Chevron Deference: 40-Year Decision Reversed & Explained | Justin Slaughter
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Because nation, have you heard about several difference? That's one of the many supreme court cases that has gone around the news recently. And this one is very, very related to crypto.

It's a really script that crypto and the sec was even cited as evidence as to why chavez difference this doctor on needed to be overturned. So this is something that is directly impacting our industry, but IT actually impacts the entire rule making process of all federal executive agencies. There is a lot to unpacked here, which is what we do in this podcast.

So go head and strap in because it's it's a big one. So just go ahead and get right into the conversation with Justin slaughter from paradigm. But first a moment to talk about some these fantastic sponsors that make the show possible.

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token valuation on today. Were talking about the shaver on difference case. I have, if not educated on what that means. We will describe IT here today.

And the question on our minds, is this good for cypher? Is this good for the united states? Or is that this giant tradeoff that will lead to bad outcomes? Our guests today is just in slaughter, his policy director at paradigm. He's previously been a senior advisor to c and also a chief adviser at the cftc, so he has spent some time in the belly of the beast. Justin, welcome to bank less.

Thanks, guys. Get this out .

of the way. So slaughter your real last name, right? And the name.

So I will tell you, when I joined paradise about two hundred years ago, first at that, someone said, slaughters the name of their positive. No one can stop us. Not like, thanks guys. I like that. You think that my name dictate tes my abilities, but I am not just wait you that knowledge .

that sounds like a me coin and that you know can be bullishly in the industry. Uh and also let's get something else of the way. So you're previously in the sec and also part of the cftc.

So you spend right some time over there as part of the administrative state. So what are you doing over there? And why do you come here? Why do you come to the late.

long question? So basically, for me, i've done a lot of things around government. I clerk for a judge back when I got started. I did law firm life for several years, didn't really love the big law lifestyle, moved over to the hill back in twenty twelve to work for then congressman at market doing oversight for him on gas futures, oil futures. And IT was doing that job.

I first encountered the only digital as of the time bitcoin, and i'm an on this president bionic, and regret that, but kept following IT move over to the senate with my boss. And twenty two thousand thirteen s are his general council move over to cftc to work commissioner and twenty fourteen he was there when I was working for her shabalin great commissioner, that cfc held bitcoin commodities first time after h i'm a democrats. We lost in two thousand sixteens.

I need to get a new job. I did vint consulting, encrypt consulting for few years and then worked at the S D. C.

At the start of bindman en, where I advised acting chair elson, hardly on a bunch of stuff, I was a faster experience. We was there during the game stop. The first game stop the ask go.

And IT was, after I finished that, I got with paradise, where they said they really wanted to build a policy function. And I just fell in love with the firm, fell in up with the work that they do freas on. Mp, wrong. Um dan Roberts, in a lot of pomatia been here now two, five years and have a blast. Yeah.

you should you still join IT?

Regrets, of course, zero regrets. Best will remain in my .

life and on the C, F, T, C. side. So we had Timothy massed on the podcast talking about, stay. Yeah, you know him. Did you interact with him?

And we worked together frequently. So I, he was one of the five commissioners of the chair when I my bosher bone was the commissioner. And we would often have to interact because for a large chunk of the time, there were only three commissioners.

There's all these little tweak and catches to the administrative state agencies. When you only have three commissioners, there's a thing called the sunshine act, which means you cannot have them on meet in private, on any substance of topic. The ideas to prevent kind of people to creating shadow majority.

exactly. So I frequently would do shuttle the plum macy between my boss and him, you know, rather than have the two then be able to speak ever so love tim talked him a few weeks ago. A great guy.

interesting. So you're like egypto bridge then like bridging information over.

I suppose i'm a bridge in everything, right? Former hill crypt, D O V C S C C C, ftc and I come from the minister to tell, to tell you dc is whip if you need A A paradigm. Ic, since of how dc works.

IT is, yeah. But are they able to get us though?

Are they? I mean, here's the way I describe IT, right? IT is not the case that everyone in dc thinking about cyp to even everyone.

Every finder agency thing about crypto. Are there people in dc who are hostile to cyp to in the adman? yes.

Are there people who are friendly even now to cypher u in the adman? yes. Also, the administration of state in the administration contains multitudes.

And the mistake is thinking, that is one lumbering behemoth that is clearly going in one direction and the other when it's all these different groupings, all these different cobalts and entities mixing together, fighting on one issue, working together one, it's much more chaotic than you might expect. And this brings us to blow or bright because, of course, so much of policy making now is decided through the administration of state. And that is something that has become increasingly controversial in the top flights of the judiciary, the spring court.

yeah. So let's talk about libera breath then get right into that. You can serve your role as a bridge once again between the administrative state and cypher.

I think we will need some definition of terms of the this administrative state, what IT is and how IT came to be. But we just set up this episode with you know some backdrop. So the U. S. Supreme court has had a busy few weeks, let's say and um out of scope to talk about in in today's episode is some of the more recent cases making you so we're going to talk about trumper ces us at all today that's out a scope of this episode maybe worth a podcast in itself, maybe on backless or maybe on a politics podcast.

But the the one ruling that we are here to talk about, which is potentially massive, I think just you said in your eet threat that I could trigger A C change in all regulations cyp to announce that is this a lobar break case? And some people may have heard IT called a cheveril difference, the chavez difference case. In fact we had a uh trad fy well street representative um sam uh journey on recently on bank las.

He told us about this. He said this is coming. This is something that most people cyp to aren't paying attention to because but you should be because it's profound. And so this case has been every on difference has been struck down, I believe, right, which is like forty years IT was, you know, in impressing and now it's down. And so i'm hearing divided things so from my encrypt o tribe and protect the people that maybe like crew right, or or or skew pro growth let's say I heard this is amazing news.

I i've heard this is finally gonna strip the power seeking regulators from their ability to make up these arbitrary and the precious ranted rules, right? Like the architect is is gary gangster or in the strikes right at the gary gensler of the world and restores power back to a kind of like where should be in congress now from non cyp to sources? I heard something different, mainstream media, those the skew left, i've heard this is going to lead to chaos.

This is like going to put us in a place where our corporations have no more checks and baLances that the decision making, the governance is going to be made by uninformed judges who just like having no idea what they're talking about, that this is going be worse governance that is going to be bad for the people. We're going to get polluted rivers and just like nuclear um like um melt win and reactor cores and all sorts of bad thing. So I think here we're trying to find out the truth, right? Like is this good for grip? Du, how good? And like all there some tradeoffs here.

So maybe we could start the conversation. Can you just tell us how we got here? What is what is a loper bright? And like what case was just ruled on? Like what did this happen? Just give us some context on the significance of IT, and we'll get into definitions of the administrative state. Ea.

alright, so forgive me on this. You can take a little while to go through the history here, because there is a long and torture of history that dates back basically to the beginning of everything in the U. S.

Seventy, eighty nine, the constitution. So we in the U. S. Could have initially very small government we had in the conclusion of congress with an executive branch we had with the president, we had a juicier.

And for about one hundred years, there wasn't much more of the government than the military wouldn't really sitting on, which are very long. There is a taxing process there worth that many advisers in the government because didn't do that much. And that's true in a lot of countries, Frankly.

But over the one thousand nine century, as the world industrialized, everyone realizes that the increasingly complicated aspects of modern life, especially increasing commerce, you need more people managing the system of government, managing the laws, and so around the world, in every develop country, the U. K, germany, france, russia, ever, japan, here you start to see a building out of expertise of politics and policy. The U.

S. In many ways, of the last country, to really build this out a big way. And our formative moment for the administers state is the new deal.

We were at that point, creating new programs, security, which needs to be administered by people, of course, to hand out the benefits. Creating new systems of law, regulation, telemundo ation law. You need the fcc for that security law, need the esc for that.

And for the first time, you really have the building of a series of different agencies that try to craft conferences of regulations across the economy, across the entire government. And to be clear, this is not a Normal a of state, and this is just what everybody has done. Nobody has found a way yet to have a very viBrant, dynamic, large national economy without some pretty large bureaucracy.

That's what the administrative state is. But of course, you build these programs. That then leads to a second question, how are these programs run? Well, in the thousand nine hundred and thirties they functioned, were run almost with total power to the president.

There is a great thing yet. People like decide is from Robert caro, famous, the power broker Robert Carol was write about Robert mosses. He is one of the great men who built some, say, destroy in new york city.

He did all these bridges and tunnels, and there was a bridge he wanted to build a law. manhattan. I was going to destroy an old fort aquarium.

The city hated IT. People hated IT. And moses just had basically powered to do, and he was going to do IT.

There's no notice and comment period. F, D, R was able to use his own, administer the power to stop IT. But he took a president to do that. So F, D, R is header dox and far side as he was realized.

You know, i'm pretty good at running this administrative state power, but what's the next guy GTA do? So he tasked his, the attorney general, future spring court justice Robert Jackson, look through and say, what do we need in terms of a law that lays out how all these administrative agencies will work under the law, one of the processes that will guide the guidelines? And Jackson came up with the report in early forties, IT was derailed by the second world war, and after whole war two, they passed the administration, or proceed direct.

This is itself the main law that details how what minister agencies work. Have you guys bank las ever done a comment on any roofs? One, I think you've certainly discuss comments. We, I know you.

you have done them I R S commentary for one. Do you later remember their ridiculous kind of like role set proposing and like yeah we encourage the community to respond, even touch, like generate some A I response um as well to just like try to comment on that. Are you telling me that was all A P I stuff?

Minister, the reason there is a requirement to you notice and comment where you proposal will get comments from the community, from stakeholders, and only then can finalize that's required under the apa. The standard of arbitrary and appreciated that no rule can exist, its arbitrary appreciation is required to the apa. This is the foundation of how all agencies work.

Now, the good thing about IT, right, is IT came up with this new standard. The bad thing, of course, is that any question you answer in law and government leads to, you know, more questions. And one of the first ones they came up with was, okay, we have all these agencies.

There are expertise. Now all theory, right, is that congress is too busy to deal with the specifications of every last jet engine or every last token, whether scare or commodity, you need someone else who can focus on this and build expertise. But to what extent is this lock? We don't have agencies in the constitution, right? We have an executive branch LED by the president.

We don't have an ssc. We don't have. And faa, so you start to see debates inside policy making, illegal spars over how should we consider an agency's actions and how should courts defer to them. Initially, the liberals, who largely dominated juicier between nineteen, specially thirty five and nineteen eighty, wanted max power to the courts because they wanted the ability to say, at any time we're going to look at this under our own thinking, our own expertise as lawyers, we will decide whether or not a rule make sense or not.

When you say liberals.

you talking about the left .

of progressive today OK.

I think they were called process sive today, they were called progressive in the thousand nine hundred tens. Identifies progressive. But like back in the one thousand nine hundred and sixty, they were neon as liberals.

So liberal, progressive, interchangeable. So the conservative. However, this point, especially in one thousand nine hundred and sixties and seventies, largely dominated national elections.

And so they were more likely to have the administration of agencies under their control. You know, you had the next ten years. You had then also one thousand nine hundred eighty, the reagan years.

So what eventually happens is that in nineteen, I think eighty two or eighty three, the E, P, A, does this rule to change the definition of the worlds source under a clean interact. And the national resources defense council suit saying, you can't do IT that way. This is the chevron case cheverel versus in r dc, where the spring courts is okay.

We're going to put this to bed. We're going to come up with the system for how you should differ to a key part, agency action, which is win agencies decide that they statute a means, what they say that means. And this is simple fy greatly.

This is a two step system. We're going to look at the statute and we say, does this answer explicit? The question being asked, does agency x have power over Fisheries as I have the power to change this word? And if IT doesn't, says IT, that's the end.

If it's silent, if it's on someday, as they didn't exist in the one thousand nine hundred and thirties or eighteen sixties when a statue was asked, then the agency can come up with its own rational interpretation, and we will give difference to that interpretation. Not saying it's locked in, but basically it's like a burden of proof. And this becomes the foundation then for administrative law for the last forty years, the idea being okay.

We have the experts in the ages deciding where their statutes begin an end and what powers they can take. But you know, of course, over time, people start to get concerned about about this as well. But one thing concerned to say this is leading to an increase in administration of power because the people analyzing statutes are the ones who get more power when they're going to be an acid, says we don't have this power.

They're always going to arrogate more power to themselves. The other thing that happens though is that over the ninety eighties you have the dwindling of republicans winning national election. You know between nineteen, uh, eighty eight and the present, the republican party has won a majority of the popular vote one time, right, increasingly democrator favorite elections.

So you have democrats starting to focus on how can they use their administrative power to make change using old statute. Says a whole discussion about this, started by men as well, of which the C, C, we can come to as part of that. And republicans are concerned about administrative power being abused.

And this is not just one thing, right? Like there's a whole push by chief justice john Roberts to reduce the power administration of state on a couple of topics. There was this big fight of years ago about whether or not this case called humper y's execute is so good.

Lahens executor was whether or not a president and fire in ftc commissioner. And it's possible that's gonna down soon too. So last week, then you have this case, spring court.

And the much like a lot of law, the individual case doesn't matter that much, right? You severan was about this one sourcing. Nobody calls, uh, lobo brides the case in question here.

This is about a Fisheries law. Apparently a local Fisher, I think in new england has to pay like seven hundred dollars a week or something to have a regulator on their own boat and monitor the law. The argument is this is not rational.

This is not realistic. And so they suit. They got spring court.

And I want to add that, like the cost of this, of the a oversight on the boat was like prohibitive for so many, like captain into Taylors. And so like the reason why that when to court is because like that I was imposed upon the agency to, like a black destroyed a lot of small businesses.

exactly right? And IT was seven hundred dolla week, which is actually quite a lot for a small business Fisheries as a terrible margin business. But you have this decision at six three.

You have all the six republicans pointed justice, saying they bought favor of this in the three democratic point judges voting against IT. Where the court says, you know, chavez has become a tool of administrative overreach, we think IT is not based on the actual A P, A or the constitution. The AA does not say that judges should refer to agencies is just as courts should consider always, whether or not an actions arbitrary appreciation power stays in the courts.

And IT was interesting, right? Our job ahead, the surprise cyp deal is part of this case. One of the arguments made by conservatives in particular, is that chebron is pernicious ous because IT prevent es legislation from passing because agencies said they don't need new legislation, anything, they can use existing powers. And when one of the it's .

like we will be here again against or say or even jay lin, like all tokens or securities, i've never seen a token that's not a security. That's effectively what they're saying like we already have the laws .

yeah would explicit say that again again to say we don't need any new laws for crypto asset security. We have the the orange growth heavy test from one thousand and thirty two. He said that many.

many times and this is what happens, right? justice. So new, so to I is talking with the planets lawyer, paul clain, great lawyer, I think, was former solor general, which is the top pelt law in the government, and asking him, you know, you're talking about gridlock from everyone.

What do you mean? And he said, you know know what i'm saying i'm quoting is ever on is a big factor in contributing to grid lock. And let me give you a concrete example.

I would think that the uniquely twenty first century phenomenon of cypher to currency would have been addressed by congress. And I certainly would have thought that that would have been true in the wake of the F. T. X. tobacco. But IT hasn't happened. Why hasn't IT happened? Because there's an agency head out there that thinks that he already has the authority to address this uniquely twenty first century problem with a couple of statutes passed in the thousand nine hundred thirties and he's going to wave as wan, he's going to say the words investment contract or ambiguous and that's going to suck all of this into my regulatory ambit even though the same person when he was a professor said .

this is probably a job for the cftc oh my god. So crypt to was part of the argument here. So crypt o currency was discussed in the supreme court and the case of uh tear gang's ler being sort of arbitrating civicus.

I mean there's only one press person who's previously been a chair of the C F C. In the by nam .

and and .

also press .

MIT 哇哦 eble。

I think this is the thing that's really notable in that globe bright represents both what happens when you don't have a push for legislation from the agencies themselves. If you don't have agcy head saying with new legislation, you don't get new legislation usually because congress in their wisdom is really, really going to say we're onna overrule one of our own you know administrations heads that he doesn't legislation.

But you you might think right that, uh, most agency has would want to legislation, but this is not always the case. Sometimes they think I don't need any, knew I have everything under my existing power, even though this court is saying that bad. We don't want that. We want you to be seeking new powers that respond to changes in the time of technology, because laws need to be updated along with technology.

Yeah, it's funny to me that the arguments point to get later tear against as basically exhibit a for this type of behavior and like why, uh, chavez difference should be overruled, right? And like they're seeing what we've seen encrypt this whole time, which is a regulator that is kind of like looking to expand his domain and increases kingdom into areas that really shouldn't be under his control. But like he thinks everything's a token, everything is even a poking my card that could be if it's token ize like, right? H one thing I want to get back to before maybe David, uh, your summarizes all of this, uh, is this statement the first time I heard this race arbitrager precious was with respect to A, I believe A A judge saying this against, I can't recall the specific case, maybe a multiple cases, but about the, uh, esc kind of pushing their jurisdiction too far in decypher.

I remember the judge, the statement has just smacked IT down, said this is arbitrary, capricious into maybe was was that the biton etf I think IT was the big etf and saying, like you have different rules for cyp to because you don't like IT, you're being arbitrary, precious with respect this and that judge was referencing the apa basically yes, and saying, like, hey, this is beyond your power. This is like the law since the nineteen forty. Did you say .

nineteen forty six?

okay. And that's what so the S. C. C has been accused by courts of being of basically breaching the A P I, A, A P. I. Previously as well.

I mean, that's the thing. Usually win a regulation struck down. It's because the asy was deemed to be acting arbitrary, a preciously.

The whole theory we have for creating a minister state is their expert to or they have something specially a unique knowledge. They're not just people off the street. They're not general practices like judges for us, it's no most judges are not to be experts and everything they touch .

because who can be they're technic craters, but they're not politicians right there, not trying to like like create power tomans. They're just trying to make like unbiased.

neutral decisions but that's the theory right, that they are not politicians and therefore we expect their decisions be reasoned to, not be arbitrary. In a precious politicians in their infinite wisdom is that represent, represent the people who voted them in office. They can decide whatever reason to make take a vote.

And that's good and that's fine because they we're protected by how they have voted on every few years. But nobody votes for the experts. Nobody votes the tech craters that the most is a chair and agency who gets voted on by the senate but is still at remove arbitrary competition standards.

And the A P itself as a whole protect us from regulators getting out of control. They create guidelines. They also create certainty. Because the theory is not that every four years, every agcy shifts massive with the president.

But there is some consistency over time that both democratic S A republican president can implement the clean eric, that they both can keep so security flowing. That's a baseline there of our government. That isn't all just stop when one party changes power. But we come now to the real topic, which is, you know, what is this all mean, I suspect.

and just who really, really laid down the punch line like the reason why we are talking about this is because this is overturned, this states quote, that has been the case for forty years and that is now gone uh and so can talk about the the shift in power that that represents in our administrative state.

The way to think about this right is that over the last forty years has been increasing power. That's been a glomeris to the ministry of state agencies have greater confidence that the choices they make will be upheld by courts. Now that is begin to fade away.

To be explained ted, it's going mainly the courts, but also to congress, not say why. So courts now can save for any reason they want to review a specific world making, and they can decide whether it's they want to differ. The agency that means courts have a greater ability to strike down rules or to say, in agency was acting arbitrary actions.

They don't have to you know, even decide whether not to defer to an agencies view. They can just do IT themselves. So are having more power to the courts and especially the supreme because, of course, there is no court is a check on the spring court.

But IT also means more powerful slog back to congress. If you cannot have agencies more able to expand their power through existing rules and statutes, that means they they need new statutes to pass. And that means that rather than just congress waiting for an agency to deal with an issue, they have to take more proactive steps to try a test legislation on IT.

This is where there's a big divide. On one hand, the argument as this is good IT will reduce missing the estate IT will make congress act Better. That kind of the view on the right, the left you is this is terrible because congress is super gd locked.

Now if ages can do things and the executive Price of all can do things and congress couldn't do things, the court can actually pass legislation and regulations itself. No one could do anything. And I think that they're both right and they're both wrong in reality, right? It's not the case that just because the court can struck down a rule that will do IT all the time IT is probably the case that now you're greater risk if you're really aggressive and novel and getting a rule struck down.

But hypothetically, ally, if you were to do most rules in a bite partisan fashion, if most rules past not be as three two majority is a lot of past as sad men or trump add men, but through a five o majority as most rules passed at the cftc during the obama years under chair ginza er even on dod Frank hates more likely course on strike him down so you're losing some, shall we say, off at guard powers in the regulatory state. But it's not the end of agency to pass a regulation. They can still do that.

It's just somewhat cabin in congress. I do also think he is probably the case that congress is not going to start becoming a legislature like the U. K.

Parliament or the japanese diet that just move bills very quickly. But IT probably will move faster eventually. Change happens one where and others no way to stop change forever. So at some point, when the issue becomes pressing enough, you'll be a push on.

And we see that even with crypto, all right, where crypto policy making seems to shift the capital hill depending on how topical IT isn't the news years like twenty seventeen, twenty twenty one and twenty two. And this year, a lot of discussion happens on cyp TOTO policy in follow years like the end of twenty two, one thousand and twenty a dozen. But that means congress still respond to evince in the universe. I don't think this means that now nothing can ever happen in the us. Is, you know, basically sentenced to a score oic existence.

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Okay, I want to try IT and do my best kind like to find the landscape that um we are all talking about that has been like evolving over the last forty years or so. Um we have the thing in amErica for all the european and asian listeners called uh separation of powers, checks and baLances, one of these three wings of government. We have the legislative that's congress, they write the laws.

We have the executive that the president and the agencies that we're talking about, uh and then we have the judicial that was at the courts and they're all in like this like three way, like finger gun battle about like who's got what power and with the several difference doctor in place, a lot of power went to the executive agencies that the gary gangs lers, the S E C S, the E P S, the F D I S, uh, the A B C D. Like whatever, any sort of like agency and I think that's the bull case of the good case for this is like we have this fundamental problem in state of like this, like kind of like last mile problem of as like we grow in like populist, as we grow in like technology, like things get really complex. And so we need to have like this, and we need to write a bunch of laws to account for all the things that we do.

And so what the server on doctoring did is that just deferred all that power to these agencies, which was the executive branch uh, and but then that introduces this, like, well, who's checking on the agency problem? Uh, and in the in the good case, we have basically like what round at a unch of technocrats, like a unch of nerds. I really want an environmentalists to be like in the epa like that, that make sense.

Some like researcher person to be in the E P. A. They write the rules, thats run and exactly yeah. And I hopefully they write good laws. They'll figure out how how to man well.

But then like the bare case is that every once in a while you have the guy who IT takes the position because he wants power, not because he's a technocrat, and that might be a gary gansler, right? Does gary ganzel ler want to promote gary gangster er or does he want to appropriately and effectively govern capital markets? Like I think that, for my opinion, might be the latter.

And so you have these edge cases where you have like these agencies that like naturally a cruel power over time, the longer that they live because they they effectively just collect power over time, they just says, like eyes, I think we should govern over that. And they started to select for that, I think, and they start to select for that. And they just comes into a cancer.

And this is where you get like the air for these types, which is like you only small government, big, small government. Let's go backwards. And so now we have this shaver doctor that is overturned.

And so rather than these federal uh, executive agencies slowly accruing power over time, they are going to dissipate power and can be split up to go to the courts and to congress. And now the courts are kind of the people who are like with that now who's checking in the courts? The supreme court is now like the people that, like no one is checking on.

And this is what some people are saying is like bad, like he is with warn put out a tweet saying like extremist courts are now like writing the rules but then we're also saying that like now also congress will have increased burden to write appropriate laws in the first place. Uh, and so we're taking this power that has like really crude in the executive branch and we're kind is splitting IT up um to both congress and the courts. And now we all like all kind of unsure of us to how this whole thing plays out, but that's where we are. How is that for like the whole summary of like all of this.

that's pretty damn good. I mean, that's basically IT that as with everything else is baLance. I think a lot of people are both being too triumph and too pessimistic being on how much they hate this case in thinking that this is like the end state.

It's A C ongoing thinking of gun battle, as you point out, between the different branches. And they're all responding to events, they're responding different sentiments. IT never ends. It's always going to go on if IT is the that this leads to a total party in the government. It's not going to persist for very long.

But as the american people will not tolerate a government that literally can't like make sure that the milk you drink is not poison or that you know, we don't have any rules, right? Everybody, I think, agrees and cyp wants some kind of rules. We debate about the nature of them, but nobody wants a total free for hours.

I does not matter what, do what, whatever you want. So I think that is a protector from this being the two two downs of the the bear case, but the bull case, the thing I would actually say as well, cyp del, his experience as we were special, a proto lobo bright world already. Increasingly, i'm hear a lot of clever people saying, okay, so the supreme court said, we can go after you, capable and regulations, but doesn't.

We can do enforcement actions. And maybe this means it's easier to have a court allow novel enforcement actions, even we can do regulations. What does this sound like? This is exactly what the asc has been doing in many ways.

They've been doing rules on cypher for us, after all. Instead, theyve been doing a whole host of enforcement actions. I think in the short term, you're going to see a lot of people take the spring court, literally not serious to use the pilots of a recent president, candidate and guess current one.

They're going to say that, you know, the supreme court is speaking literally not seriously. So we're going to try and say what we can do is we can do enforcement actions now. But in reality, what they're saying is we don't want novel approach oratory power at all.

But for the short term, for the next few years, IT might be the case. We see a lot more actions. V enforcement actions are trying to support causey right to reaction enforcement actions on novel spaces.

So here to ecru pto may be kind of the genesis of a change because we are probably the industry is going to get stream court first in terms of discussing whether or not the current administration actions take by the esc are actually allowed able. And I tend to think they are not under this docker we're seeing in lobo bride and other anti misery of state cases. If you're saying you can't do this, you're not going to say about you can do a totally novel off the wall enforcement action.

It's not GTA fly. I would throw one more framing your way to see if you can like kick the tires and and give me a great on IT one framing for like this spectrum of like pro shavon dor, anti shavon doctor is, is that we have like on one side, overregulating expert agencies versus overregulating uninformed courts. And so like some people are saying, like what of course we want, of course we want the agencies to do the rule making.

They're the smart people who know the subject matters that they're regulating over and but then a bear might say, yeah, but they do too much. They make too many rules. They fill in very proactively, make rules where they didn't need to make rules.

And that's really just like sucking the oxygen out of like startups and things. And then on the other, on the flip side of things, you have courts who are like reactive. So they're not making rules ahead of time.

They're n regulating and they're also uninformed by contrast to the agencies. Uh, but they're like allowing for a avoids to like hopefully be filled by like the market and startups and like allowing things to happen before they react to them rather than making proactive roles. So that's my framing over regulating expert agencies versus overregulating uninformed courts. How accurate do you think that framing is?

I think it's pretty good act framing. I mean, anything for a lot of people, how you feel about this depends upon that framing about whether you fear the risk of an overregulating court or an overregulating agency. But I actually is even more complicated, which is IT also just goes most times right less to the theory and more of the people at the start of this pockets.

I mentioned, of course. They initially, the people who want to power the courts on the left, people who want to power the action on the right, because back in the left of the courts, the right had the agencies. Now is reversed because the left has the agencies, the right as the courts.

So I I think for a lot of people, it's less about the actual theory and more a tribal which one is what I want is an outcome based, you know, process and it's a fear in fact, right? Because I look at this in the overall goal here is baLance. IT is always the case.

There's a role for the experts. It's also always the case. There's a role for non expert judges. Nobody gets IT right hundred percent the time there was bias and everything.

I have actually become a big believer that the best thing you can do in hiring the government is hire or White for the people, not just the usual people who come from capital hill, which I did, but people who have never set foot the government agency, almost because their new eyes and new experiences will give them insights that you would not give from someone who is a life. Her at the carnegie, down at the heart foundation, in the U. S.

senate. IT really just take everything. And I think that, in fact, one of the great powers of cyp do as we have so many people coming from so many different parts of the world, almost a pure fed, and I meant to, would be a big support of the centralization.

But that makes us more powerful, makes us Better. And when government is in its best, IT has views from many, many people. It's a big tent that takes some kind of everybody, and I would there say that kind of the small l liberalism that even know eric and others say they want, nobody wants us. Since they are locked out of power, they can have a conversation with those in power you want, have an ongoing engagement with everybody of many different interest troops coming together for the common good.

One thing that is the case, regardless of like the bears in the balls, is that we have hit sort of um peak gary angler, uh haven't way in like twenty twenty four and twenty twenty three because uh gary gancy lor has been significantly defect on the back of the overturning of chavez, a difference not fully defined but like significantly defect. I think I think this is a pretty big move.

And I guess like you know, even if you are a uh you see this as a as as as tragedy a tragedy maybe on kind of the left I think you have to acknowledge that um like power corrupts over time ends like what I when sort of hearing from the the folks that are barriers h on this is like, okay, we have an inactive congress. This gives more part of the courts. And we want, uh, administrative state to be full of technocrats.

S, that can actually look at the detail. But in effect, because we've had forty years of this, we've moved from technical craters filling these rules to like politicians who are hand selected by other politicians, and it's been corrupted. It's more about sort of power and expansion and less about a actual credible neuters.

And I think i've seen this first hand like cyp do is a lesson money. It's a lesson economics is lesson finance. It's a lesson philosopher. It's a lesson in in civics.

And i've seen at first time i've seen the difference between a hester purse who approaches her role as a regulator from first principles, right, and gary gangster, or who I would content have many crypto would contend is seeking power and has a political agenda behind his motives. And those are two very different regulators. And that's because we have had forty years of all of this power occurring to the administrative state. So the reason I am probably net bullish on this is because IT just restores some of that baLance. And the other thing that does, other thing I I have seen, Justin, I wanted to crop ate this is congress is like not doing its job at all.

So like what IT tends to do is when something like F, T, X happens, right IT calls the administrative state and you know the regulators to task and has this whole no show man um like a testimony in front of congress and blames them for like not doing and i'm like congress is your job, what you you should put together some laws for this industry rather than advocating all your authority to the administrative state. So that kind of forces them into a position of having to act because the administrative state is no longer there and it's a jumble of thoughts. But um yeah what's you're take on all of that?

I mean, it's all true in many ways. What I would say is like I think a lot of people have not appreciated how agencies have change themselves over the last thirty years. We have had them become more partisan part because I say this is someone who supported this.

Was there the time? And I still support IT for a long time. I took sixty votes to get confirmed to a post in the U.

S. A government. That's a cynical confirm post, which meant almost always you needed both party's votes. And this, over time, became weak.

Ized people realizes a way to use this to restrict more three members in either side that then let one party to respond to to kill the phillip ster for those nominations. IT was in twenty thirteen. I was there in the senate.

So now you get more aggressive people in their side, more politicians of both parties, and then you start to see once your politicians in the agencies, they they are willing to engage in more political behavior because they're only speaking right to the people who put them in there in the first place. If you don't need both parties to vote for you next time, you're not going to look at both parties. But at the same time, I will note was the sand.

Gary was confirmed. Gary got republican votes. He got four, five republican votes at the time. So it's not as though he was a partisan point like other people were at the same time.

Um this goes to a real question of like how is the government is meant to work? IT is definitely the case that congress has moved away and loss of the muscle memory of leisler. There's a whole bunch of reason we go into on that.

There is an ongoing issue where I love this in a for a long time. If you're a member of congress, your count salaries. Capt, of course, doesn't go with cola unless they vote for.

There is a big scandal. They were voting pay increases well, for most years, the their staffers, as while sellers were kept the members and they're paid very little. So as a result, people don't stay in congress very long.

The staff for class leaves and becomes lobby ous or other jobs. So you had everything of knowledge. They close down some areas in congress in terms of power and it's become a job.

It's more in many cases, and hear some members of congress messaging and substance. It's part of why a lot of member, especially Younger members, love cyp do. They're like this is a topic where it's not partisan.

I am a liberal, democratic and serve republican on Richard, tourists or time member. I can work with someone I would never with any other issue. And we engage subsided vely on and policy.

This is not some. It's been done in decades in many cases. And I think that is the real lesson of all of this.

There is no shortcuts and policies, right? We see occupant. There's no like easy solution of you to flip a switch. You do one slight change and suddenly everything falls in the place. It's complicated, hard or facing novel questions.

They are not easily resolved by the thirty three act or the forty act or automatic exchange act as chairman and points out thinks he needs the in laws. I agree, by and large, the way to deal with that is to come together, work with everybody and figure out a solution that maybe nobody will find perfect, but everybody you can find acceptable. And that should be to the common good.

And that power has been lost. I'd say, over time, IT used to be the congress would pass many new laws of year. And these days, that does not happen much because it's really, really hard.

And the incentives are not there, to your point, right? Even agency can do IT for you. Why are you gonna take on all the pain and struggle of actually doing to me, unless you are determine to make a naim E E yourself, or just wonderfully crazy.

So I I look at this as a result on the left, with less anxiety than I do possibility, because I do think this could lead to a return to focus of the core theory of change, which is always the legislature, that is, article won in the constitution, not the executive bras. Article to, not the juicier. Three congress was meant to be the primary locus of making change.

And I think the more we can restore that muscle memory to congress, the Better. And if we can do IT with buy parties in topics like crypto u, more the Better. I do think I think your .

tweet thread made this point as well. I mean, there's sort of a win here for folks on the left because so I think probably the administrative estate is generally a bit more left leaning. At least the get against the world in particularly is is under A A bian administrative istra's. You can imagine a world where let's say, like the republican presidential nominee wins and just like delete everybody, just like basically go through fires everyone and replaces them with right leaning um like people who are uh in these heads of very administrations we are very much towing a party line and not neutral at all. They are like politicians, not technocrats at all. How bad with that bee for the left right this kind of like this argument of um like it's good for that power not to resides in the administrative state in general because if the right Marshals IT to its purposes, then IT could be used very much against the the left that's why I was a little confused about was on the reaction the left of of eliza with warm and I think you painted a counter reaction of somebody on the left was like, hey, we don't want trump to have this administrative state power. This is actually a good thing for the left because IT restores baLance.

Is there anything to that? I think so, right? This goes to a core theory of, like how power should work, because there are some people that you should try to make IT impossible. Anyone do anything right? Then no one can ever get hurt, but no one ever do anything.

And I don't agree with that, but also I don't agree with the theory of if we have no restrictions on us, then we will be able to make change to be so popular, no one will ever vote us out. This was a theory of a british communist group called militant in the ninety eighties. Theory was were going to use that run.

The government were going, you know, basically nationalized everything we're to run as a planned economy. And they see what happens if you lose and protects power, we would never lose because ever be so happy. I tend to think the centralization good as a watchword for a lottery on at least.

I would never want to live in a system where I would hate if I was entirely on the wrong side of power. And I say that is progressive because there is never a system in the world where absolute power will only be used by your friends. Absolute power is too easy corrupting and corrupted.

IT is Better to have many overlapping systems so that no one can get out of control because you, we're all human. One of the greatest lines ever gave in a speech for my bossy and ball and was citing Thomas jeffson. This is back when I was, see, ftc and IT was, if men were Angels, they would have no need of government.

We are not perfect. It's because we're not perfect that we come together to come up with laws and the regulations because we know we can all fall pray to not only momentary temptation, but consistent, long lasting temptation in mistake is to protect against that. You want nobody who is particularly over powerful.

I think that in the course goes to the second point, which is for the left, I think the anxiety they have is that this super court is not in the level for their wording, that it's not a fair system. And I don't disagree. Necessary, I think six, three, too unbaLanced as a partisan split. I know republicans who even say they don't want to get more powerful in the spring for because IT become even more on baLances. If you had a court that people felt was not bias in one direction, there be a lot less agitator about this decision.

Yeah, that makes sense to me. okay. Well, let's close this out and talk about the implications for um crypto and ology puts together kind of like a bull case uh you like tweet for h shaver's difference being overturned. And very bullish on like net new space for for startups in particular tech because certainly new tech areas are an area where the administrative state can start to encroach and say, ah no, that's a new so that's mine. IT falls under my territory.

I got IT and that's certainly what we've seen in cyp to so my immediate reaction to um shaver on difference being a returned was like I don't know what this means as far as like is IT good for the U S. Or not um but I know it's good for cyp to at least i'm pretty sure IT is because our big request from uh the U S. Government is just like let us do some stuff, give us a sandbox if if if you'd like but just like we're developing, uh you know we're cook these things just kind like the internet allow us uh, some freedom and don't clamp down on us uh too earlier and maybe along the way bringing some helpful legislation.

But what we've gotten instead is a bunch of over eager, over zell's h administrators kind of like clamping things down in ways that feel arbitrary, capricious. So is this just like net good for crypto? And is that c going to like withdraw all know its cases against consensus, uni swap and crack in in coin base and are gone to live happily ever after? Or like, yeah, what's what's the take for cypher?

A so in the short term, I don't think much changes because gary still the chair, and I love him or hate him, gary never backs down. That is his .

common cause except for the three meeting.

That's not a public time media that was that the rare exception? Some ways um I think in the medium term, IT is good for crypto and that this shows one for all lot of us have argued this approach is not work well. You're not going to get to a regime of sensible regulation through the courts, through rifle shot.

That was what I think the the uh judge, uh amy burma Jackson said on friday night the finance case that seems strange to do this system regulation through all these into ja rifle shot case of the hundred of thousands of tokens. So my hope in the short term is this kind of refocuses a lot of attention, especially on democrats, that okay, you can't get this. You dealt with for lack of Better word, by regulatory action or enforcement actions that requires legislation in the medium term.

I think IT probably does reduce the risk that someone really goes after a novel space with an existing statute because that's pretty clearly what's being disallowed here. IT probably makes IT more likely that congress is not just doing legislation on new topics, but that agencies are lobbying for them to do that. So for crypto to where we're pretty mature is a good thing.

I do worry control logy that if we had some still pretty nason space, say, quantum computing, that a regulator would now run to congress too soon before you would knew anything and create a mote accidently. That's not, I think, a risk for cypher to at this point. But IT could be for a sub area that not yet fully built out.

Overall, I think IT probably is going to be positive for a lot of startups because the biggest problem we have is all these motes around. If IT takes ten million dollars to exist and to do a business, no start can fundamental exist. The more we can create system tear regulations that fit to here's where you are when you're starting in the sandbox, you're grow and you're getting bigger.

We add the regulation that seems Better. And I think what we will get, but there is a long way to go. I think we're going to see a lot of agencies respond to this with more enforcement actions to make up for their loss regulate powers, which again, hard to see that happening.

More crypt to give. We've gone through. You may see them more for A I maybe for other text spaces, but pretty soon that i'll be seen to be a and and then you'll refocus on, okay, time to go back to congress. So you think these .

enforcement actions, which are not real, making they are enforcement actions and at some level maybe get against A C, C, was kind of like predicting that something like this could, and exercising its power through enforcement. But you think ultimately that is going to be smacked down by the courts because of this ruling as well.

I think so I don't think this court, or is going to say, all you got us, you did enforcement action, that was Normal verse regulation. But I mean, part of this came for me. I I still know a lot of people who are both die hard crypto democrats and die hard anti crypto democrats.

And I was vacation, and I eat about this. All say again with an anti cypher democrat is pretty senior. The government last summer, I was like, why do you guys why don't we just do some regulation? And he said to me just it's easier for the supreme court to strike down regulation and enforcement actions. And I mean, what I said is, you know that pretty cynical. And I don't think that's even right.

I think really one of the big risk here, but the since I got right is that if in when this fails, and I think even this person was pretty confident this spring court was not going to bite at this, the reason to do IT then is so people are seeing you're fighting, which again, not popular, but people make bad decisions, then I think there will be an understanding of, okay, we really can't do this. It's time to kind of accept that the administrative agencies are not the loss of change that we wanted them to be. And that means different routes.

I mean, in the end, I am an electoral alist. I think all power flows out of elections, one of the races. I also like prediction markets because I like understanding elections and how things change moment to moment. And the more you can focus on winning a majority of voters for your policy platform in the congress, in the senate, and then excuse IT, that's Better than trying to do IT through a qazi, faceless or shadow super regulator.

So what do you think about this take as we close? So maybe they take is that we have hit peak administrative state and peak gang's ler in the first half of twenty twenty four. And like now, in order to move forward in cypher a, we ve got to focus all of our energy, all of our firepower on elections, on congress to put together good bills and good legislation that will support this industry, protect a civic freedoms and propeller ford.

And that is the new fight, because the administrators are going to have less power to get in our way. But we have to show up there and make sure we don't have bad legislation put in place. Or that will be a kind of like the the new, you know I guess, gum in the works for clipped out moving forward.

All power flows from the ballot box in amErica when you show that you have a voting block behind you IT changes things macula sly. And I think we saw that last month with sab with getting support for people who I never want to thought would sit in the comfort cyp ta. We saw with to some extent legislation on marka structure.

Um but I would also know, of course, the courts are important to right. I think a lesson this should be that if you're a small company, you feel like the an agency is bullying you and out of their space, you should consider before you just settle. Actually you know, the courts may not agree with this. So I hope the pig makes people really think through whether or not just as an agency says, the laws and they are side, they actually do just .

not been great. I got another civics lesson and been fun. Actually, I didn't use select civics, but this when the context of cyp du, much more interesting to me.

So thank you so much. My pleasure, guys, is great love talking about this stuff.

because nation gotto end with this. Of course, you guys know crp to risky so as politics. So our court kisses, I suppose, from time to, I think we won this one.

Uh, you could lose what you put in, but we have had west. This is the frontier. It's not for everyone, but we're glad you with us on the banks journey. Thanks a lot.