Genny Ngai and Vani Upadhyaya Discuss Crypto AI Regulation in Law360
Morrison Cohen Partner Genny Ngai and Associate Vani Upadhyaya published an article in Law360 entitled “Tips for Crypto AI Agent Developers Under SEC Watch.” They explore how the rapid rise of crypto AI agents—autonomous software that analyzes market data and executes crypto transactions—may trigger regulation under the Investment Advisers Act of 1940, and provide practical guidance for developers navigating this emerging regulatory landscape.
With crypto AI agent user activity up nearly 90% in 2025 and over $1 billion raised by related projects this year, these tools are being rapidly adopted for automated trading, DeFi portfolio management and market intelligence. In response, the SEC has begun more aggressively scrutinizing the use of AI in financial services.
If the SEC applies the Investment Advisers Act of 1940 to crypto AI agents, developers could face registration, fiduciary and recordkeeping obligations. While these agents differ from traditional advisers—they operate autonomously, lack direct client relationships and don’t custody user assets—they may still raise regulatory concerns if they provide securities-related recommendations and receive any form of compensation. Given the SEC’s history with robo-advisers, the authors urge developers to closely monitor how the agency approaches this technology.
Given the lack of clear regulatory guidance, the authors urge developers to proactively manage risk by ensuring training data is accurate, up-to-date and unbiased; auditing smart contracts for vulnerabilities; and avoiding overstated or misleading claims about their AI agents’ capabilities.
Despite the legal uncertainty and technical complexity surrounding crypto AI agents, the authors note that AI also presents opportunities to strengthen compliance—enabling real-time monitoring, flagging high-risk activity and improving reporting functions, particularly when combined with human oversight.
Law360 subscribers may read the full article here.
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