Regulating new technologies has never been easy, but it is especially difficult in the modern era. The U.S. legal system faces an unprecedented challenge due to emerging blockchain and AI technology. Should the U.S. legal system fail to manage these changes effectively, the next decade of technology innovation may bypass the U.S. for brighter shores.
Michele Benedetto Neitz is a Visiting Professor at the University of San Francisco School of Law and the Founder & Academic Director at the Blockchain Law for Social Good Center. This op-ed is part of CoinDesk’s “State of Crypto” Week, sponsored by Chainalysis.
The front line for creating laws for new technology law today is not Congress. State legislatures, state agencies and judges in state and federal courts are taking the lead. This fragmented approach to rulemaking is the result of three legal trends: Congressional inaction, the decline and potential fall of the Chevron doctrine (see below), and regulation by enforcement. Combined, these three forces are converging to shift the balance of power to courts and states in a way we have not yet experienced in the U.S.
Why should non-lawyers care?
The consequence of this power shift has been readily apparent in the regulation of the decentralized technology industry. The industry struggles to comply with a patchwork of judicial decisions across jurisdictions and varying state laws and regulation. But this challenge will not be unique to blockchain – it’s just the beginning. Other newly developing industries, such as artificial intelligence, could battle the same issues. Consequently, until federal leadership emerges, the pressure will be on judges and state actors.
Trend one: Congressional Inaction
Recent legislative proposals in the U.S. Congress indicate an intent to get federal legislators and agencies “caught up” with emerging technology developments. However, the failure of Congress to create a cohesive legislative framework for decentralized technologies and artificial intelligence leaves a large regulatory gap.
By mid-summer 2023, all eyes were on courts — not Congress and not federal executive agencies — to make decisions on important legal issues related to digital assets. While Congress sits on the sidelines, increasingly bold state legislatures are regulating…
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