Illustration: Eniola Odetunde/Axios

It's normal for regulators to take on the companies it oversees. What's rarer is the opposite: entities taking their regulators to court — but that might be changing.

Why it matters: The legal showdowns between companies and regulators show just how far big business is willing to go to fight regulations that could dent profits.

What’s happening: In an unprecedented move, the New York Stock Exchange, Nasdaq and Cboe sued the Securities Exchange Commission over the regulatory agency’s “transaction fee pilot" — which would undermine how much money the three largest U.S. stock exchange operators could pay and charge to draw trading onto their platforms.

  • “We don’t look forward to suing our regulator ... [w]ith so much at stake, we have no choice but to ask for judicial relief,” Stacey Cunningham, president of the New York Stock Exchange, wrote in an op-ed earlier this year.

And last month, Institutional Shareholder Services (ISS), the largest proxy adviser whose recommendations can sway how shareholders vote on crucial corporate governance issues, said it would also take the SEC to court.

  • The firm is suing over stricter regulations that would force the proxy adviser to be more transparent about how it makes shareholder recommendations. In the suit, ISS called the agency’s actions “arbitrary and capricious.”
  • “The decision to sue our regulator was not taken lightly, but the stakes are too high,” Gary Retelny, ISS CEO, wrote in an op-ed titled “Why we are suing the SEC.”

The SEC isn’t the only target: Last week, PayPal sued the Consumer Financial Protection Bureau over the regulatory agency’s “Prepaid rule,” which requires prepaid card issuers to disclose fees upfront.

  • In the suit, PayPal says the forced disclosures “misrepresent the fees that most customers pay,” as the Silicon Valley Business Journal reports.

Between the lines: The actions are a sign that “suing a company’s regulator—an uncommon and aggressive tactic—is becoming less taboo,” as the WSJ’s Cezary Podkul notes.

The SEC, for one, has commonly been sued by states or trade groups over the rules that peeve corporations.

  • What they’re saying: “Regulated entities that sue the SEC risk that the SEC might retaliate through more stringent inspections,” Larry Harris, a professor at the University of Southern California Marshall School of Business and former economist at the SEC, tells Axios.
  • “Such retaliation would be wrong, and I have no knowledge that it has ever occurred, but the possibility normally would sober entities thinking about suing the SEC.”

The bottom line: Typically companies push back against regulators behind closed doors. The fights are more commonly starting to play out in public.

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Data: Docket Alarm; Shows all cases where SEC is listed as a defendant; Chart: Andrew Witherspoon/Axios

The SEC is facing more suits this year than last, but way fewer than it did in prior years, according to data compiled for Axios by Docket Alarm.

  • Among the suits it’s facing this year: Several states are pushing back against the SEC's broker rule that they say doesn’t go far enough in protecting Main Street investors.

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