Why is the commerce clause so important?

Answer 1

The "Commerce Clause," Article I, Section 8, Clause 3, of the United States Constitution arguably is important because it is the means by which Congress is able to legislate in areas that would otherwise be left to the States to decide.

In the U.S. federal system, any powers not granted to the federal government are reserved by the States. For example, there is no Constitutional grant of power to Congress to regulate the issuance and registration of securities. Regulating the securities industry, therefore, was left to the various States to determine. Where, then, does the authority lie for the Securities and Exchange Commission to regulate the public markets?

The answer lies in the Commerce Clause. It allows Congress to "regulate commerce... among the several states." Accordingly, as soon as a company in Virginia offers shares of its stock for sale to a person in North Carolina, "interstate commerce" has occurred and Congress is empowered to regulate that commerce. Congress thus passed the Securities Act of 1933 and the Securities Exchange Act of 1934 on the authority that it was regulating interstate commerce.

Note that, in general, those laws do not apply to offerings of securities made wholly within a single state. For example, a company in Roanoke, VA, selling its shares of stock to a person in Stafford, VA, would not be subject to the federal securities laws if no one outside of Virginia purchased those share.

An internet search of this topic will uncover a laundry-list of instances by which Congress has invoked the Commerce Clause to regulate in areas in which it was not explicitly granted authority.