Regulatory Shakeup and the Rise of a copyright Task Force
The U.S. Securities and Exchange Commission (SEC) held its first-ever copyright roundtable on Friday, bringing together skeptics and advocates in a lively debate over how digital assets should be classified and regulated. The discussion primarily centered around the question: what defines a copyright asset as a security?
The event followed a major shift in the regulatory landscape after President Donald Trump’s election victory in November. One of his key campaign promises was to remove former SEC Chairman Gary Gensler, a well-known critic of copyright. Anticipating the change, Gensler resigned in January and later joined MIT as a financial technology professor.
Following Gensler’s departure, acting SEC Chairman Mark T. Uyeda swiftly announced the creation of a new copyright task force. This team was tasked with tackling complex issues in the digital asset space, starting with the fundamental question of how securities laws should apply to cryptocurrencies. Uyeda, along with SEC Commissioners Hester Peirce and Caroline Crenshaw, delivered opening remarks before a panel of eleven legal experts engaged in nearly four hours of intense discussion.
The tone of the opening remarks hinted at the divide within the regulatory body. While Uyeda and Peirce took a more open-minded and positive stance on copyright, Crenshaw, appointed under the Biden administration, expressed caution. She warned against making hasty regulatory changes, stating, “We cannot poke holes in the foundation without expecting the walls may crack.”
SEC’s copyright Critics Voice Concerns Amid Security Classification Debate
The roundtable intensified when John Reed Stark, a former SEC’s copyright Roundtable Enforcement Division veteran and now president of John Reed Stark Consulting, strongly advocated for tighter regulation. Stark argued that copyright buyers were primarily investors and emphasized the SEC’s duty to protect them. He went further to claim that he had received death threats for speaking against copyright’s lack of regulation.
Stark’s views were echoed by Benjamin Schiffrin, director of securities policy at Better Markets, who pointed out that large brokerage firms list cryptocurrencies alongside stocks, bonds, mutual funds, and ETFs. “I struggle with the idea that only four out of five are securities, and not all five,” he noted.
Lee Reiners, a lecturer at Duke Law, further reinforced this stance by citing numerous legal cases where courts applied the Howey Test and concluded that most digital assets—except Bitcoin and NFTs—qualify as securities. “In hundreds of cases, judges have found the presence of an investment contract,” Reiners argued, solidifying the anti-copyright faction’s position.
Pro-copyright Advocates Defend Industry’s Future
Despite being outnumbered, SEC’s copyright Roundtable proponents pushed back, arguing that regulatory oversight should not solely rest with the SEC. Coy Garrison of Steptoe LLP and Rodrigo Seira of Cooley LLP stressed the need for “regulatory humility,” urging the SEC to recognize the role of the Commodity Futures Trading Commission (CFTC), state authorities, and Congress in shaping digital asset policies. Garrison also commended the SEC’s copyright Roundtable recent statements clarifying certain aspects of copyright regulation, including meme coins and proof-of-work mining activities.
Collins Belton, managing partner at Brookwood P.C., cautioned against focusing too much on the securities classification question, warning of unintended consequences across various industries. Meanwhile, Teresa Goody Guillen of BakerHostetler challenged the fundamental premise of applying the Howey Test to digital assets. She argued that blockchain and distributed ledger technology (DLT) represent a “fourth industrial revolution,” fundamentally altering traditional business and economic models.
The SEC’s copyright roundtable laid bare the deep divide between regulators and industry stakeholders. While critics advocate for stricter enforcement, supporters call for a more adaptive approach that acknowledges copyright’s transformative potential. As regulatory discussions continue, the fate of digital assets remains uncertain, with key decisions yet to be made on how they will be governed in the U.S. financial system.