Ending Chevron Compliance Is a ‘Power Shift’ for Investors – Lowell Sun

A view of the United States Supreme Court on July 1, 2024, in Washington, D.C. (Photo: DREW ANGERER/AFP via Getty Images)

By Sam Taube | NerdWallet

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What do fishing, air pollution, and Bitcoin have in common? Maybe just one thing: Until recently, they were all governed by a powerful legal doctrine known as the Chevron deference.

But in late June, a Supreme Court case related to fishing, Loper Bright Enterprises v. Raimondo, put an end to Chevron’s compliance. Experts say the decision could trigger significant changes to financial regulation — especially when it comes to cryptocurrencies. Here’s what investors need to know.

What did Chevron’s compliance consist of?

The term “Chevron deference” comes from a 1984 Supreme Court decision, Chevron USA Inc. v. Natural Resources Defense Council Inc. That case concerned whether the Environmental Protection Agency (EPA) had the right to modify regulations on factory emissions that flowed from a broadly worded air pollution law.

The court upheld the amended regulations, creating the “Chevron doctrine,” under which judges had to defer to the expertise of federal agencies such as the EPA when those agencies issued, amended, or enforced regulations based on unclear provisions.

Jeff Sovern, professor of consumer law at the University of Maryland Carey School of Law, sums up Chevron’s deference this way:

“Congress writes the laws, and they can’t anticipate everything. Nobody can. So they leave loopholes; they’re human. Someone has to fill those loopholes. And under Chevron, If there were any gaps, it was largely the responsibility of administrative agencies,” Sovern says.

Over the past 40 years, the Chevron Rule has been applied in more than 19,000 federal court cases, and Congress has enacted broadly worded statutes with the expectation that the Chevron Rule would allow agencies to interpret them as specific regulations.

But on June 28, the Supreme Court ruled against the agency’s federal fishing boat regulation in Loper Bright Enterprises v. Raimondo, ending Chevron’s compliance. Federal agencies no longer have the authority to enforce regulations based on their interpretation of ambiguous provisions. They can regulate only when their rulemaking authority is clearly established by law, either by Congress or a federal judge.

Financial regulations may be relaxed

The chevron rule has been an important legal principle in many federal regulations, and its disappearance could lead to the undoing of many financial regulations.

Sovern says the full impact of Loper Bright on financial regulation is unclear. Some agencies, such as the Consumer Financial Protection Bureau (CFPB), have specific congressional authority to create “appropriate” rules, and those rules could still apply in court after Loper Bright.

But that doesn’t always have to be the case. For example, a federal judge in Texas has already cited Loper Bright in an order that could potentially overturn the FTC’s recent ban on noncompete agreements.

Cryptocurrencies are another area of ​​financial regulation that could undergo a lot of change because of the Loper Bright decision, according to Alex Alben, a professor at the University of California, Los Angeles School of Law and a former Washington state privacy director.

“In cases like cryptocurrency regulation, where there’s very little regulation and also very little agency interpretation — in those areas we’ve definitely seen a shift of power from the agencies to the courts,” Alben says.

Now, cryptocurrency regulations are up to Congress

Congress has passed legislation on cryptocurrency taxation and debated several bills that would clearly define the regulatory framework for digital assets.