The US Securities and Exchange Commission (SEC) held its first crypto task force roundtable on March 21 to discuss regulation, which ended in a consensus that crypto needs regulatory clarity in the US despite diverging views among the panelists.
Panelists ranged from crypto advocates to skeptics and the session focused on longstanding debates, including the classification of digital assets and the limits of existing securities laws in addressing decentralized technologies.
Advocates defended decentralization as a gauge for determining whether a token is a security. At the same time, skeptics argued that the current definition by the Howey test works, as the SEC won more motions than lost.
The event marked a shift in tone from the SEC under former Chair Gary Gensler, who frequently characterized most crypto tokens as securities and pursued enforcement actions against major firms.
Legal definitions and the scope of securities law
Discussions extended to what characteristics of digital assets, if any, justify different treatment under the law. Crypto advocates at the event suggested that beyond asking whether something is a security, the more relevant question may be whether certain securities merit exemptive relief.Â
Proponents argued that one possible differentiator is the degree of control exerted by issuers, a concept that better captures the decentralized nature of many blockchain networks.
Lee Reiners, a lecturing fellow at the Duke Financial Economics Center, said that all panelists agree that Bitcoin (BTC) is not a security because it is sufficiently decentralized.Â
However, he added that drawing a line to define if something is sufficiently decentralized or an investment contract is impossible, citing a Commodity Futures Trading Commission (CFTC) report that divides decentralization by spectrums based on different aspects.
Investor risk and statutory authority
Skeptics of the crypto industry presented contrasting perspectives. Former SEC enforcement official John Reed Stark and the most vocal critic maintained that the agency’s responsibility is to protect investors who purchase digital assets.Â
Additionally, crypto critics argued that the Howey Test remains a sufficient legal standard and that the SEC’s track record of litigation success affirms its interpretive authority. Stark suggested that there is no need to reinvent the framework.
Despite these divisions, participants generally agreed that clearer definitions and regulatory consistency would benefit the industry and the SEC’s oversight responsibilities.Â
The roundtable represents the first in a series of efforts to modernize the agency’s stance on crypto markets while balancing investor protection with technological innovation. It signals the beginning of the regulator’s reassessment process.
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