All Rise for the Honorable Judge: the Increasing Power of United States Courts in Crypto Asset Regulation

Abstract

The regulation of crypto assets in the United States is at a critical juncture. Although there is no shortage of crypto-related bills pending in the U.S. Congress, including the Lummis-Gillibrand Responsible Financial Innovation Act, to date not one of them has actually become law. In the absence of Congressional action, federal agencies seeking to take the lead on regulating a multi-billion-dollar industry are increasingly turning to court actions to create law.

This article argues that the failure of the United States Congress to successfully pass a cohesive legislative approach, coupled with the inter-agency battle between the Securities and Exchange Commission and the Commodity Futures Trading Commission, is leaving important decisions regarding federal oversight of this industry in the hands of judges. The article analyzes two important pending cases, SEC v. Coinbase and SEC v. Binance, and identifies the negative consequences that will occur if government agencies and the crypto asset industry must rely on judge-made law for regulatory clarity in the United States.

Keywords: crypto assets, Lummis-Gillibrand, Responsible Financial Innovation Act, digital assets, SEC v. Coinbase, SEC v. Binance, digital assets, blockchain, crypto, legislation

JEL Classification: K20, K40