018 action against TokenLot LLC and its 2014 case against a computer programmer.
Coinbase Takes the Fight to Regulators
In a parallel development on the same day, Coinbase filed lawsuits against both the SEC and the Federal Deposit Insurance Corporation (FDIC) for failing to comply with Freedom of Information Act requests. The exchange, which has been locked in a legal battle with the SEC since being charged with operating an unregistered securities exchange in June 2023, argues that federal regulators are deliberately withholding information about their internal deliberations on crypto regulation.
Coinbase is seeking documents that could reveal whether the SEC and FDIC coordinated efforts to restrict crypto companies’ access to banking services — a practice commonly referred to as “Operation Choke Point 2.0” by industry advocates. The lawsuits, filed in federal court, ask a judge to compel both agencies to produce the requested records.
Paul Grewal, Coinbase’s Chief Legal Officer, has been vocal about the company’s frustration with what it describes as regulatory opacity. The exchange contends that the SEC has refused to provide clear guidance on which digital assets qualify as securities, while simultaneously pursuing enforcement actions against companies operating in the space.
A Turning Point for Crypto Regulation
The convergence of these two events on a single day underscores the rapidly evolving relationship between the crypto industry and its regulators. With the Supreme Court constraining the SEC’s enforcement toolkit and Coinbase going on the legal offensive, the balance of power is shifting. Bitcoin trades at $61,604 and Ethereum at $3,444 as the market digests the implications of a regulatory environment that may become more favorable — or at least more predictable — for digital asset businesses.
Justice Neil Gorsuch, in a concurring opinion, offered words that resonate with crypto’s ongoing regulatory battles: “In reaffirming all this today, the Court hardly leaves the SEC without ample powers and recourse.” The message is clear — regulators retain significant authority, but they must exercise it through proper constitutional channels.
Why This Matters
These twin developments represent a structural shift in how the U.S. government regulates cryptocurrency. The Supreme Court’s ruling ensures that crypto companies facing SEC enforcement will have access to neutral federal judges and juries rather than agency-appointed adjudicators. Meanwhile, Coinbase’s lawsuits could force transparency on whether regulators have been coordinating behind the scenes to suppress the crypto industry. Together, these actions could establish a more fair, transparent, and constitutionally sound framework for digital asset regulation in the United States.
Disclaimer: This article is for informational purposes only and does not constitute legal or financial advice. Readers should consult qualified professionals for guidance on regulatory matters.
Roberts writing that defendants deserve a jury of their peers should have been obvious from the start. The SEC had 14 years of unchecked power from Dodd-Frank to run roughshod over due process.
the 6-3 split tells you everything about where this court stands on agency overreach. this affects NLRB too, way bigger than just crypto
Coinbase suing both the SEC and FDIC over FOIA in the same week is aggressive. Makes you wonder what documents the agencies are sitting on that they do not want the public to see.