For decades, the SEC addressed new financial instruments by interpreting existing law. When a novel asset appeared, the agency applied the Howey test, issued guidance, or brought enforcement actions. Courts deferred to the agency’s interpretation under Chevron. The system was slow and sometimes contradictory, but it functioned because agencies could fill statutory gaps through authoritative interpretation.

In June 2024, the Supreme Court eliminated Chevron deference in Loper Bright Enterprises v. Raimondo. Courts must now exercise independent judgment on questions of statutory interpretation rather than deferring to agencies. This decision has a profound but underappreciated implication for digital asset regulation.

The old approach — letting the SEC figure out whether tokens are securities through enforcement — is no longer constitutionally tenable. Without Chevron, the SEC’s interpretive framework has no special legal weight. Courts in different circuits can and do reach opposite conclusions about identical instruments. The Ripple court said programmatic sales of XRP were not securities. The LBRY court said all sales of a functionally similar token were securities. With no deference owed to the agency, there is no mechanism for resolving this divergence short of Supreme Court review of each token — an impossibility given the thousands of digital assets in circulation.

This is what makes congressional legislation not merely desirable but necessary. The CLARITY Act provides what no agency can: a uniform, legislatively enacted framework that does not depend on interpretive deference. It creates a new statutory category for digital assets, establishes lifecycle-based regulation, and provides a certification mechanism — none of which the SEC could create through rulemaking alone.

The irony is that Loper Bright was decided by justices skeptical of administrative overreach. The decision constrains agency power. But in the crypto context, it also eliminates the only mechanism that was providing any national coherence to digital asset regulation. The result is that Congress must act — not because crypto is special, but because the constitutional framework now requires legislation where interpretation used to suffice.

Read the full article: Replacing Howey with CLARITY: Resolving Securities Regulation’s Temporal Paradox, Review of Banking and Financial Law (forthcoming 2026). SSRN