Nov 25 (Reuters) - America suddenly discovered the

phrase Chevron ( CVX ) deference when the U.S. Supreme Court decided

last June to overturn longstanding precedent that required

courts to bow to federal agencies in the interpretations of the

laws they enforce.

Now nondelegation doctrine is poised to become the new

Chevron ( CVX ).

You need some basics to understand what I'm talking about.

Nondelegation doctrine is rooted in Article I of the U.S.

Constitution, which empowers Congress to enact federal laws. The

doctrine, broadly speaking, bars Congress from delegating that

power to the executive branch - which, these days, means to

federal agencies.

But that's not all there is to the nondelegation doctrine. A

related constitutional principle known as private nondelegation

doctrine holds that neither Congress nor federal agencies can

authorize non-government entities to exercise governmental

power. This doctrine has become a critical issue in

constitutional challenges to private regulation of the

securities and horse-racing industries, both of which are

overseen by membership group wielding significant rulemaking,

investigatory and enforcement power.

The Supreme Court has already agreed to hear a case raising

nondelegation and private nondelegation issues, as my Reuters

colleague John Kruzel reported on Friday.

The case involves a constitutional challenge to a law

authorizing the U.S. Federal Communications Commission to levy

fees from telecoms to broaden nationwide access to phone and

internet services. The FCC relies on a private company to

administer the multibillion-dollar fund.

A group led by conservative nonprofit Consumers' Research

persuaded the en banc 5th U.S. Circuit Court of Appeals last

July that, in combination, Congress's delegation of taxing

authority to the FCC and the FCC's subdelegation of

administrative authority to a private company is

unconstitutional.

The U.S. Justice Department asked the Supreme Court in

September to review the 5th Circuit decision, citing a split

between the conservative appellate court and two other federal

circuits, the 6th and 11th Circuits, that have recently sided

with the government on the constitutionality of the FCC program.

The FCC case seems likely to focus on Supreme Court

precedent allowing Congress to authorize federal agencies to

implement federal statutes as long as lawmakers codify an

"intelligible principle" to guide and limit agency power. The

justices most recently endorsed that principle in 2019's Gundy

v. United States, which confirmed the constitutionality of the

federal sex offender registry, although four justices signaled

interest in Gundy in reinvigorating the nondelegation doctrine.

The private nondelegation doctrine seems to be a secondary

issue in the FCC case - but it is at the heart of a different

case that the Supreme Court is likely to agree to hear this

term.

In that litigation, Texas and a plethora of horse-racing

groups challenged the constitutionality of the federal statute

in which Congress empowered a private entity, the Horseracing

Integrity and Safety Authority, to act under the auspices of the

U.S. Federal Trade Commission to regulate the horse-racing

industry.

The 5th Circuit ruled in July that the horse-racing

authority was acting within constitutional bounds when it

promulgated rules governing its members, because those rules had

to be approved by the FTC. But the appeals court, splitting from

two other federal circuits, also held that the private group's

enforcement power was unconstitutional under the private

nondelegation doctrine because the horse-racing authority can

conduct investigations, impose sanctions and bring lawsuits

without consulting the FTC.

The Justice Department, the horse-racing authority and

several challengers separately filed petitions asking the

Supreme Court to reconsider different pieces of the 5th

Circuit's decision. Crucially, though, all of the petitioners

seem to agree that the justices need to take a look at the

constitutionality of the authority's mandate from Congress in

light of the 5th Circuit's split with the 6th and 8th Circuits.

The issue for the justices, in other words, is probably not

whether it will take a look at the private nondelegation issue

but how broad its review will be.

Lurking in the background, moreover, is a ruling on Friday

from the D.C. Circuit in a similar constitutional challenge to

Wall Street's private regulator, the Financial Industry

Regulatory Authority.

The appeals court enjoined FINRA from expelling

broker-dealer Alpine Securities before the U.S. Securities and

Exchange Commission can review FINRA's decision, holding that

Alpine's lawyers at Cooper & Kirk were likely to prevail on

their argument that expulsion without SEC review was

unconstitutional under the private nondelegation clause.

The panel majority framed its decision narrowly, declining

to rule on Alpine's broader assertion that the entire FINRA

self-regulatory regimen is an unconstitutional violation of both

the private nondelegation doctrine and the Appointments Clause.

But in a partial dissent, Judge Justin Walker, the lone

Republican appointee on the panel, argued that allowing FINRA to

police the securities industry "subverts the constitutional

design." Even if the SEC must review FINRA expulsion orders

before they take effect, Walker said, FINRA is exercising

unconstitutional power by conducting enforcement actions against

its members.

FINRA, Alpine and the U.S. government (which intervened in

the case) have so far been mum about whether they will seek

additional review of the D.C. Circuit ruling. Their decisions

may depend, in part, on when and whether the Supreme Court

grants review in the horse-racing case, which raises parallel

questions about the private nondelegation doctrine.

I'm getting way ahead of events, but if the Supreme Court

decides to delve into the constitutionality of industry

self-regulation by a private organization, the incoming Trump

administration will have to decide whether to maintain the

Justice Department's stance in favor of self-regulation.

Would a Trump DOJ advocate against a privatized regulator?

Would it call for private regulators to be appointed by and

accountable to the president? Would it call for the abolition of

private regulators as an unwarranted check on industry

participants?

That's all speculation right now. But one thing is sure:

Nondelegation is going to be a much more common word in ordinary

discourse than it was a year ago.

Read more:

Court faults Wall Street regulator FINRA's system for

expelling brokerages

US Supreme Court to decide Federal Communications Commission

fund's legality

US Supreme Court lets thoroughbred racing authority continue

to oversee tracks