Overview
On April 10, 2025, the SEC’s newly formed Crypto Task Force held the second of its promised series of roundtables in the SEC’s “Spring Sprint Toward Crypto Clarity” initiative. Titled “Between a Block and a Hard Place: Tailoring Regulation for Crypto Trading,” this roundtable focused on market structure challenges posed by crypto trading platforms, jurisdictional coordination, and the application of existing securities laws to tokenized markets. This roundtable followed the first roundtable on March 21, 2025 titled “How We Got Here and How We Get Out – Defining Security Status,” which focused on the challenge of determining when a digital asset constitutes a security under U.S. federal law. The two roundtables reflect an evolving regulatory tone, which is markedly more collaborative than in prior years, with SEC officials and panelists exploring ways to tailor regulation to the technological realities of crypto markets.
Highlights from the Roundtables
- Task Force Leadership and Commissioner Perspectives: Led by Commissioner Hester Peirce, the Crypto Task Force emphasized the importance of addressing foundational definitional questions before broader regulatory reforms can move forward. Commissioner Peirce called for thoughtful engagement around whether security classifications can evolve over time, particularly in decentralized networks. Acting SEC Chair Mark T. Uyeda highlighted the agency’s pivot away from “enforcement-first” strategies in favor of rulemaking and interpretive guidance, noting divergent court interpretations of the Howey test as a key area requiring clarity. Commissioner Caroline Crenshaw underscored the importance of consistent and adaptable rules to safeguard the U.S. capital markets, warning against rigid definitions that could be easily circumvented.
- Howey Test and the “Common Enterprise” Debate: The first roundtable focused heavily on the “common enterprise” prong of the Howey test. Panelists debated whether shared price interest alone suffices to constitute a common enterprise or whether explicit pooling and centralized managerial activity are required. Several participants emphasized the importance of distinguishing between an investment contract and the underlying asset itself—illustrated through analogies such as De Beers’ control over the diamond market without making individual diamonds securities. The consensus was that further SEC guidance is needed to bring clarity and predictability to digital asset classification.
- Secondary Market Transactions and the Howey Test: The second roundtable included discussion of whether secondary market transactions of crypto assets satisfy the Howey test. Some panelists argued that such trades, particularly where there is no pooling of funds or ongoing managerial involvement, fall outside the test’s scope. There was strong interest in the issuance of SEC guidance clarifying this issue.
- Regulatory Jurisdiction and Investor Protection: Both roundtables acknowledged the overlapping jurisdiction of the SEC and CFTC, given the hybrid characteristics of many digital assets. Panelists warned that continued ambiguity harms investors and stifles innovation. Concerns were raised that the CFTC may lack the historical experience, resources, and investor protection mandate necessary to effectively oversee a rapidly evolving, retail-facing crypto market, and many expressed a preference for the SEC to maintain primary authority over assets bearing similar attributes to traditional securities. Regardless of these differences in points of view, panelists broadly supported stronger inter-agency coordination.
- Practical Disclosure and Compliance Frameworks: Several panelists in the first roundtable advocated for interim disclosure frameworks tailored to crypto’s unique attributes, referencing the proposed “Safe Harbor 2.0” regulatory framework introduced by SEC Commissioner Hester Peirce in 2021, which expanded on her proposal in 2020 to offer a three-year grace period for network development without triggering securities registration. The revised 2021 version added several investor protections, including semi-annual disclosures, a required block explorer, and an exit report with outside counsel's analysis of whether the network had achieved decentralization or functionality. Participants discussed how such a framework could offer much needed regulatory clarity while still safeguarding market integrity. They also addressed challenges faced by firms attempting to register with the SEC in various capacities such as broker-dealers, alternative trading systems, or national securities exchanges, including compliance barriers and uncertainty around required disclosures.
- Crypto Market Structure and Platform Regulation: The second roundtable addressed the vertically integrated nature of many crypto platforms—combining trading, custody, and clearing in a single entity—and how these structures challenge traditional regulatory assumptions. Multiple panelists called for a regulatory framework that accommodates the operational differences of crypto markets while preserving core investor protections. Suggestions included exemptive relief frameworks and the need to revisit the broker-dealer registration regime for crypto intermediaries.
- Self-Custody and Decentralization: Both roundtables recognized the growing importance of decentralized technologies. Participants emphasized that peer-to-peer transactions and self-custody reduce many traditional financial risks and should not be regulated on the same bases as intermediated markets. There was also acknowledgment that decentralized protocols challenge existing regulatory frameworks and that principles-based adaptation of those frameworks may be appropriate.
- Global Regulatory Challenges: With an estimated 85% of crypto trading volume occurring offshore, panelists in the second roundtable recognized the need for the SEC to coordinate with global regulators and for federal preemption over state-by-state licensing regimes. Participants also supported reciprocity and international frameworks to help bring more activity onshore.
- Capital Markets Innovation and Use of Blockchain: Panelists in the second roundtable emphasized blockchain’s potential to improve collateral management, enable 24/7 trading, and reduce counterparty and settlement risks. Several panelists called for the integration of smart contracts and tokenized securities into existing market infrastructure, while adapting capital requirements and custody rules to accommodate digital asset realities.
Key Takeaways and Looking Ahead
The SEC’s first two crypto roundtables signal a shift toward a more collaborative and tailored approach to digital asset regulation. The SEC has announced that its next crypto roundtable, titled “Know Your Custodian: Key Considerations for Crypto Custody,” will take place on April 25, 2025; future roundtables will also address topics such as tokenization and DeFi. Moving beyond an enforcement-led strategy, the SEC is engaging with market participants to develop frameworks that reflect the unique characteristics of crypto markets. Acting Chair Mark Uyeda’s endorsement of time-limited exemptive relief and Commissioner Hester Peirce’s advocacy for decentralized and self-custodial models mark this evolving posture.
These events reflect a growing recognition within the SEC that digital assets and blockchain-based systems challenge traditional regulatory models. The Task Force’s willingness to engage publicly on difficult questions—such as classification of crypto assets, trading platform models, self-custody considerations, and regulatory coordination—marks a significant turning point in the U.S. regulatory approach.
