Every time you derive a financial instrument, you produce a new asset class. That doesn't make the instrument or its derivative not a security; the definition of "security" impinges regardless.

So, what do you expect to happen? Cryptocurrency companies should just be allowed to run around doing whatever the hell they like until Congress, which is clearly dysfunctional ever since the Republican Party made it their mission to prevent the Democratic Party from doing anything ever again, manages to get some kind of regulation out? And how long do you expect that to take?

The only real alternative seems to be "no one is allowed to do anything with cryptocurrency until there are clear regulations around it."

I know which one of these I would prefer, given only these choices, and it's definitely not the one that enables massive fraud and grifting.

There are a lot of dynamic securities and instruments out there. The dynamism isn’t a property considered. In fact the complexity of an instrument makes it get especially close scrutiny. But the primary thing that’s driving scrutiny is scale of public impact. It’s hard to say crypto is a fringe asset class, or that the public isn’t harmed by lack of regulatory frameworks. You can’t look at FTX, or the other stories of millions of people being soaked by con artists and poorly managed controls. The more crypto becomes a public commodity, or the effects of crypto trading impacts the public indirectly through systemic instability, the more strident the regulatory actions will become. Frankly the market participants created the situation through their flagrant inability to keep their hands in their own pockets.