Chevron Deference: 40-Year Decision Reversed & Explained | Justin Slaughter

Bakeless Nation, have you heard about Chevron Deference? 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 so related to crypto that crypto and the SEC was even cited as evidence as to why Chevron Deference, this doctrine, needed to be overturned. So this is something that is directly impacting our industry, but it actually impacts the entire rulemaking process of all federal executive agencies. There is a lot to unpack here, which is what we do in this podcast. So go ahead and strap it in because it's uh it's a big one. So let's go ahead and get right into the conversation with Justin Slaughter from Paradigm, but first a moment to talk about some of these fantastic sponsors that make this show possible, especially.

Begless Nation, today we're talking about the Chevron Deference case. All right. If you're not educated on what that means, we'll describe it here today. And the question on our minds is this good for crypto? Is this good for the United States? Or is it this giant trade off that will lead to bad outcomes? Our guest today is Justin Slaughter. He's policy director at Paradigm. He's previously been a senior advisor at the SEC and also a chief advisor at the CFTC. So he has spent some time in the belly of the beast. Justin, welcome to Bankless.

Thanks for having me, guys.

Well, let's get this out of the way. Uh so slaughter is your real last name, right?

Bless me.

Okay.

I will tell you, when I joined Paradigm about two and a half years ago, some when I first tweeted, someone said, slaughter's the name of their policy director. No one can stop us. And I was like, thanks, guys. I like that you think that my name dictates my abilities, but I'm gonna, I'm not gonna, you know, dissuade you of that knowledge.

It sounds like a meme coin, and that's you know, can be bullish in this industry. Uh and also let's get something else out of the way. So you're uh previously in the SEC and also part of the CFTC. So you spent some time over there as part of the administrative state. So what were you doing over there? And why'd you come here? Why'd you come to the light?

Long question. So basically, for me, I've done a lot of things around government. I clerked for a judge back when I was getting started. I did law firm life for several years, didn't really love the big law lifestyle. Moved over to the Hill back in 2012 to work for then Congressman Ed Markey doing oversight for him.

On

gas futures, oil futures.

And it was doing that job I first encountered, the only digital asset at the time, Bitcoin.

And I'm an honest person, didn't buy any. I regret that.

But kept following it, moved over to the Senate with my boss in 2012, 13, sorry, he's a general counsel, moved over to CFTC to work for commissioner in 2014. It was there when I was working for her, Sharon Bowen, great commissioner,

that CFC held Bitcoin as a commodity for the first time.

After uh I'm a Democrat, we lost in 2016. So I need to get a new job. I did fintech consulting and crypto consulting for a few years, and then worked at the SDC at the start of the Biden admin,

where I advised acting chair Allison Heron Lee on a bunch of stuff.

That was a fascinating experience. Uh, we were there during the GameStop, the first GameStop fiasco.

And it was after I finished that I

got connected with Paradigm, where they said they really wanted to build a policy function. And I just fell in love with the firm, fell in love with the work that they do, Fred Erzm, Matt Wong.

Um, Dan Robinson, a lot of Palmetto, and been here now two and a half years and just having a blast.

Yeah, you still enjoying it, no regrets.

Of course. Zero regrets. Best we've ever met in my life.

And uh on the CFTC side, so we had uh Timothy Massed uh on the podcast talking about state stuff. Yeah, did you know him? Did you interact with him?

We worked together frequently. So I he was one of the five commissioners of the chair when I, my boss, Sharon Bowen, 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 tweaks 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 all meet in private on any substantive topic. The idea is to prevent kind of people creating shadow majorities, exactly. So I frequently would do shuttle diplomacy between my boss and him, you know, rather than have the two of them be able to speak ever. So loved Tim, talked to him a few weeks ago, great guy.

Interesting. So you're like a a crypto bridge then. You're like bri bridging the information over, I suppose.

I'm a bridging everything, right? Former Hill, Crypto VC, SEC C FTC. And I come from the administrator to tell to tell you

DC is V. If you need a pair a paradigmic sense of how DC works, it is V.

Yeah. But are they out 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 is thinking about crypto, even everyone at every FENREG agency is thinking about crypto. Are there people in DC who are hostile to crypto in the admin? Yes. Are there people who are friendly even now to crypto in the admin? Yes. Also. The administrative state, any administration contains multitudes.

And the mistake is thinking it it's one lumbering behemoth that is clearly going in one direction or the other. When it's all these different groupings, all these different cabals and entities mixing together, fighting on one issue, working together another one. It's much more chaotic than you might expect. And this brings us to Loper Bright because, of course, so much of policymaking now is decided through the administrative state. And that is something that has become increasingly controversial in the top flights of the judiciary, the Supreme Court.

Yeah, so let's talk about Looper Bright then, get right into it. And you can serve your role as a bridge once again between the administrative state and crypto. I think we'll we will need some definition of terms of the this administrative state, what it is and how it came to be. But let me just set up this episode with you know some backdrop. So the US 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 uh making nude. So we're not gonna talk about Trump versus US at all today. That's out of scope of this episode, maybe worth a podcast in itself, maybe on bank list or maybe on a politics podcast. But the the one ruling that we're here to talk about, which is potentially massive, I think Justin, you said in your tweet thread that it could trigger a sea change in all regulations, crypto and outside it, is this uh Loper Bright case. And some people may have heard it called uh Chevron Deference, the Chevron Deference case. In fact, we had a um uh TradFi Wall Street representative, um, Sam uh journey in on recently on Bankless. And he told us about this. He said, this is coming. This is something that most people in crypto aren't paying attention to because, but you should be because it's profound. And so this case has been uh the Chevron Deference has been struck down, I believe, right? Which is like for 40 years it was, you know, in in precedent and now it's down. And so I'm hearing divided things. So from my in-crypto tribe and pro tech, the people that maybe like SKU right or or or skew pro growth, let's say, I've heard this is amazing news. I've heard this is finally gonna strip the power seeking regulators from their ability to make up these arbitrary and capricious random rules, right? Like the archetype is Gary Gensler, and this strikes right at uh Gary the get Gary Genslers of the world and restores power back to kind of like where it should be in Congress. Now, from non-crypto sources, I've heard something different. Mainstream media, those that skew left, I've heard this is gonna 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 have no idea what they're talking about, that this is gonna be worse governance, that's gonna be bad for the people. We're gonna get polluted rivers and just like uh nuclear um like um meltdowns and and reactor cores and all sorts of bad things. So I think here we're we're we're trying to find out the truth, right? Like, is this good for crypto? How good? And like, are there some trade offs here? Uh so maybe we could start the conversation. Can you just tell us how we got here? Yeah. What is what is uh 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 then we'll get into definitions of the administrative state, etc.

All right. So

Forgive me on this, it's gonna take a little while to go through the history here because there is a long and torturous history that dates back basically to the beginning of everything in the U.S., 1789, the Constitution.

So

we in the U.S. had initially a pretty small government. We had in the Constitution a Congress, we had an executive branch, we had led by the president,

we had a judiciary. And for about a hundred years, there wasn't much more of the government than the military. We didn't really have a standing army for very long. There was a taxing process. There weren't that many advisors in the government because it didn't do that much.

And that's true in a lot of countries, frankly. But over the 19th century, as the world industrializes, everyone realizes that in 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 developed country, the UK, Germany, France, Russia, even, Japan, here, you start to see a building out of expertise of politics and policy.

The US, in many ways, is the last country to really build this out in a big way. And our formative moment for the administrative state is the New Deal. We were at that point creating new programs, social security.

Which needs to be administered by people, of course, to hand out the benefits.

Creating new systems of law and regulation, telecommunications law, you need the FCC for that.

Securities law, you need the SEC for that.

And for the first time, you really have the building of a series of different agencies that try to craft comprehensive regulations across

the economy, across the entire government.

And to be clear,

This is not a normative statement. 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, and it then leads to a second question

how are these programs run?

Well, in the 1930s, they functionally were run almost with

total power to the president. There's a great vignette, people like to cite, it's from Robert Carrow's famous The Power Broker.

Robert Carrow was writing about Robert Moses. He's one of the great men who built some say destroyed New York City. He did all these bridges and tunnels. And there was a bridge he wanted to build in Lower Manhattan.

It was going to destroy an old fort and aquarium. The city hated it. The people hated it.

And Moses just hadn't basically power to do it. He was going to do it. There's no notice and comment period. FDR was able to use his own administrative power to stop it.

But it took a president to do that.

So FDR, as heterodox and far sighted as he was, realized you know, I'm pretty good at running this administrative state power, but what's the next guy going to do?

So he tasked his then attorney general, future Supreme Court Justice Robert Jackson, to 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? What are the processes that will guide us? What are the guidelines? And Jackson came up with a report in the early 40s. It was derailed by the Second World War. And after World War II, they passed the Administrative Procedure Act. This is itself the main law that details how administrative agencies work.

Have you guys at Banklist ever done a comment on any rule so far? I think you've certainly discussed comments, but I'm not sure Banklist

We have