What Will the New American Revolution of Limiting the Power of the Regulatory State Mean for Businesses?
Identifying business benefits and detriments, and winners and losers
A new American Revolution is going on in the Supreme Court. In recent years, the Court has issued four major decisions curtailing the power of the regulatory state. In March, the Court heard oral arguments in a fifth case.
What does this trend mean for businesses?
Hobbes v. Locke – Still Relevant 350 Years Later
This harkens back to the Declaration of Independence. In it, the principal author, Thomas Jefferson, embraced the political philosophy of John Locke and rejected that of Thomas Hobbes.
In his primary work, Leviathan, Hobbes argued that, without strong government, people existed in a state of nature where life would be “solitary, poor, nasty, brutish, and short.” To combat that, he argued for an all-powerful central government, particularly an omnipotent king. While the people would grant power to the king, Hobbes argued that they would have nearly no right to revolt against him once they did so.
In his Two Treatises of Government, Locke acknowledged the need for government but argued that people have natural rights to their lives, liberty, and property that are “inalienable.” He argued that these rights limit government power and that the people have a right to revolt if the government violates them.
Jefferson heavily based the Declaration of Independence on Locke’s writing. Jefferson wrote of individuals’ “unalienable rights” to “life, liberty, and the pursuit of happiness.”
Because of Hobbes’ writing, many now refer to the massive and powerful regulatory state ushered in by President Franklin Roosevelt during the New Deal as the “Leviathan regulatory state.”
The Recent Lockean Revolution at the Supreme Court
Republican appointees to the Supreme Court have been leading a Lockean revolution against the power of the regulatory state in the past several years.
In 2022, in West Virginia v. EPA, the Court applied the “Major Questions Doctrine” to hold that the EPA exceeded its authority in regulating carbon dioxide emissions based upon an obscure statutory provision. This doctrine says regulators may not make rules on major policy issues unless Congress has clearly granted the power to do so in a statute. While this case didn’t create the Major Questions Doctrine out of whole cloth, the Court elevated its previous expressions of concern into a powerful rule.
In 2024, in Loper Bright Enterprises v. Raimondo, the Court struck down the Chevron Doctrine. In Chevron U.S.A., Inc. v. NRDC (1984), the Supreme Court held that courts should defer to a regulatory agency’s interpretation of a statute when the statute is vague and the agency’s interpretation is reasonable. In Loper Bright, the Court overruled Chevron and held that regulatory agencies are not entitled to deference regarding their interpretation of vague statutes. This decision shifted the power to resolve such vagueness to the courts, although they may still find an agency’s interpretation persuasive.
Also in 2024, in SEC v. Jarksey, the Supreme Court held that the Seventh Amendment right to a jury trial limited the power of the SEC’s in-house tribunal. That decision makes it easier for businesses to go to federal courts to fight fraud-type claims made by regulatory agencies.
This year, in Trump v. Wilcox, the Supreme Court permitted the President to fire the heads of the National Labor Relations Board and the Merit Systems Protection Board despite statutory language saying they can be fired only for neglecting their duties or malfeasance. The Court didn’t issue a full opinion; it just stayed lower court rulings blocking the firings. Most interpret this stay as a signal that the Court will soon reverse Humphrey’s Executor. This 1935 Supreme Court case upheld the constitutionality of statutes placing certain regulatory officials beyond the President's unlimited power to fire them.
Will the Supreme Court Reinvigorate the Non-Delegation Doctrine?
In March of this year, the Supreme Court heard oral arguments in Consumers’ Research v. FCC. This case concerns whether the Court should revive the Non-Delegation Doctrine.
The Supreme Court created this doctrine in a pair of 1935 New Deal-era decisions that struck down two instances of Congress delegating broad policy-making power to regulators (Panama Refining Co. v. Ryan and Schecter Poultry Corp. v. United States). The Non-Delegation Doctrine holds that Congress cannot wholesale delegate the making of policy decisions to regulators. Congress must provide an “intelligible principle” (i.e., standards or rules) to guide a regulatory agency’s actions. Since then, the Supreme Court has not reversed the Non-Delegation Doctrine, but its standard for what constitutes sufficient congressional guidance has been so lax that the doctrine has been effectively dead.
In 2019, the Supreme Court came close to reinvigorating it in Gundy v. United States. Only four justices supported keeping the Non-Delegation Doctrine weak. Three conservative justices called for reinvigorating it, and a fourth, Justice Alito, indicated his openness to doing so. But Justice Kavanagh, a Trump appointee, recused himself, so there weren’t five votes for reinvigoration.
Later in 2019, Kavanaugh penned a statement in the denial of Supreme Court review in another case (Paul v. United States) in which he signaled that he may be aligned with the justices calling for reinvigoration.
Since then, the composition of the Court has changed – there is now a 6-3 majority of Republican appointees rather than the 5-4 majority that existed at the time. Based on the oral arguments, it’s hard to say how the decision will go. It’s possible the Court will strengthen the Non-Delegation Doctrine even if it doesn’t find that it was violated in this case.
What does this Lockean Revolution at the Supreme Court Mean for Businesses?
There will be benefits and detriments, and winners and losers.
Benefits and Detriments
Regarding benefits and detriments, governmental regulation is akin to taxation. Understanding and complying with regulations imposes a cost on businesses, such as buying advice from lawyers and accountants, and hiring employees to run compliance. The reining in of the regulatory state could be viewed as a kind of tax cut for businesses.
Also, a lower compliance burden frees up some time for management and boards of directors to focus on advancing the business, such as R&D, new product development, and revenue growth. Perhaps this shift in focus would attract more talented people to such business leadership roles.
In addition, this revolution creates more opportunities for businesses to challenge burdensome regulations in court. Large businesses have the wherewithal to do so individually, and smaller ones can do so with the support of trade associations, think tanks, and foundations.
On the other hand, uncertainty about whether a regulatory regime will be invalidated has a cost. If a business doesn’t know the rules going forward, it is difficult to plan for the future. For example, should a company spend a lot of money and time to comply with a burdensome regulatory regime if there’s a good chance it will be struck down in court?
Governmental regulations in some areas appear particularly vulnerable to legal challenge, such as the EPA’s Clean Air Act and Clean Water Act rules and NLRB and Department of Labor regulations on overtime and worker classification (independent contractor vis-à-vis employee).
Winners and Losers
Regarding winners and losers, if your business sells goods or services to assist with regulatory compliance, realize some regulations could crumble or fall in court challenges. For example, this could affect businesses that assist with regulatory compliance in environmental matters, cryptocurrency, labor and employment, and workplace safety (i.e., OSHA).
On the other hand, entrepreneurs might spot areas where courts are likely to strike down or limit regulatory structures, thereby creating new business opportunities that presently are illegal or cost-prohibitive under existing regulations. Entrepreneurs might be able to get a first-mover advantage in such industries. This can be especially worthwhile in industries subject to network effects, which is where users tend to gravitate toward the dominant provider (e.g., YouTube for online videos).
Perhaps the new Lockean regulatory world will create new opportunities for cryptocurrency exchanges and token issuance platforms, drone-based services, and online marketplaces offering gig work opportunities.
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On his tombstone, Virginian Thomas Jefferson listed his authorship of the Declaration of Independence as one of his three biggest achievements. The power of his and John Locke’s philosophy is gaining renewed strength some 250ish years after that world-shattering declaration.
Written on June 18, 2025
by John B. Farmer
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