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Sure, A.I. has some 'real risks,' but the human extinction fears are a distraction, says CEO of a $2 billion unicorn backed by Oracle and Nvidia

Artificial intelligence destroying humanity used to be the stuff of sci-fi blockbusters. More recently, billionaires, lawmakers, and large swaths of the public have fretted about it for real.

But Aidan Gomez, cofounder and CEO of Coherea red-hot A.I. startup recently backed by database giant Oracle and chipmaker Nvidiathinks such fears are overblown. Worse, theyre distracting us from real risks with this technology, he said in a Financial Times interview published Thursday.

Oracle said this week it will use Coheres technology to let its business customers build their own generative A.I. apps. Cohere is in some ways to Oracle what OpenAI is to Microsoft, with each startup receiving hefty investments from their Big Tech partners who in turn use their A.I. technology. The difference is that Cohere is designed for corporate customers that want to train A.I. models on their own data without sharing it, whereas OpenAI has tapped more readily available information to train its buzzy A.I. chatbots ChatGPT and GPT-4.

Gomez, previously a researcher at Google Brain, one Googles A.I. arms, sharply criticized the open letter signed in March by tech luminariesincluding Tesla CEO Elon Musk and Apple cofounder Steve Wozniakcalling for a six-month pause on development of A.I. systems more advanced than GPT-4 to give policymakers a chance to catch up. Aside from it being not plausibly implementable, Gomez told the FT, the letter talked about a superintelligent artificial general intelligence (AGI) emerging that can take over, a scenario he considers exceptionally improbable.

(The letter asking for the pause reads in part, Should we develop nonhuman minds that might eventually outnumber, outsmart, obsolete and replace us? Should we risk loss of control of our civilization?)

To spend all of our time debating whether our species is going to go extinct because of a takeover by a superintelligent AGI is an absurd use of our time and the publics mindspace, Gomez argued.

Real A.I. risks

Instead, he said, there are real risks that need to be addressed today. One immediate concern is that we can now flood social media with accounts that are truly indistinguishable from a human, so extremely scalable bot farms can pump out a particular narrative.

Asked about the danger of such capabilities undermining democratic processeswith the U.S. presidential election loominghe replied:

Things get normalized just by exposure, exposure, exposure, exposure. So, if you have the ability to just pump people the same idea again and again and again, and you show them a reality in which it looks like theres consensus it looks like everyone agrees X, Y and Z then I think you shape that person and what they feel and believe, and their own opinions. Because were herd animals.

To address the problem, he said, we need mitigation strategies such as human verification, so we can filter our feeds to only include the legitimate human beings who are participating in the conversation.

He credits Musk for the blue-check revamp at Twitter, despite its rough start and surrounding controversy. Under Musk, the marks previously given to notable figures for free are now given to anyone for a monthly subscription, with Musk describing it in late March as the only realistic way to address advanced AI bot swarms taking over.

You can complain about the price or whatever maybe it should be free if you upload your drivers license, or something, said Gomez. But its really important that we have some degree of human verification on all our major social media.

Another pressing risk, he said, is with people trusting A.I. chatbots for medical advice. ChatGPT and its ilk are known to hallucinate, or basically make things up, which can be problematic when your health is on the line. Gomez didnt offer specific ways to address the danger, but warned: We shouldnt have reckless deployment of end-to-end medical advice coming from a bot without a doctors oversight. Thats just not the right way to deploy these systemsTheyre not at that level of maturity where thats an appropriate use of them.

Given the real risks and real room for regulation with A.I. technology, he said, he hopes the public takes the fantastical stories from A.I. doom merchants with a grain of salt.

Theyre distractions, he said, from the conversations that should be going on.

The world just blew past the Paris climate talks' maximum temperature threshold: 'I feel like I am watching a global train wreck in slow motion'

Worldwide temperatures briefly exceeded a key warming threshold earlier this month, a hint of heat and its harms to come, scientists worry.

The mercury has since dipped again, but experts say the short surge marked a new global heat record for June and indicates more extremes ahead as the planet enters an El Niño phase that could last years.

Researchers at the European Unions Copernicus Climate Change Service said Thursday that the start of June saw global surface air temperatures rise 1.5 degrees Celsius (2.7 Fahrenheit) above pre-industrial levels for the first time. That is the threshold governments said they would try to stay within at a 2015 summit in Paris.

Just because weve temporarily gone over 1.5 degrees doesnt mean weve breached the Paris Agreement limit, cautioned Samantha Burgess, deputy director of the Copernicus program. For that to happen the globe needs to exceed that threshold for a much longer time period, such as a couple of decades instead of a couple of weeks.

Still, the 11 days spent at the 1.5-degree threshold shows how important it is for scientists to keep a close watch on the planets health, not least because previous spikes above 1.5 have all happened during winter or spring in the northern hemisphere, she said. Its really critical to monitor the situation, to understand what implications this has for the summer to come.

As a climate scientist I feel like I am watching a global train wreck in slow motion. Its quite frustrating, said University of Victorias Andrew Weaver, who wasnt part of the measurements.

Thats because a three-year La Niña phase which tends to dampen the effects of global warming has given way to the opposite, an El Niño period, which could add another half-degree or more to average temperatures.

The expectation is that 2024 will be even warmer than 2023 as this El Niño continues to develop, said Burgess.

We know as well the warmer the global climate is, the more likely we are to have extreme events and the more severe those extreme events may be, she said. So theres a direct correlation between the degree of global warming and the frequency and intensity of extreme events.

Stefan Rahmstorf of the Potsdam Institute for Climate Impact Research said the Copernicus data are a reminder of how close we are to the 1.5 C global warming limit, beyond which there are major risks for humanity in terms of climate instability and ecosystem system losses.

Rob Jackson, a Stanford University climate scientist who like Rahmstorf wasnt involved in collecting the Copernicus data, said its significance is still unclear.

But sometime in the next few years we will shatter global temperature records, he said. Its the coming El Nino, yes. But it isnt just El Nino. Weve loaded the climate system. No one should be surprised when we set extended global records. 1.5 C is coming fast; it may already be here.

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Associated Press climate and environmental coverage receives support from several private foundations. See more about APs climate initiative here. The AP is solely responsible for all content.

Rrecession is 'at our doorstep' but investors are falling for a goldilocks scenario, Wells Fargo says. It 'isn't going to end all that well'

Wall Streets repeated recession warnings are beginning to lose their bite. After more than a year of consistent doomsday forecasts, the U.S. economy has remained resilient in the face of stubborn inflation, with the unemployment rate sticking near pre-pandemic lows and GDP growth continuing. The stock market has also rebounded after a bleak 2022, with the S&P surging nearly 16% year-to-date.

Still, Darrel Cronk, president of Wells Fargo Investment Institute, argues the evidence remains overwhelming that a recession is at our doorstep.

Much of the manufacturing sector of the economy is already in recessionary territory, Cronk told reporters at a mid-year outlook presentation this week, pointing to the ISM manufacturing index, which showed that the sector contracted for the seventh consecutive month in May.

He noted that leading economic indicators have also consistently declined for over a year and are at levels consistent with past recessionary cycles. To his point, The Conference Boards Leading Economic Indicator Index, which looks at data like building permits, average weekly hours worked, and manufacturers new orders to get a sense of the health of the economy, dropped for 13 consecutive months through April. Justyna Zabinska-La Monica, senior manager of Business Cycle Indicators at The Conference Board, said the data signals a worsening economic outlook, noting that weaknesses among underlying components were widespread.

Cronk did admit that the labor market has held up this year, and the services sector of the economy has remained somewhat strong due to savings consumers built up during the pandemic, but he said he still fears the worst is yet to come for the economy. And Sameer Samana, Wells Fargo Institutes senior equity strategist, argued that investors arent properly pricing in this still gloomy economic outlook amid enthusiasm over the latest developments in artificial intelligence and fading inflation.

Thats the real dichotomy right now, he explained at the mid-year outlook presentation. The market seems to be pricing in a very rosy scenarioand we just dont think thats going to end all that well.

Priced for perfection

Inflation remains well above the Federal Reserves 2% target; Fed Chair Jerome Powell has warned that more interest rate hikes are on the way this year; and corporate profits have been falling since the second quarter of 2022. But despite the warning signs, investors are still willing to pay a pretty penny for stocks, lapping up shares at valuations well above historic norms throughout the year. Samana believes that might be a mistake due to the ongoing earnings recession.

The strategist noted that corporate revenues have been falling for a few quarters because parts of the economy are already in recession, and on top of that, the stronger than expected labor market has left many firms with sticky costs.

So what were noticing is margins are deteriorating, basically the top line is coming down faster than those sticky labor costs are going down, he said. As a recession hits the economy later this year, slowing corporate revenue growth and combining with higher labor costs to hurt earnings, Samana believes the S&P 500 will fall roughly 7% from its current level to 4,100.

Still, theres a reason so many investors have become increasingly bullish of late. With year-over-year inflation falling from a four-decade high of 9.1% in June 2022 to just 4% in May, consumers are becoming more optimistic.

The University of Michigans Consumer Sentiment index rose to 63.9 in June from 59.2 last month, topping economists consensus expectations and pushing the index to its highest level since February. And long-term inflation expectations also dropped slightly, from 3.1% to 3.0%, in a positive sign for economists who feared inflation expectations would become entrenched and keep prices elevated.

Some analysts also believe A.I. is an $800 billion opportunity for tech firms alone this decade. Wedbushs Dan Ives has repeatedly argued that the A.I. gold rush has just begun, comparing it to the start of the dotcom bubble that started inflating in 1995. And Tom Lee, co-founder of the equity research firm Fundstrat Global Advisors, who is known as the biggest bull on Wall Street, said earlier this week that he believes the economy is slipping into an expansion rather than a recession as inflation fades and the Federal Reserve ends its interest rate hiking cycle.

For Samana, though, the risk might not be worth the reward. The strategist noted that the S&P 500 is currently trading at 20 times its peak earnings from last year, despite a recent earnings contraction.

Were going to be in a highly volatile, higher inflation, elevated rate environment where the Fed may or may not be done [with interest rate hikes] and theres a healthy dose of uncertainty to go alongside it. You probably dont want to pay earnings multiples that are all that high in that environment, he said. I dont think that were going to take off to the upside.

A 14-year-old who weighed 430 pounds cut 35% of his body weight through a controversial surgery but sees it as a 'journey to wellness'

John Simon III was a hungry baby, a chunky toddler and a chubby little boy, his mother said. But by age 14, his weight had soared to 430 pounds and was a life-threatening medical condition.

Nine months after weight-loss surgery that removed a portion of his stomach, John has lost about 150 pounds, boosting his health and his hopes for the future.

It was like a whole new start, said John, who will start high school in California this fall.

In Minnesota, Edward Kent was diagnosed with fatty liver disease. The 6-foot, 300-pound high school sophomore started using the obesity drug Wegovy in January just a month after federal regulators approved it for children 12 and older and has lost 40 pounds.

Its a huge deal and it will affect him for the rest of his life, said his mother, Dr. Barbara Van Eeckhout, an obstetrician-gynecologist. This is about his health.

John and Edward are among a small but growing group of young teens turning to treatments like body-altering surgery and new drugs that rewire metabolism to lose large amounts of weight. Critics urge caution at intervening so early, but the kids and their parents say the aggressive and often costly measures are necessary options after years of ineffective diet and exercise programs.

John has tried with all of his might, said his mother, Karen Tillman, 46, an accountant. Its not because he couldnt try. It was getting harder and harder.

Eighty percent of adolescents with excess weight carry it into adulthood, with potentially dire consequences for their health and longevity. Obesity was first classified as a complex, chronic disease a decade ago by the American Medical Association, but meaningful treatments have lagged far behind, said Aaron Kelly, co-director of the Center for Pediatric Obesity Medicine at the University of Minnesota.

Its a biologically driven disease. Its not a behavioral disease, Kelly said. We need to get on it early. Dont wait until later in life because its too late.

In January, the American Academy of Pediatrics issued guidelines that call for considering obesity drugs for kids as young as 12 and surgery for those as young as 13. The recommendations were immediately controversial.

Mental Health America, an advocacy group, called them dangerous and disheartening, saying they would increase eating disorders and perpetuate harmful stigma regarding weight. Some on social media accused doctors and parents of taking the easy way out, blaming things like junk food or video games or accusing parents of child abuse.

Dr. David Ludwig, an endocrinologist and researcher at Boston Childrens Hospital, warned that the justified excitement over new weight-loss medications shouldnt eclipse non-drug options.

Especially for children, diet and exercise must remain at the forefront of obesity prevention and treatment, he wrote in JAMA.

But medical experts who treat kids with severe obesity say research is clear: Diet and exercise alone arent enough. More than 240 diseases are associated with excess weight including liver problems, diabetes and inflammation and the signs show up early, said Dr. Janey Pratt, a Stanford University surgeon who performed surgery on John Simon.

Its already affecting major organs by the time they get to me, Pratt said. Youre dealing with a train thats headed over a cliff.

Starting in elementary school, John struggled with joint pain, shortness of breath and sleep apnea so severe that, at age 12, he needed coffee to stay awake. He developed anxiety triggered by daily bullying at school and was hospitalized as a sixth grader for two months with post-traumatic stress disorder.

They call me names, hit me, push me, all of the above, John said. It was a lot of hardship I had to go through.

He tried diets and exercise, losing up to 40 pounds. But intense food cravings meant the weight always came back plus more. By the time John met Dr. Callum Rowe, a pediatrics resident in a public health clinic at Childrens Hospital, Los Angeles, John had a body mass index of 75. It was way off of the charts that measure body-mass index, or BMI, which is regarded as a flawed tool but widely used by doctors to screen for obesity.

John, who has a shy smile and a soft voice, asked for help. He said he wanted to go on a journey to wellness, Rowe recalled.

I found that very profound for a 13-year-old. Hes an old soul to have that level of insight about what can I do to change my situation? said Rowe, who referred John to the Stanford Medicine Childrens Health weight-loss program.

It meant traveling to Palo Alto, 350 miles north, but Karen Tillman said she was ready to do anything.

His weight was just going up by the minute, she said.

Sign-ups for the Stanford surgery program have doubled since the release of the AAP guidelines, Pratt said. Its is among the busiest sites in the U.S., performing more than 50 of the 2,000 pediatric weight-loss surgeries logged each year.

John was fortunate; fewer than 1% of children who qualify for metabolic surgery go through with the procedure. Doctors can be reluctant to refer, and families either dont know its an option or it costs too much, experts said. Fees run upwards of $20,000 and can be as much as $100,000.

Johns surgery was covered by Medi-Cal, Californias Medicaid program, which paid for 47 operations for kids ages 11 to 17 last year, according to state health records. Across the U.S., Medicaid coverage of weight-loss surgery for kids varies significantly by state.

On average, children who receive weight-loss surgery lose about a quarter to a third of their body weight, studies show. But about 25% of kids regain the pounds and need further treatment, Pratt said.

With Wegovy, adolescents lost about 16% of their body mass over nearly 16 months in a clinical trial. Those who take obesity drugs requests for which have soared at Stanford and nationwide regain weight once they stop, research shows. Some taking the drugs see potentially serious side effects like gallstones and inflammation of the pancreas.

Edward Kent has responded well to the obesity medication, which has turned off his ravenous appetite like a light switch, his mother said. At a recent exam, Edwards liver function had returned to normal.

John Simon has lost about 35% of his body weight in less than a year. His liver function and insulin resistance have both improved, Pratt said. His arthritis is receding. Hes sleeping better and moving more easily.

Johns struggle still extends past conquering cravings and improving his health. Attacks by bullies got so bad at his middle school, teachers were assigned to walk with him between classes.

Hes going to come out with some type of hurt, said Johns pastor, Charles Griffin III of DaySpring Christian Church. The prayer is that when he does come out of this, he will be stronger.

John graduated this month from his middle school, where officials wouldnt comment on steps they took to address the bullying. Hell go to a charter high school next year that will be smaller and, his mother hopes, more compassionate.

John, now 15, is focused on the future. He has learned to cook healthy meals, like a recent dinner of sauteed shrimp and chard. He works out at a local gym, puts 18,000 steps on his pedometer every day and hopes to study hard to land his dream job as an automotive engineer.

I just want to live a happy, healthy life, he said. Without the pain. And just without the weight.

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The Associated Press Health and Science Department receives support from the Howard Hughes Medical Institutes Science and Educational Media Group. The AP is solely responsible for all content.

Mercedes trials ChatGPT to help its cars sound more human

The crime-fighting Pontiac Firebird Trans Am immortalized in the 1980s action series Knight Rider featured an artificial intelligence that sounded every bit as human as its partner behind the wheel.

Decades later some cars can in certain conditions already drive themselves, just like KITT, but A.I. hasnt yet been able to give us a convincing dashboard assistant that can carry a conversation naturally.

Mercedes-Benz, the worlds second best-selling premium car brand behind BMW, wants to finally change the industrys often stilted and artificial-sounding voice command experience.

By using Microsofts Azure OpenAI Service to harness the power of ChatGPT, it hopes to make everything more intuitive and comfortable.

An advanced AI chatbot able to mimic a friendly human offers the chance at a more emotional bond to the vehicle like Knight Riders fictional protagonist Michael Knight had with his car. The greater that connection, the more loyal the customer.

Users will experience a voice assistant that not only accepts natural voice commands but can also conduct conversations, it said on Thursday.

U.S. owners that have one of the more than 900,000 vehicles equipped with the brands MBUX infotainment system can opt into the three-month-long field test starting this Friday.

All they need to do is tell their car: Hey Mercedes, I want to join the beta program, and then the rollout commences over the air.

Based on the findings and customer feedback, Mercedes will then consider further integration of this technology into future iterations of its MBUX Voice Assistant while maintaining high standards of customer privacy.

Markus Schäfer, development chief for Mercedes, called it a milestone on our way to making our cars the center of our customers digital lives.

Mercedes fending off Teslas challenge

Mercedes is currently locked in a fight to defend its business from Elon Musks Tesla, which overtook Audi in the first quarter to become effectively the worlds third largest manufacturer of premium price vehicles (Tesla is already the most valuable auto company).

One of the reasons brands like Mercedes can still earn double-digit margins is their technological leadership over the competition.

Being the first to integrate ChatGPT into its vehicles could help give it an edge over rivals. It already scored a coup this month by beating Tesla to the approval of its automated driving feature in the tech-savvy state of California.

Amid this shift towards automated driving, cars once bought for the horsepower under their hood are morphing into a kind of second living room. Going forward, entertainment and relaxation will play an ever-growing role.

In early 2017, Toyota showcased its Concept-i study designed to give a sense of what was to come but despite advances, the industry is still far from the futuristic vision portrayed in its promotional video.

That might finally begin to change now with the Mercedes pilot.

In a twist of irony, the German brand could end up integrating the OpenAI chatbot that Musks $50 million helped birth when he co-founded the developer in December 2015 as an answer to Googles dominance in the field.

The West is poorer and it's very good news, says top inequality researcher. There is no reason why for 2 centuries, people from the West shouldve been at the top

For Americans, a report saying inequality has dramatically fallen seems absurd. In the West, the gap between the rich and poor has been widening, and the middle class is gradually vanishing. But on a global scale, economic equality has improved to the highest level since the late 19th century, according to new research by one of the worlds foremost experts on the topic. Its very good news, he told Fortune.

Inequality in individual countries has been generally, in the last 30 years, up, economist Branko Milanović, said in an interview with Fortune about his findings. But global inequality at the same time has been going down. So these two things are not contradictory. Simply, global inequality depends on rates of growth of different countries.

Milanović is one of the worlds foremost experts on global inequality, having previously served as the World Banks lead research economist and authored several books on the topic, including Worlds Apart (2005) and The Haves and the Have-Nots (2011). Currently a professor at the City University of New York, Milanović has been a visiting scholar at several universities including Oxford, the London School of Economics, and Johns Hopkins. He published his findings in a large essay for Foreign Affairs titled The Great Convergence.

Milanović measures inequality using the Gini coefficient, in which zero is perfect equality and 100 is total inequality. The worlds score was 60.1 in 2018, the most recent year for which data is available, down from 61.8 five years prior in 2013. The global Gini coefficient for each year is usually only calculated a few years later, because it requires over 130 countries individual income distributions.

As with so many features of the modern global economy, he says, you have to look at China to really understand it.

A story decades in the making

Global inequality began to fall two decades ago, when Chinas economy started to boom, Milanović writes. Chinas explosive growth has been a main driver of the global inequality decline, partly because its home to over 1 billion humans, nearly a fifth of the world population. Its meteoric rise on the world stage has closed the chasm between the West and the rest of the world, according to Milanović.

There are now more rich people in Asia than there were two decades ago. For the rich or middle class in North America and Europe, this means less purchasing power on a global scale. Especially for the Western middle class, luxuries like international travel or state-of-the-art tech will become increasingly unaffordable.

In his essay, Milanović gives the example of a worker in Germany no longer being able to take a luxurious four-week tour of Thailand, and instead opting for a shorter or cheaper vacation. This is because as more people become wealthy globally, some people are displaced from the global middle or upper-middle class. The wealthiest Westerners will remain the worlds richest, but the middle earners will feel the squeeze of the changing global income distribution. A global economic balancing of the scales is finally eroding the Western hegemony, Milanović said.

Its very good news. There is no reason why for two centuries, people from the West shouldve been at the top, he said. Now they will not be at the top, and I dont see that as a catastrophic outcome. I see it as a rather good outcome.

The current shuffling of the global wealth pyramid is the most significant since the Industrial Revolution, according to Milanovićs research. Because the U.S. is the worlds largest economy, it would be very difficult if not impossible for it to match the rate of growth by Asian giants like China, India, and Indonesia. Even China is now so developed that it cannot maintain its previous pace.

All eyes turn to Africa

Of course, global equality does not benefit the populations of each country. In fact, the increasingly even distribution of wealth globally comes as inequality increases in certain Western societies, because now people of neighboring classes (like upper-middle class and upper class) in the West belong to hugely different classes in the worldwide hierarchy. Several decades ago, the upper, upper-middle, and middle classes in the U.S. were among the worlds richest, but thats no longer the case.

Whats interesting is that actually [falling global inequality] would reduce the real income of people in lower deciles in the West, Milanović said. Even if nothing changes domestically, real incomes will become more polarized.

The impact of the COVID-19 pandemic, the state of U.S.-China relations, and Russias invasion of Ukraine make it difficult to forecast the future of global inequality, Milanović said. However, the spotlight will likely shift from Asia to Africa. Because Chinas GDP has already significantly improved, it cannot continue to dramatically drive global inequality down, as such movement requires rapid economic growth.

Africa has the advantage of high birth rates, and thus a growing population and expanding workforce, unlike the rest of the world where birth rates are falling below replacement levels. Most African countries are also poor, meaning they have the potential to increase their wealth considerably and eclipse the growth rate of richer countries. However, Milanović does not have much optimism for that scenario, considering that only six African countries have maintained a 5% growth rate for at least five years since 1950.
What is new is the discussion of the role of Africa, because Africa is the only continent with an increasing population, Milanović told Fortune. In order to actually continue with the decrease in inequality, it will have to grow fast, but thats fairly unlikely.

'Perfect storm of investor risk': SEC enforcement chief pushes back on crypto industry's 'regulation by enforcement' chorus

The Securities and Exchange Commission has had a busy June, with lawsuits filed against crypto giants Binance and Coinbase that have rocked the industry and expanded the agencys purview of digital asset oversight.

On Friday, Gurbir Grewal, the SECs director of enforcement, pushed back against criticism from industry participants that his agency is engaging in regulation by enforcement, arguing that crypto represents a perfect storm of investor risk that needs to be addressed through existing securities law.

At an event in Midtown Manhattan hosted by the law firm Lowenstein Sandler and Rutgers Law, he told two law professors that the SECs frenzied activity was spurred by the crypto industrys promises of financial inclusion and wealth generation coupled with wholesale noncompliance, a lack of meaningful disclosures, and widespread fraud.

The increase in risk has forced us to focus our efforts here, he said.

Getting smoked

Although Grewals enforcement division has a staff of around 1,300 that annually compiles more than 700 recommendations for action, he cautioned that it cant be everywhere at once. Since the collapse of FTX, the SEC has brought highly publicized enforcement actions against everyone from Kim Kardashian and Paul Pierce to failed projects like Terraform Labs.

Barring the passage of new crypto regulation by Congress, the SEC relies on existing securities law, which Chair Gary Gensler has argued are sufficient to oversee the industry. Even so, the agency has expanded its view of cryptocurrencies that it deems securitiesan approach participants say prevents them from operating compliantly. On Friday, the digital assets platform Bakkt decided to delist three major tokens after the SEC named them as securities in its recent lawsuits against Binance and Coinbase.

Speaking on Friday, Grewal described accusations of regulation by enforcement as catchy but tired.

What were doing is enforcing existing rules and regulations, he said. Folks just really dont like the application of the rules to their particular projects.

Grewal argued that existing standards, including the Howey Test, as well as previous SEC guidance such as a 2019 framework for investment contract analysis of digital assets, should be sufficient for firms operating in the space. Too many in the sector, he contends, are too focused on labels, not the underlying offerings.

Weve seen plenty of DeFi products that are neither decentralized nor financebut rather just straight fraud, he added.

Recent criticism has centered around an insider trading case brought by the SEC against a Coinbase employee, whom the agency accused of using confidential information on token listings for personal benefit. In the lawsuit, the SEC alleged that several cryptocurrencies were unregistered securities. While firms sought to challenge the assertion through amici briefs, the SEC settled with the defendant before the issue could be litigated.

Grewal defended the SECs approach, arguing that it would be impossible to take individual action against the more than 20,000 available cryptocurrency tokens, the vast majority of which Gensler argues are securities. Grewal said the agency should not have to bring individual actions against token issuers before filing insider trading cases.

Speaking at a later panel on Friday, Coinbase chief policy officer Faryar Shirzad criticized the SECs action, saying that companies should have the opportunity to weigh in on token classification, even if the final court decision does not settle in their favor.

Grewal said that the SEC has been engaging with the crypto industry, including changing its approach to individual enforcement actions after meeting with stakeholders, including after issuing Wells Notices, or notifications that the agency plans to bring a lawsuit.

Its not picking winners or losers, he said. Its about protecting people who are getting smoked.