If regulation was focused on function it would be less expensive and yield better results for society.
> ... is not hindered by regulation.
It is effectively stymied by added total cost.
And of course, regulation can not cover every case. And if it turns out to be a problem, we can cover the additional cases. This way (in Europe at least) we gradually require cars to be safer for passengers and the environment.
But I think GP is wrong in considering this to be a problem. Rules may be expressed in a non-functional way, but that's often just a way to embody functional rules in a heuristic that doesn't require expertise to apply.
For a computing example, you may have a processing algorithm that has a tendency to explode in computational complexity on some datasets, because of complicated algorithmic reasons. Instead of explaining the exact problem to users, most of whom will not be able to understand it, you could determine that the failure mode is very unlikely to happen for smaller datasets, and just say "the input should be no larger than 10MB in size".
Other reason for "form, not function" is coordination - there may be many good ways to do something, but all of them require everyone to do the same thing. So it makes sense to pick a reasonable default and tell everyone to stick to it.
... and that would actually require that those in charge of regulations would be technical enough to understand the complexities involved. If you're that good with technical matters and can confidently reason about the wider second- and third-order effects, you are likely to have a bright - and better compensated - future in the industry at large.
If you are a regulator, you have to confront two facts. 1) that the most competent will either never be available or will leave at the first opportunity; and 2) that box-ticking is much easier to measure.
In the end, you have to ask yourself who are you left with?