By Curt Levey. August 1, 2022. (The Federalist Society)
With the rapid growth of cryptocurrencies have come increasing calls for its regulation and both uncertainty and overreach concerning the applicability of existing rules. If Congress doesn’t address the regulatory confusion, that job may fall to the Supreme Court.
Most of the attention has focused on the Securities and Exchange Commission, which has sued a number of companies in the cryptocurrency field, citing its authority to regulate securities under the 1933 Securities Act and the 1934 Securities Exchange Act. But that’s quite a stretch. Unsurprisingly, those 90-year-old statutes did not include anything like crypto—that is, digital assets existing only on a decentralized ledger (the “blockchain”) that’s distributed across disparate computers—in their definition of a security.
Instead, the Acts defined a “security” by listing well-understood examples, such as “stock” and “bond,” then adding a catch-all term, “investment contract.” Because cryptocurrency is not among the examples, the SEC argues that crypto is sometimes an investment contract.