Policy Formulation Survival Guide for Security Status

Focus: Regulatory posture toward crypto assets, SEC jurisdiction, token taxonomy, and proposed reform paths.

I recently gave a speech in front of a policy-focused crowd at the Decentralization Research Center’s 2025 Decentralized Tech Summit in Washington, D.C. The speech summarized my reflections from participating in the recent roundtable on Securities Status held by the SEC’s Crypto Task Force and my thoughts on the path forward.

In honor of keeping crypto weird, I prepared a (slightly unhinged) Smokey the Bear themed slide deck for the occasion. If you are too young for me bro, I am not in fact referencing Berachain but the need for us to be stewards of our future (full download on Smokey here). This theme reflects the pivotal moment we face in the crypto industry. The policies we advocate for today will determine whether we foster sustainable, long-term growth or if we continue to self-immolate.

Where We Are, How We Got Here, and What We’ve (Maybe) Learned

There’s a big contrast between this presentation and the mood behind it—because while things feel lighter lately, we’re still kind of on fire.

Over the past four years, I’ve watched the regulatory climate become a proximate cause of harm for the crypto markets. The SEC’s extreme posture didn’t just generate confusion—it created drag on innovation and skewed market incentives. Now, in this brief intermission where enforcement has slowed and public discourse on the future of regulation is happening again, we’re hearing rising calls for self-regulation and arguments that crypto tokens fall entirely outside the SEC’s jurisdiction. But let’s be honest: we’ve seen what it looks like to be outside the regulatory envelope over the past years. It’s not great. There’s no need to double down on that once we have an opportunity for reasonable regulation.

Arguments that “tokens are commodities” and thus beyond the SEC’s reach are getting louder—particularly around secondary markets. But absent legislation, pushing the SEC entirely out leaves us with no markets regulator. That’s not a sustainable place to end up.

What I’ve Learned from Experiencing Regulatory Extremes

Here’s a theme I keep coming back to: there are real consequences to regulatory extremes. The SEC’s stance over the last few years should have forced policy makers to ask a crucial question: Just because securities laws can be stretched to reach nearly all economic activity—should they be? That question didn’t get enough policy-level reflection as securities laws were stretched to apply to staking.

Today, we’re still dealing with the same foundational challenges we faced in 2020—but now we’re burdened with a ton of additional regulatory debt (as Chris Brummer referenced on the roundtable).

How do we start wading through this regulatory debt? It is not swinging the regulatory pendulum in the other extreme. Nor is it by continuing to analyze Howey to divine our path forward. But we seem to be locked into this pattern of not learning from past mistakes. I saw that clearly in the recent roundtable conversations, where too many proposals are still anchored in two extremes: either fully applying Howey to its logical limits, or constraining it in artificial ways—like evaluating tokens transaction by transaction instead of as part of broader schemes.

We need new framing for what we do from here on out—one that isn’t defensive but one that’s focused on outcomes. Are our policy choices producing better markets, stronger protections, and a healthier environment for innovation? That’s the lens I want us to adopt as we evaluate competing proposals.

Policy Should Be Outcomes-Based, Not Doctrine-Based

As part of this framing, I think we take a pragmatic view: policy requires balance. At the SEC level, we need to evaluate proposals based on how they impact all three elements of the SEC’s mission—investor protection, market integrity, and capital formation. Good policy should advance all three, not disproportionately sacrifice one for the others.

Instead of continuing to re-litigate Howey (we’re on year seven of that fight), let’s focus on what’s actually broken and how to fix it. To start us on this journey, I have been advocating for a few things since the start of 2025:

Clear Regulatory Debt, Provide Transition Relief Through (Interim) Safe Harbors: These can protect existing projects as looking for a path toward compliance and guide early-stage projects to market, all while we build toward better practices.
Guidance for Low-Risk Activities: We need to continue to produce clarity around things like airdrops, staking (which is forthcoming), and protocol usage. Not everything has to be a fight.
A Path Toward Formal Rulemaking: Let’s stop relying on enforcement-by-surprise. An interim safe harbor can also serve as a sandbox and the SEC can issue a variety of forms of guidance to the market (even through non-binding and informal means) to indicate practices it looks upon favorably or disfavorably. We should police fraud and scams with the utmost vigor and otherwise concentrate on providing viable paths forward & not persecute people for failing to discern said paths before regulators do.

Crypto and Capital Markets: Separate Problems, Separate Fixes

Another point I want to emphasize—especially to my fellow policy advocates in crypto—is this: we shouldn’t use crypto as a backdoor for reforming traditional capital markets. Making crypto a regulatory arbitrage play and a vampire attack on capital markets – some sort of cheap and easy way to make money, all but ensures that we wont fix current incentives and we continue on the path to zero. Much like we have learned with RWA tokenization plays (and I guess we are running it back again every cycle), liquidity is not a cure for offering junk assets. This also would harm capital markets overall in terms of order, efficiency and overall growth.

Yes, there are real problems in legacy finance. The accredited investor rules are outdated. Crowdfunding frameworks are clunky. But those issues should be addressed in traditional markets, not projected into crypto policy design decisions as some sort of short-sighted escape hatch.

Because here’s the thing: tokens are a poor substitute for equity. They lack built-in investor protections and network and app tokens (absent regulatory frameworks that distinguish between models) can be altered unilaterally by their issuers – from their features, their function, to their tokenomics and supply models. If we allow crypto to become the primary vehicle for capital raising without guardrails, we don’t just harm investors—we undermine the SEC’s mission and our credibility with policy makers.

The follow-on effects of pushing an overly permissive regulatory environment are likely existential – in the inevitable blow up that occurs, we should expect reactive and potentially severe regulatory responses that might eliminate future opportunities for balanced crypto regulation.

Token Taxonomy: Helpful, But Not Dispositive

Let’s talk token taxonomy. I see two extreme stances dominating the discourse:

The “infection theory”—if a token was ever sold in a securities transaction, it’s forever a security.
The “four corners” theory—if the token itself doesn’t contain security-like language, then it must be a commodity.

Both are flawed. The infection theory freezes projects in a permanent state of regulatory uncertainty since there is no framework to register ‘securities by infection’. The four corners approach, on the other hand, is reductivist and strips away the context that actually determines risk profile.

Taxonomy can be helpful—but only as a conceptual tool. While taxonomy can serve as a useful conceptual framework—helping to categorize tokens into broad groups such as network tokens requiring bootstrapping, governance tokens influencing protocol behavior, and collectibles or digital “pet rocks”—it falls short as a means to provide legal certainty. This is particularly true for network and application tokens, whose risk profiles are not solely determined by their intrinsic features at any given moment. Instead, these profiles are heavily influenced by external factors, including how the tokens are utilized, the degree of decentralization within their ecosystems, and the intentions and actions of their issuers.

Tokens are inherently programmable and mutable, often evolving over time. This lifecycle underscores the inadequacy of static classifications and highlights the need for legal frameworks that are adaptable to the dynamic nature of token ecosystems. They may start as part of a scheme for which securities laws rightfully apply and mature into something else entirely. Our laws should reflect and accommodate that kind of lifecycle.

Focus on Outcomes, Not Just Labels

At the end of the day, what I’m advocating for is a shift in mindset. Instead of obsessing over whether a token is a security or commodity, we should be asking:

What outcome does this classification drive?
Does it protect people?
Does it promote innovation?
Does it serve the public interest?

Tokens aren’t just lines of code or abstract legal instruments—they’re programmable systems that often exist in gray areas. Let’s stop trying to fit them into 1930s-era boxes and start building frameworks that actually reflect what’s happening on the ground.

What I’m Calling For

To recap, here’s what I think a pragmatic, forward-looking approach looks like:

Safe harbors for early-stage development and to facilitate broad distributions of tokens in need of network effects
Activity-based exemptions for lower-risk activities (ie. airdrops) and non-financial use cases
A flexible taxonomy to guide—not dictate—regulation
Outcome-oriented analysis across the SEC’s mission
Regulatory restraint when securities laws serve no function for the risks of a particular activity (ie. staking).
Complementary reforms of securities laws more broadly, including liberalizing accredited investor laws and the ability to use Rule 701 for compensatory securities issuances, expanding exemptive relief and crowdfunding frameworks.

We don’t need to overcorrect from overreach to anarchy. There’s a better way. Let’s build it.