Last Friday, the Securities and Exchange Commission held its first-ever crypto roundtable, a discussion with industry leaders and skeptics to answer a grand question: how should the SEC regulate crypto?

The agency under President Donald Trump is taking what many see as a friendlier approach to cryptocurrency and has already dropped a number of lawsuits against various crypto exchanges initiated during the Biden Administration.

Marketplace’s Meghan McCarty Carino spoke with Brady Dale, reporter and author of the Axios Crypto newsletter, about what was discussed and why the question of regulating crypto like a stock or a bond is a very complicated one to answer.

The following is an edited transcript of their conversation.

Brady Dale: Well, the big topic was just, how do you characterize crypto assets? You know, the skeptics on board were like, these are all securities, and they should all just be treated like securities and that’s really complicated, and the court should just sort it out. And of course, if that’s the way you do it, it’s going to take a really long time, because courts aren’t fast. And the folks the other side were like, it’s not fair to lump all of these assets into one bucket. A lot of them do very different things, and so they were encouraging the SEC to refine their approach, to look at, you know, different assets different ways. Don’t treat diesel trucks like they’re Pintos, you know, as a way you might put it, sort of thinking about cars.

Meghan McCarty Carino: So why is this such an important distinction, whether or not these digital assets are considered securities and what are kind of the arguments in each column?

Dale: The big picture of why it’s so important is, if all crypto assets were securities, they basically become useless. The folks who make these things don’t want to just trade them willy nilly forever. They don’t want to just bet on “number go up forever.” They want them to be a part of the real economy eventually, they want them to be used for all kinds of things, sorting out complex new applications for making payments. But if they’re securities, that means they’re subject to all kinds of rules and have to be tucked away in these special digital vaults controlled by third parties, and you just can’t do any of that stuff. So it’s kind of existential for these networks that they not all be treated like securities. Some of them can be, that’s fine, but just not all of them, or sure, they can be treated like securities for a while when they’re new and things are getting worked out. But if enough people are using them, if this decentralization thing people talk about really takes off, for one, then they can graduate out and can be freely traded the same way that like coffee or gold is freely traded and no one will watch it. And then that’s an okay middle ground. The other side is like, look, none of this stuff is ever going to be useful for anything. It’s all just a big casino, and so we ought to regulate it as tightly as possible. So that’s sort of the other side’s take on it.

McCarty Carino: Then there’s sort of been this bigger foundational question of what exactly the SEC has regulatory jurisdiction over? Is it the crypto token itself or the transaction? Why is this an important issue?

Dale: Man, it’s so subtle. I mean, the more attorneys I talk to, it does seem clear. And this is, I mean, this is so fuzzy, but it’s like [what] we talk a lot about is, are crypto tokens securities? And the truth is, that’s kind of the wrong question. And everyone kind of knows that, it’s just we say it this simpler way, but the real question is like, is the actual transaction, is that an investment contract? And so the easiest, there’s a lot of subtleties here, but I think the easiest distinction that can be made is one thing I think most people agree on, is if somebody is selling tokens before like a product even exists, to investors ahead of time, to raise money, to hire developers to actually build the thing, that is a kind of transaction that looks a lot more like a security, whereas once the thing is live and people can use it, then it should be able to freely trade. That’s a secondary market transaction, and maybe that’s less likely to be a security transaction. And, you know, one point that one of the attorneys made at this session on Friday was that, in fact, the SEC has never actually won a case on the idea that secondary market transactions are a security. They’ve gotten some sort of earlier stage things in courts that have kind of said it, but not a full case so that’s a fuzzier area, but one that the industry seems to be making some headway on. So yeah, it’s this really subtle point that I’m sure will leave your listeners scratching your head, but if it makes them feel better, it also leaves everyone else who’s been following this for a year scratching their head too. So it’s a tough one.

McCarty Carino: So did we get any sort of sense of what direction the SEC may be going in in the near future?

Dale: Not on Friday, because the commissioners really didn’t have much to say at it, you know. But I mean, when Commissioner [Hester] Peirce, who’s the head of the task force, announced the task force with her blog post, “The Journey Begins,” and she said a part of Americans’ freedom is the right to invest in whatever we want and that includes the right to lose money without the government telling you what is a good investment and what is a bad investment. You know, she’s very clear on the idea that the SEC is a disclosure-based regime. That means their job is to make sure investors have all the facts they need, not to tell investors like, this is good or this is bad. So I think that’s the direction we can probably expect. You know, the nice thing about blockchains is you can have 24/7, round-the-clock, complete pictures of the distributions of these tokens and assets, you know, all the time. You could probably have better disclosures than you have about the equity market now, if we have a regulator who says kind of what those disclosures should look like, and I think that’s what the industry is sort of waiting for.

McCarty Carino: The SEC has made some notable signals. It dropped several crypto lawsuits in the last couple of months, can you kind of explain what’s going on there? Which ones were of note to you?

Dale: I would like to tell your listeners that the lawsuits that were dropped were all just over this bureaucratic question of what is or isn’t a security and should, you know, a particular company have been trading this thing or not and that is true for almost all of the cases that were dropped. So most of them were cases where, like, Coinbase, for example, the SEC was saying, well, you’re letting people trade securities on your platform. And Coinbase was like, I don’t think we are. And that was a debate. You know, it’s an important question but it’s not like there’s someone deeply harmed and there’s not some big crime, you know, in the middle there. So it’s a bureaucratic question, right? It’s an important bureaucratic question. It’s a bureaucratic question. And so mostly what the SEC has done is dropped those cases in order to say, like, look, let’s figure out what the rules are and then we can decide who we should get mad at. However, when you ask, like, what stands out to me? There were two cases it was doing in which there were more serious allegations. And so that was Binance and the case against Justin Sun, the creator of this token, Tron. Folks may remember him as the guy who bought the $6 million banana artwork. And in both of those cases, the SEC was alleging various degrees of market manipulation and that’s more serious. And so it’s somewhat more disturbing that they dropped those cases without sort of dealing with that piece as much. But in most other cases, it was just over this esoteric question of like, what should the SEC be regulating and what should they leave alone?

More on this

One recent policy the SEC did land on was about meme coins, those crypto tokens branded with internet trends or celebrities, like the Shiba Inu dog that inspired dogecoin or more recently, President Trump’s meme coin.

The SEC has clarified those are not securities.

Meanwhile, World Liberty Financial, the decentralized crypto venture backed by the President and his family, says it has launched a new stablecoin — a type of crypto coin which typically has a fixed value tied to another asset, in this case, U.S. government debt.

According to reporting in the Wall Street Journal, the stablecoin — called USD1 — will be tied to short-term treasury bonds and cash deposits. It will be issued on the Ethereum network and a blockchain created by the crypto exchange Binance.

As Brady noted, Binance had been the target of an SEC lawsuit until the new administration put it on hold last month.