Yesterday, the U.S. Supreme Court ruled on two important cases that could have far-reaching implications for Bitcoin and cryptocurrencies. National Rifle Association v. Vullo (NRA) and Cantero et al. v. Bank of America, N.A. (Canter).
in NRAThe court addressed an important issue that impacts traditional advocacy groups as well as disadvantaged but legitimate industries. The decision draws parallels with Operation Chokepoint 2.0, in which U.S. regulators allegedly targeted cryptocurrency businesses through financial exclusion. Additionally, the recent Canter The ruling clarifies how this legal framework will affect Custody Bank’s appeal against the Federal Reserve’s denial of its master account.
The NRA case
The National Rifle Association (NRA) has sued Maria Vullo, the former director of the New York State Department of Financial Services (DFS), accusing her of using her regulatory powers to force financial institutions to sever ties with the NRA, which the NRA claims is an unconstitutional suppression of its First Amendment rights.
Vullo argued that her actions targeted business practices and relationships, which were “non-expressive activity” rather than speech, and therefore not unconstitutional coercion. But the Supreme Court found this argument to be misplaced: “The fact that Vullo ‘regulated’ business activities arising from the NRA’s ‘relationships with insurance companies and banks’ does not alter the argument that her actions were intended to punish or suppress speech.” look NRA Judgment, p. 17 (internal citations omitted, emphasis added).
The Supreme Court reversed the Second Circuit’s decision in favor of Vullo and remanded the case, reiterating: AlsoGovernment authorities may not use coercive force to indirectly punish or suppress objectionable speech or advocacy.
Chokepoint Operation
Operation Choke Point was a Department of Justice (DOJ) effort aimed at “clogging out” businesses deemed high risk by denying them access to banking and payment networks. Although these businesses, such as gun dealers, payday loan providers, and adult entertainment, were legal, the DOJ pressured banks to sever ties with these businesses due to “reputational risk.” This effort effectively forced banks to comply under the threat of federal investigation, significantly impacting legitimate businesses in a variety of industries. The FDIC eventually The lawsuit was settled. Related to Operation Choke Point in 2019.
Operation Chokepoint 2.0 is a term coined to describe the alleged actions of U.S. regulators against the cryptocurrency industry, involving a series of informal guidance and regulatory pressure on financial institutions to limit or end ties with cryptocurrency businesses, reminiscent of the original “Operation Chokepoint 2.0.” IllegalOperation Choke Point targeted industries such as payday lending and firearms sales without due process or clear legal justification.
just NRAIn Operation Chokepoint 2.0, regulators overstep their authority and exert undue influence and outright coercive power over undesirable but legitimate actors. NRA They stress that such abuse of power is unconstitutional, especially when it is used to suppress particular views or industries. In both cases, regulators are accused of using their power to enforce ideological positions rather than following clear statutory mandates.
The core of the NRA’s argument is that Vullo’s actions violated First Amendment rights. Similarly, similar violations could occur if regulators were to target cryptocurrency businesses for their unfavorable views on decentralization and financial independence. The Supreme Court’s decision strengthens the position that indirect suppression of speech through coercion is unconstitutional.
NRA It also highlights serious due process issues where affected entities are denied a fair opportunity to defend themselves against secret regulatory actions. Cryptocurrency businesses facing sudden account closures and banking restrictions without clear explanation or remedy mirror the NRA’s experience and raise serious due process concerns.
Finally, and this is a bit speculative, one could argue that, as the Supreme Court has clearly stated, qualified immunity does not apply to government officials who knowingly violate the Constitution by coercing or attempting to coerce the infringement of First Amendment rights. Eliminating qualified immunity would mean that such officials could be held accountable. Personally is responsible for violating the Constitution.
of Canter The decision and its impact on custodia banks
of Canter The case concerned whether Bank of America, a national bank, was required to pay interest on escrow accounts as required by New York state law. The Second Circuit dismissed the case based on the argument that New York state law preempts federal law, but did not conduct a thorough analysis of the issue. The Supreme Court unanimously ruled that state laws that significantly interfere with the authority of national banks are preempted, but that Congress, as outlined in the Dodd-Frank Act, has provided detailed procedures for determining whether preemption is appropriate. The Supreme Court reversed the Second Circuit’s decision and required the Circuit to fully engage in a thorough review of the issue.
As part of its judgment, the Court reiterated that:
The United States maintains a dual banking system in which federal and state banking systems exist in parallel. This dual system allows private banks to choose whether to be chartered by the federal government or by a state government.
Federally chartered banks, known as national banks, are subject primarily to federal oversight and regulation, while state chartered banks, known as state banks, are subject to additional state oversight and regulation. These two banking systems coexist and compete with each other.
Canter They emphasize that determining whether state law significantly interferes with national banking power requires a nuanced analysis consistent with Dodd-Frank and past Supreme Court precedent, and they explicitly and implicitly emphasize that at a high level, the dual banking system is alive and well.
However, if the Federal Reserve Banks could exercise powers beyond the Minister’s discretion in denying master accounts to state-chartered banks, the very existence of a dual banking system could be invalidated. Moreover, if local Federal Reserve Banks do in fact have arbitrary discretion to grant or deny master accounts (as Judge Skavdal held in the Custodia case), District Court Decision), and as the Kansas City Fed argues, regional reserve banks are private banks, NRA That may apply here too.
Conclusion
The Supreme Court ruling NRA and Canter Both have taken steps to address the federal government’s expanding authority over Bitcoin, impacting both Operation Chokepoint 2.0 and Custody Bank’s access to the financial system. NRA I believe it will have a more immediate effect and will be used in the short term to attack aspects of Operation Chokepoint 2.0 and the bank shutdowns of legitimate but disadvantaged industries and individuals. Canter Custody seems to suggest it is on solid ground in its complaint, but on a more general level it further exposes the unchecked nature of the modern administrative state, which has also been deployed against bitcoin mining. Environmental Impact Assessment case.
Small victories, sure, but like Sats stacking up, the wins add up.
This is a guest post by Colin Crossman. The opinions expressed here are entirely Crossman’s own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
