Securities & Exchange Commission vs. Kim Kardashian and the 'Major Questions Doctrine'

Abstract

The SEC has brought some highly publicized enforcement actions against Kim Kardashian and other celebrity social media influencers who received undisclosed payments for their endorsement of cryptocurrencies. This article describes those cases and analyzes whether the SEC is exceeding its authority under the Constitutional “major questions doctrine” that was recently applied by the Supreme Court in West Virginia v. Environmental Protection Agency. That doctrine prohibits a federal agency from regulating activities that raise a major question that Congress, rather than the agency, must resolve. Such a question is one in which there is major political and economic interest and over which the agency has no clear authority from Congress to act. As this article relates, the cryptocurrency market is of major political and economic interest to millions of individuals and businesses. It is also the subject of intense policy making efforts in the Executive Branch and in Congress. The article further analyzes whether the SEC was granted any clear authority by Congress to regulate the cryptocurrency market. It finds no such authority. In its absence, the SEC relies on the 1946 Supreme Court decision in SEC v. Howey as the basis for its jurisdictional claims. The article finds that decision, which involved the sale of Florida orange grove investments to tourists, to be vague at best and anything but clear on whether cryptocurrencies are ”securities” that are subject to SEC regulation.

Keywords: cryptocurrencies, Securities & Exchange Commission, Howey test, major questions doctrine, celebrity cryptocurrency endorsers

JEL Classification: k00, k22