Durable Deregulation Scaffolding
Legal artifacts that outlast the personnel who authored them
The Case
Definition
Durable Deregulation Scaffolding is the pattern by which a regulated industry — typically through alumni-of-the-regulator at a small number of vault firms — authors deregulatory legal artifacts (interpretive letters, no-action letters, advisory bulletins, FAQs, guidance documents) during a friendly administration, and those artifacts persist as operative law across administration changes. Subsequent transactions, often filed by partners from the same authoring firm, cite the prior artifacts as authority to obtain charters, approvals, exemptions, or preemption rulings. The mechanism's value is durability. Personnel rotate. Statutes are slow to amend. But interpretive letters and similar agency artifacts have a peculiar status: they are not formal rules subject to APA notice-and-comment, yet they are treated as binding agency interpretations. Once issued, they sit on the agency's website as a structural feature of the regulated industry's permitted activity, rescindable only by an equally slow successor action. The artifact outlasts the personnel who authored it; it becomes the durable infrastructure that subsequent personnel rotations exploit.
Extends Stigler's 'Theory of Economic Regulation' (1971) on regulator capture by regulated industry, and Levitin & Wachter's 'The Great American Housing Bubble' (2020) on rule-making artifacts as durable infrastructure. The framework operationalizes how interpretive guidance — formally non-binding but practically dispositive — becomes the persistent unit of regulatory leverage.
Mechanism
A vault-firm alumnus enters the regulator (typically Acting Comptroller, Acting Director, Chief Counsel, Senior Advisor) and authors interpretive letters or guidance that expand the regulated industry's permitted activity. Brooks's IL #1170 (Jul 2020, custody of digital assets by national banks) and IL #1174 (Sep 2020, stablecoin reserve activities) are paradigm cases.
The authoring official cycles back to private practice or an industry CLO/General Counsel role (Brooks → Bitfury CEO Apr 2021). The artifact remains live on the agency's website even though its author is gone.
The successor administration could rescind but typically does not, because (a) rescission requires its own administrative process, (b) the regulated industry mobilizes against rescission, and (c) rescission may itself be challenged as arbitrary-and-capricious if reliance interests have built up. The artifact ages into entrenchment.
When the political wind shifts again, partners from the same firm (or tightly connected vault firms) file applications that cite the dormant artifacts as binding authority. Skadden partner Jonathan Gould files the Erebor Bank charter Jun 11 2025 citing IL #1170/1174/1184; Gould enters OCC as Sr Deputy + Chief Counsel Aug 11 2025; Erebor approval issues 65 days later.
The approval letter itself becomes a new artifact — a precedent that subsequent applicants will cite. The scaffolding extends. What began as one Brooks letter in 2020 cascades into 2025-2026 charter approvals that cite the chain.
Canonical Instances
Acting Comptroller Brian Brooks (ex-Coinbase CLO) authors IL #1170 (Jul 2020, digital asset custody) and IL #1174 (Sep 2020, stablecoin reserves), then exits to Bitfury CEO Apr 2021. The letters survive the entire Biden-era OCC. Skadden partner Jonathan Gould files Erebor Bank's conditional charter application Jun 11 2025 citing IL #1170/1174/1184 as binding authority. Gould joins OCC as Senior Deputy Comptroller and Chief Counsel Aug 11 2025. Erebor approval issues 65 days later.
Second instance of vault-firm-to-OCC cycling within the Round 6 window: Skadden partner enters OCC during Trump-II window with portfolio overlapping the Brooks-era crypto custody letters. Demonstrates firm-level (not merely individual) coordination of the scaffolding pattern across multiple cycles.
Mark Paoletta cycles between regulator-side and private practice across multiple administrations, with each cycle producing or activating durable interpretive artifacts. The 2018 and 2025 placements bracket a hostile administration during which the prior cycle's artifacts persisted unrescinded — the diagnostic durability marker.
Brian Brooks's exit from Acting Comptroller to Bitfury CEO in April 2021 — within months of authoring IL #1170/1174 — is the canonical 'return to private practice' step. Bitfury's subsequent role in the Cipher/Stargate cluster (see Announcement Bundling) shows how the scaffolding artifact and the personnel pipeline compound: the same individual builds the artifact, then deploys industry-side activity that benefits from it.