Because the law isn't computer code and there are always grey lines. From Matt Levine:
>But there are also a lot of places in securities law where the rules are a little bit vague and you are operating a little bit on the cutting edge and the best practice is to pick up the phone and call the SEC staff and say “hey what do you think about this?” Sometimes this is fairly formalized: The SEC staff issues “no-action letters” (you send them a letter saying “is it okay if we do this,” and they send back a letter saying “if you do that, we probably won’t sue you,” which is almost as good as them saying “yes”) and “telephone interpretations” (you call them up and ask “is it okay if we do this,” they say “sure seems fine” or “no that’s bad,” and then they write down the question and answer so other people with the same question don’t have to ask it again). These are places where the rules are unclear, or they are clear but applying them as written would create bad results, so the solution is to ask the SEC “is it okay if we do this” and they just tell you.
>Crypto people want rules! I don’t mean that they want to be regulated; I mean, specifically, that they want rules. They want published, objectively specified, open and transparent rules, so that everyone is on a level playing field to do crypto stuff that complies with whatever the rules are. I don’t mean that everyone in crypto wants that: Informal regulation favors the well-capitalized and the incumbent, and if you’re a big crypto firm on good terms with the SEC (which might be an empty set) you might prefer informality and opacity. I just mean that, philosophically, crypto people should want open transparent rules for permissionless innovation. That is how the crypto system is designed to work, and they should want the securities laws to work the same way. And in fact Coinbase Global Inc., which is maybe the closest thing the US crypto industry has to a big regulated incumbent, has sent the SEC a petition asking it to make rules for crypto securities.
>Temperamentally I do not think the SEC likes this, and I think that Gensler means what he says about “working directly with entrepreneurs,” and I think that this is a reasoned choice. Look at how crypto often works in practice. People write smart contracts with immutable public code, and then other people hack them to steal their money. That could be the SEC! If you are the SEC, and crypto people say “please write clear transparent rules so we know what is and isn’t allowed,” you might hear that as “please write clear transparent rules so that we can game them.” This would be a reasonable lesson for the SEC to take from (1) the history of crypto’s “code is law” philosophy ending in hacks, (2) the history of crypto firms ignoring the US securities laws, and for that matter (3) the history of traditional finance firms trying to game the SEC’s rules. Crypto is a wholly new area for US securities regulation, and if you try to write all the rules from scratch in one go you will get things wrong. And then people will ruthlessly exploit whatever you get wrong.
https://news.bloomberglaw.com/securities-law/matt-levines-mo...