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US Supreme Court Restricts SEC’s Power in Enforcing Securities Laws

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  • The US Supreme Court found 6-3 that the SEC’s employment of in-house judges violates the right to trial by jury.
  • Crypto firms now have the right to jury trials in federal court, which might affect how the SEC pursues its proceedings against them.
  • The SEC may need to change its approach, which might cause delays in actions against the corporations.

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The United States Supreme Court has curtailed the Securities and Exchange Commission’s (SEC) jurisdiction to enforce securities laws. In a 6-3 judgment, the court found that the SEC’s employment of in-house judges to decide matters violates the constitutional right to a jury trial.

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This is one of several cases on the docket featuring conservative and business-led challenges to the authority of federal agencies. The court’s 6-3 conservative majority has frequently been sympathetic to such claims.

The case focused on how the SEC enforces securities laws, especially bans on insider trading.

The SEC has traditionally employed in-house hearings overseen by administrative law judges, but it can also file cases in federal court and seek financial penalties in both settings.

Hedge fund manager disputes SEC

The controversy began with hedge fund manager George Jarkesy, who was charged by the SEC with violating securities laws by lying and concealing critical information from investors while managing two hedge funds.

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The SEC’s in-house judges fined Jarkesy and his firm $300,000 and ordered them to refund approximately $685,000 in what the SEC deemed “illicit gains.” Jarkesy was also barred from certain positions in the securities business.

Jarkesy claimed that the SEC’s internal process was unfair and violated his rights. His fight against the SEC was supported by billionaires Elon Musk and Mark Cuban.

SEC headquarters in Washington D.C.

The SEC filed a petition with the Supreme Court after the 5th Circuit U.S. Court of Appeals in New Orleans ruled against it.

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The Supreme Court ruled that anyone accused of fraud by the SEC are now entitled to a jury trial in federal court. Chief Justice John Roberts, speaking for the court’s conservative majority, stated:

“A defendant facing a fraud suit has the right to be tried by a jury of his peers before a neutral adjudicator.”

The SEC petitioned the Supreme Court after the 5th Circuit Court of Appeals in New Orleans ruled against it.

The Supreme Court ruled that individuals accused of fraud by the SEC now have the right to a jury trial in federal court. Chief Justice John Roberts, speaking for the conservative majority, said:

“For those and countless other agencies, all the majority can say is tough luck; get a new statute from Congress.”

What this means for the crypto sector

Crypto firms facing SEC enforcement actions will now be able to seek a jury trial in federal court rather than going through the SEC’s in-house administrative proceedings.

This reform may level the playing field for cryptocurrency enterprises, as they will no longer be subject to the biased internal SEC procedure. The SEC may need to rethink its enforcement techniques, perhaps causing delays in taking cases against cryptocurrency companies.

High-profile cases involving businesses such as Ripple, Binance, and Coinbase may be impacted, necessitating review or transfer to federal courts.

Federal judges may use higher standards when considering SEC enforcement actions, perhaps resulting in more dismissals or favorable verdicts for cryptocurrency companies.

Cryptopolitan revealed earlier today that Coinbase has filed a lawsuit against the SEC and the FDIC for unfair treatment of the cryptocurrency business.

For years, the SEC has been antagonistic against cryptocurrency startups. Coinbase and the rest have just received more ammunition in the war.CRYPTOCASTER® - DECENTRALIZED FREEDOM!


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