Supreme Court of the United States of America

Chevron Overruling Sparks Regulatory Uncertainty Across Industries

Chevron Overruling Sparks Regulatory Uncertainty Across Industries

July 10, 2024

Chevron Overruling Sparks Regulatory Uncertainty Across Industries

By: Jake Gray

A landmark decision by the Supreme Court overruled 40-year precedent that provided the bedrock for modern federal agency rulemaking and administration. In Loper Bright Enterprises v. Raimondo (2024), alongside its companion case Relentless, Inc. v. Department of Commerce, the Supreme Court overruled Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc. (1984), holding that deference to an agency’s interpretation of the statute is inconsistent with both the Administrative Procedure Act (APA) and the judiciary’s function in interpreting statutes and determining questions of the law. The decision commences an era of potential regulatory uncertainty with broad implications for many industries regulated by the federal government and its agencies, while also formalizing what the Court noted as an existing tendency to selectively apply Chevron. In essence, while Chevron could have been invoked in future cases where it hadn’t been before, now it definitively won’t be a factor in any case going forward.

Chevron and Loper Bright / Relentless

The concept of Chevron deference was a critical feature in the current US administrative law regime, as it required courts to defer to a federal agency’s reasonable interpretation of an ambiguous statute that the agency is charged with administering. In other words, when a law was unclear, courts had to accept an agency’s interpretation as long as or if it was reasonable, even if the court thought a different interpretation was more plausible. This notion relied on the Chevron court’s presumption that Congress implicitly delegates authority to administrative agencies to fill in statutory gaps when it leaves ambiguities in the laws they are tasked with implementing.

The Chevron ruling arose from a dispute over the Environmental Protection Agency’s (EPA) interpretation of the Clean Air Act. The case centered on the EPA’s decision to treat all pollution-emitting devices within a single industrial plant as one “stationary source,” which allowed companies more flexibility in modifying facilities without triggering stricter permit requirements. The Supreme Court established a two-step framework for reviewing agency interpretations of statutes: first, determine if Congress had directly addressed the issue; if not, and the statute was ambiguous, defer to the agency’s interpretation so long as it were considered reasonable. Otherwise, the rule interpretation would be impermissible. This approach presumed agencies possessed technical expertise and were better positioned to make policy decisions within their delegated authority. Chevron deference swiftly became a cornerstone of administrative law, shaping regulatory actions across federal agencies for the last four decades. According to the NY Times, 70 Supreme Court decisions have relied on Chevron, along with 17,000 in the lower courts.

Both Loper Bright and Relentless concerned fishing companies challenging a National Marine Fisheries Service (NMFS) rule authorized under the Magnuson-Stevens Fishery Conservation and Management Act, a rule which required fishing companies to pay for federal monitors assigned to their boats. The companies argued that the Act did not permit NMFS to pass these costs to them, but lower courts, applying Chevron’s second step, had ruled in favor of NMFS, holding that the NMFS interpretation of the statute was reasonable given the statutory “silence on the issue of cost of at-sea monitoring.” In the joint-decision for Loper Bright and Relentless, the Supreme Court considered whether Chevron should be overruled or clarified.

In overruling Chevron, the Court held that Chevron “cannot be squared with the APA” and its requirement that “the reviewing court…decide all relevant questions of law” and “interpret statutory provisions.” According to the Court, the Chevron deference requires the judiciary to ignore its responsibility of statutory interpretation—one given to it by both the APA and the Founders—in favor of determining whether an agency’s interpretation is merely permissible. As the Court notes, “when courts confront statutory ambiguities in cases that do not involve agency interpretations or delegations of authority, they are not somehow relieved of their obligation to independently interpret the statutes.”

Additionally, the Court states that Congressional silence or ambiguity cannot be considered an implicit delegation of authority because there may be many reasons for ambiguity, including Congress’s failure to consider the issue altogether, in which case a delegation is unclear. Delegations of authority therefore must be explicit, says the Court, otherwise statutory interpretation remains a responsibility of the judiciary. While decisions applying Chevron stand, the Court determined stare decisis does not prevent Chevron from being overruled, as it is “unworkable, unfair, and at odds with our separation of powers” with its “byzantine set of preconditions and exceptions… [which has caused] some courts [to] have simply bypassed Chevron or failed to heed its various steps and nuances.”

Implications for Agencies and Industries

An aura of uncertainty may pervade federal agency rulemaking and administration for the foreseeable future, as there will be an increasing amount of litigation with federal agencies with respect to their rulemakings as well because courts are no longer necessarily required to defer to an agency’s interpretation on the grounds that it is reasonable. Industry members may be invigorated to battle it out with federal agencies in an attempt to ensure the courts determine the best reading, as the Court put it in Loper Bright. But recent alarm over the Chevron decision may be overblown in some cases, as some federal agencies have been accustomed to rule administration, enforcement, and litigation without a reliance on deference in the first place.

The Securities and Exchange Commission (SEC) and Commodities Futures Trading Commission (CFTC) are prime examples of agencies which have not enjoyed Chevron deference in all cases, bolstering the statement from the Loper Bright decision that courts have simply bypassed the rule historically. As former General Counsel to the SEC and former Commissioner of the CFTC Dan Berkovitz notes, “[i]n almost all major cases over at least the past two decades, especially in reviews of agency rulemakings, the courts have not granted Chevron deference to these agencies…the court’s opinion in Loper reflects the current reality of judicial review for these agencies.”[1]

For instance, both agencies contend with the cryptocurrency industry over regulatory boundaries and enforcement in the absence of congressional legislation, an issue which we have covered ad nauseam. The SEC and CFTC have asserted jurisdiction over various aspects of digital assets and cryptocurrencies, often interpreting existing securities and commodities laws to fit this new technology. Industry participants may have leapt at the notion of Chevron being overruled, seeing that deference was no longer a requirement as declared by the Supreme Court of the United States. But Chevron was never necessarily at play here. As Berkovitz cites, in SEC v. Telegram Group Inc. (2020) and SEC v. Kik Interactive Inc. (2020), the courts determined whether particular cryptocurrencies constitute “investment contracts” without deference to the agency’s views in the enforcement matter, a tendency which is much within historical precedent. Indeed, courts have ruled generally without deference on jurisdictional and definitional issues under both securities and commodities laws, elaborating “on the characteristics of the instruments within the definition of ‘security,’ such as ‘investment contract,’ ‘stock,’ ‘note,’ and ‘certificate of deposit.’[2] Rather than a cause for celebration for those engaged in legal battles with the SEC and the CFTC, the Loper Bright decision is last week’s weather forecast –- old news.

But for other federal agencies, there may be more relevance. For instance, the Federal Trade Commission (FTC) potentially faces significant challenges in the wake of Chevron’s overruling. The agency’s broad mandate to prevent “unfair methods of competition” and “unfair or deceptive acts or practice” has long relied on flexible interpretations of these terms. The FTC’s recent efforts to expand its authority in areas such as data privacy, non-compete agreements, and digital markets may now be vulnerable to legal challenges. Courts will likely scrutinize the FTC’s reading of its enabling statute more closely, potentially constraining the agency’s ability to adapt to emerging market practices and technologies. This shift could particularly impact the FTC’s approach to regulating “Big-Tech” companies, where the agency has sought to apply existing consumer protection laws to novel business models and data practices. As a result, the FTC may need to rely more heavily on case-by-case enforcement actions and seek explicit Congressional authorization for broader rulemaking initiatives.

Conclusion

In general, the application of deference has varied significantly across different types of cases and over time for all agencies. In other words, Chevron deference has been a pick-and-choose sort of precedent which some agencies more than others have enjoyed. The Supreme Court’s overruling of Chevron marks a pivotal shift in administrative law and federal regulation, since the deference requirement is no longer in play. By reasserting judicial primacy in statutory interpretation, the Court has altered the power dynamic between agencies, courts, and Congress. This change will reshape how federal agencies approach rulemaking and enforcement, likely slowing regulatory action and increasing reliance on explicit congressional directives. For regulated industries across sectors, the post-Chevron era brings both uncertainty and opportunity. Companies may find new avenues to challenge agency interpretations but face a less predictable regulatory landscape. As courts tackle technical and policy issues previously left to agency expertise, a surge in litigation is expected.

[1] https://www.law360.com/articles/1853931

[2] Ibid.

Jake Gray

Jake Gray

Jake Gray is a graduate of Columbia University and an established technology researcher, currently working in the betting and futures space as a consultant to a variety of operators. He frequently writes about online gaming and sports betting laws.

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