What Will the New American Revolution of Limiting the Power of the Regulatory State Mean for Businesses?

A new American Revolution is going on in the Supreme Court. In recent years, it has issued four major decisions curtailing the power of the regulatory state. In March, it heard oral arguments in a fifth case. What does this trend mean for businesses?

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 for an all-powerful central government, particularly an omnipotent king. Locke acknowledged the need for government but argued that people have natural, “inalienable” rights to their “lives, liberty, and property” and that these rights limit government power.

Because of Hobbes’ writing, many now refer to the massive and powerful regulatory state ushered in by President Franklin Roosevelt during the New Deal Era as the “Leviathan regulatory state.”

Republican appointees to the Supreme Court have been leading a Lockean revolution against the power of regulators in the past several years.

In 2022, 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 this doctrine, it elevated it from an expression of concern into a powerful rule.

In 2024, the Court struck down the Chevron Doctrine, which 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. Now, regulatory agencies are not entitled to deference regarding their interpretation of vague statutes.

Also in 2024, 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, the Supreme Court permitted the President to fire the heads of two regulatory agencies despite statutory language saying they can be fired only for neglecting their duties or malfeasance. Most interpret this stay as a signal that the Court will soon reverse a 1935 Supreme Court case that upheld the constitutionality of statutes placing certain regulatory officials beyond the President’s unlimited power to fire them.

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 decisions striking down New Deal Era legislation. This 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 1935, the Supreme Court has not reversed this doctrine, but its standard for what constitutes sufficient congressional guidance has been so lax that the doctrine has been effectively dead. It’s possible the Court will use this case to reinvigorate the doctrine.

What does this Lockean revolution at the Supreme Court mean for businesses? There will be benefits and detriments, and winners and losers.

Regarding benefits and detriments, understanding and complying with regulations imposes a cost on businesses, so reining in the regulatory state could be viewed as a kind of tax cut for them. Also, a lower compliance burden frees up some time for management and boards of directors to focus on advancing the business. In addition, this revolution creates more opportunities for businesses to challenge burdensome regulations in court.

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.

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).

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 compliance in environmental matters, cryptocurrency, labor and employment, and workplace safety.

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. Perhaps the new Lockean regulatory world will create fresh opportunities for cryptocurrency exchanges and token issuance platforms, drone-based services, and online marketplaces offering gig work opportunities.

On his tombstone, 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.

NOTE: A longer, more detailed version of this column is available on John Farmer’s Substack, which is here.

Written on June 18, 2025

by John B. Farmer

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