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The cryptocurrency industry is hoping to fight back against the recent crackdown by the U.S. Securities and Exchange Commission (SEC) with a long-shot argument based on the "major questions doctrine" adopted by the Supreme Court last year.
The theory has been outlined in a white paper by Coinbase, a case involving Ripple Labs, and an insider trading case in Seattle federal court against former Coinbase employee Ishan Wahi.
The major questions doctrine, as named by the Supreme Court, states that in "extraordinary" cases of "economic and political significance," federal agencies cannot regulate without specific Congressional authorization.
Ripple Labs supporters and allies have also argued that the SEC had overstepped its power by suing crypto targets without waiting for the US Congress to define the agency's power in the fast-growing industry.
The SEC has responded in a brief in the Ripple case, stating that the argument is misguided and inconsistent, and it is expected to provide a more detailed response if judges express interest in the argument.
Coinbase's argument is all-encompassing, with its major questions doctrine "foreclosing" regulation of the trillion-dollar crypto industry, and the appropriate body to develop a comprehensive regulatory regime is Congress.
The company has warned that it intends to force the issue to be decided by a court with potentially disastrous consequences for the agency, unless the SEC changes course and decides not to bring an enforcement action against the exchange.
This argument has emerged in response to the SEC's recent enforcement actions against crypto defendants, including Ripple Labs Inc and Coinbase. Ripple Labs and its executives were accused of selling unregistered securities, while Coinbase faced an insider trading case in Seattle federal court against former employee Ishan Wahi.
