The U.S. Securities and Exchange Commission is looking to reset its relationship with the crypto industry, even before a permanent chair is confirmed by Congress. The latest effort was Friday’s roundtable, hosted at the SEC’s headquarters in Washington, D.C. and featuring a dozen attorneys representing different views and positions within the crypto industry.

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The narrative

So, how did this SEC “reset” actually begin? Well, it seems Acting Chair Mark Uyeda got the ball rolling by launching a crypto task force. And since then, we’ve seen the agency withdraw Staff Accounting Bulletin 121, drop some ongoing lawsuits, put a pause on others, and issue several staff statements about how they might be viewing things like memecoins and proof-of-work mining.

Why it matters

Let’s be real, the SEC is probably the biggest deal federal regulator in crypto right now. Sure, the Commodity Futures Trading Commission (CFTC) might be the agency that eventually oversees crypto spot markets, but at this moment, crypto companies are mostly looking to the SEC for some direction on what they’re allowed to do.

Breaking it down

The roundtable discussion was split into two main parts (or maybe three if you count those initial words from the three commissioners). First up was a roughly 90-minute panel discussion, led by Troy Paredes – former SEC Commissioner and founder of Paredes Strategies. After that, they moved into a 90-minute town hall, still with Paredes moderating, but this time with questions coming from the public.

Want to dive deeper into the panel discussion? You can check out CoinDesk’s coverage right here.

The core question hanging in the air during the discussion – and it’s been the same one for years – was: when exactly does a crypto or crypto transaction become a security? But the panelists covered a lot of ground beyond that, touching on everything from crypto’s role in ransomware to the practicalities of how crypto businesses should operate.

Chris Brummer, the CEO of Bluprynt and a professor at Georgetown Law, got the conversation started by breaking down what the Howey Test really means. He said, “Basically, what we’re saying is when you have people putting their savings into something, you’ve got to think about investor protection. That whole ‘common enterprise’ thing we talk about? It’s really about tackling a kind of ‘provider problem.'”

“It really boils down to information being unevenly spread, and then when you look at profits, it’s all about investor psychology – you know, greed and fear, the kinds of things that can mess with good decision-making,” he explained. “And when you put all those factors together, you end up with a need for mandated disclosure [rules].”

Sarah Brennan, General Counsel at Delphi Ventures, pointed out that the SEC’s current approach has put a lid on a lot of crypto projects. She noted that while many crypto projects are meant to have a wide initial distribution, “the looming threat of securities laws” is making many projects act more like they’re going public, instead of embracing their crypto roots.

“We’re seeing more and more that the token is becoming the product itself… and there are definitely ways people are artificially boosting prices, which, I would say, is generally pretty toxic for the market,” she added.

John Reed Stark, a former SEC attorney, stressed that the “economic reality of the transaction” is what really matters.

“No matter how you look at it, the people buying crypto aren’t just collectors,” he stated. “We all know they’re investors, and the SEC’s mission is to protect those investors.”

It’s still up in the air how the SEC’s efforts will play out, but the agency is definitely taking a more active role in talking about these issues publicly, and the industry seems to be responding. At times, the SEC auditorium was about three-quarters full – and that’s not even counting everyone who tuned in online.

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If you’ve got thoughts or questions on what I should discuss next week or any other feedback you’d like to share, feel free to email me at [email protected] or find me on Bluesky @nikhileshde.bsky.social.

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See ya’ll next week!