Could SEC v. Jarkesy Bring Down the Administrative State?
Last Friday, the U.S. Supreme Court heard arguments for Securities and Exchange Commission v. Jarkesy, which challenges the authority of the administrative state.
The defendant is George Jarkesy, a conservative radio host who was fined over half-a-million dollars by the SEC for allegedly defrauding investors and appealed this sentence by arguing that the SEC does not have the constitutional authority to do this.
Jarkesy’s Three Arguments
- The SEC is violating the Seventh Amendment, which guarantees a trial by jury.
- The SEC doesn’t have the authority to adjudicate these matters since it’s an executive agency, not a federal court.
- The SEC judges are unfairly protected from serious political and legal accountability.
All these arguments add up to condemn the administrative state as a whole, which Jarkesy’s team claims “is effectively rigged against virtually every defendant that goes before an ALJ [administrative law judge].”
Based on Supreme Court justices’ questioning (specifically those appointed by Trump), Jarkesy may be actually successful in winning his case.
According to a report from The New York Times, Justice Kavanaugh took issue with the fact that the SEC is basically acting as the judge, jury, and executioner; Justice Gorsuch pointed out the lack of accountability that results from no jury option; and Justice Coney Barrett was bothered by the blurriness between what counts as public and private law.
As for the liberal justices and the SEC’s legal team, they mainly argued that this is the way things have always gone, citing the precedents set by the Chevron doctrine (which delegates legal authority to executive agencies) and Atlas Roofing Co. v. Occupational Safety and Health Review Comm’n (a 1977 case that reinforces the Chevron doctrine). Sotomayor said changing the existing order would be “dramatic,” and Kagan noted the “chutzpah” of the defendant’s claims.
Frankly, writers of the pro-government left seemed to make a more spirited (albeit more logically fallacious) case against Jarkesy.
In an Atlantic article provocatively entitled, “The Case that Could Destroy the Government,” Noah Rosenblum expresses how the left really feels about all this: Basically, right-wing yahoos are using fringe constitutional theory to overturn what we generally know as “the government.”
Rosenblum goes on to explain that the SEC needs to have this authority to continue doing its job of keeping investors safe from swindlers like Jarkesy.
Congress and the courts are simply too busy and not sufficiently specialized in administrative statutes to handle the problems of market manipulation.
In so many words, he maintains that the idea of checks and balances and the Bill of Rights inhibit “effective government.”
After dismissing originalist jurisprudence as “born in sin” since it was supposedly implemented to defend racial segregation, Rosenblum concludes his essay by asserting that “the consequences of Jarkesy’s success would be disastrous, especially for the American economy.”
For him, regulators like those in the SEC are the final line of defense against certain chaos threatening all areas of American life.
Ignoring the alarmism, Rosenblum’s reasoning somehow combines naivety and cynicism into an incoherent yet typically leftist argument.
The cynical aspect is that he confuses the whole government with an executive agency.
This means that instead of protecting the rights of its citizens, as is explicitly stated in the Declaration of Independence, the government exists to tell its citizens what to do and how to do it.
If the government is prevented from doing this, then Americans will automatically degenerate into savages and resort to harming one another in every way possible.
The naive aspect is that he assumes that executive agencies are actually neutral, trustworthy, and competent.
Whether it’s the SEC, IRS, or the FBI, their agents are professionals with a heart of gold.
They could never be corrupted with unbridled authority or gargantuan budgets.
They would never target specific Americans, conduct political witch hunts, or neglect their actual responsibilities.
Of course, both of these premises are ridiculous.
As Sohrab Ahmari details in his recent book Tyranny Inc., it is quite possible to have a tyrannical system exist under the guise of technocratic economic governance.
The problems that he sees with corporate arbitration — the private judicial process for employees with a grievance — are the same as the ones with ALJs at the SEC: “a vast parallel court system where powerful interests get to tailor the rules to their advantage, dominate weaker actors, and ultimately close off access to justice.”
This explains the fact, cited by Jarkesy’s lawyers, that “the agency had won the last 200 times” before “Jark
What are the three arguments presented by Jarkesy’s team in their case against the SEC?
T Jarkesy’s case is just another attempt by conservatives to dismantle the government and undermine its authority.
This article highlights the ongoing legal battle between conservative radio host George Jarkesy and the Securities and Exchange Commission (SEC). Jarkesy was slapped with a hefty fine by the SEC for allegedly defrauding investors, but he appealed the sentence on the grounds that the SEC lacks the constitutional authority to do so.
Jarkesy’s team presents three arguments in their case. Firstly, they claim that the SEC is violating the Seventh Amendment, which guarantees a trial by jury. Secondly, they argue that the SEC, being an executive agency and not a federal court, does not have the authority to adjudicate these matters. Lastly, they argue that the SEC judges are unfairly protected from political and legal accountability.
These arguments, taken together, condemn the administrative state as a whole, alleging that it is rigged against defendants that appear before administrative law judges (ALJs). Notably, based on the Supreme Court justices’ questioning, Jarkesy might have a chance at winning his case, especially with the support of justices appointed by Donald Trump.
Justice Kavanaugh raised concerns about the SEC’s role as judge, jury, and executioner, while Justice Gorsuch criticized the lack of accountability due to the absence of a jury option. Justice Coney Barrett also expressed concerns about the blurred line between public and private law.
On the other hand, the liberal justices and the SEC’s legal team argued in favor of maintaining the current system, citing precedents set by the Chevron doctrine and the Atlas Roofing Co. v. Occupational Safety and Health Review Comm’n case. They emphasized that changing the existing order would be dramatic and criticized the defendant’s claims.
However, the pro-government left seemed to make a stronger (yet logically fallacious) case against Jarkesy. An article in The Atlantic titled “The Case that Could Destroy the Government” suggests that conservatives are trying to overturn the government using fringe constitutional theories. The article argues that the SEC needs the authority to protect investors from fraud, as Congress and the courts lack the expertise in administrative statutes required to handle such issues.
The article concludes by dismissing originalist jurisprudence and asserting that Jarkesy’s case is just another attempt by conservatives to dismantle the government and hinder its effectiveness. Ultimately, this case poses important questions about the authority of administrative agencies and the balance between government power and individual rights.
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