US Supreme Court's decision to overturn Chevron could complicate legislative efforts: TD Cowen

A recent U.S. Supreme Court decision to overturn the Chevron doctrine muddles the push for legislation to regulate the crypto industry and stablecoins, investment bank TD Cowen said on Monday.

The Supreme Court voted 6-3 on Friday to overturn a 40-year-old court decision that defers to federal agencies to interpret the law how they see fit. Crypto pundits have said the decision gives the crypto industry an advantage and means that agencies, such as the Securities and Exchange Commission, will have to proceed with caution in the future. 

"The conventional wisdom after the Supreme Court acted is that the decision benefits the crypto sector. We partly agree as this will help future crypto challenges to SEC rules and enforcement. Yet it does not change any past rulings or open prior decisions to reconsideration," TD Cowen Washington Research Group, led by Jaret Seiberg, wrote in the note. 

A bigger issue is what the decision means for lawmakers looking to enact legislation to regulate the industry and stablecoins, Seiberg said. In May, the U.S. House passed a Republican-led Financial Innovation and Technology for the 21st Century Act, also known as FIT21, which garnered some Democratic support. Meanwhile, lawmakers in the House and Senate are also mulling over bills to regulate stablecoins. 

"It [Chevron decision] takes off the table the most common tactic to find a bipartisan compromise, which is to keep the language ambiguous in order to leave the final decision to the regulator," Seiberg said. "This offers political benefits as lawmakers can later criticize the regulator for not following the intent of Congress, even if Congress failed to clearly articulate what should happen." 

Lawmakers will get into specifics when it comes to when a token goes from being a security to a commodity, as well as other details, Seiberg said.

"We are talking details we don't normally see in legislation such as what happens when a retail investor participates in a staking program at a trading platform or how to AML/BSA control apply if a token at one point went through a mixer to hide its origins," Seiberg said. "No longer will either side be comfortable deferring to the regulator as the courts are now likely to second guess those decisions."