How neurotech companies navigate the grey zone

This is part three of Between wellness and medicine, a series of articles examining the growing market of consumer neurotechnology devices caught between medical and wellness regulation. Subscribe to receive part three and four via email (select “Neurotech”).

Introduction

Developers of wearable neurotechnology devices face a fundamental choice: either pursue certification as a medical device or operate in consumer markets. Companies must get medical certification if they make clinical claims or have a medical intended use (even though this is a fine and blurry line), while they can remain consumer if their products are low-risk and avoid clinical positioning. In this brief, we explore how companies make that choice in view of current European and US regulation, and how that in turn impacts the neurotechnology market.

The commercialisation route companies take determines the level of regulatory oversight, the speed of market entry, which customers they can credibly serve, whether they must build out clinical study capacity, and what funding needs, opportunities, and challenges they will likely encounter. In other words, commercialising products in medical or consumer markets is not only a technical classification but a fundamental decision that affects everything from company structure to business model. As difficult as it is relevant for the industry, this decision is also shaped by the ambiguities of the regulatory grey zone.

As the consumer neurotechnology market grows in size and complexity, founders can adopt a variety of practices to ensure the long-term sustainability of their companies. Many focus on specific layers of the tech stack that align with the opportunities and constraints of current governance frameworks. These practices can affect the evolution of the market just as much as the development of the technology itself.

Drawing on a series of formal interviews and informal conversations with neurotechnology industry executives based in both Europe and the USA, this brief explores how companies make the choice of positioning a product as medical or consumer. We explored topics such as:

• Where neurotech founders draw the line between wellness and medicine.
• The incentives and challenges of the consumer and medical routes.
• The role of data in consumer and medical markets
• The challenges neurotech companies face and what they would like to see from regulators
• The future they envision.

Our conversations offer a picture where the answer about where wellness ends and medicine begins is highly subjective, and highlight common incentives and challenges that industry executives find when pursuing each option.

Because of the sensitivity of the topic, we have chosen not to disclose company names. Instead, we focus on the multiplicity of company practices as well as their shared features, with the goal of providing a point of reference for policy discussion.

We welcome companies to complement, challenge, or refine the findings presented here. Likewise, we encourage any reader to engage with us if they wish to connect directly with industry actors, many of whom are open to discussion and value direct exchange.

The wellness and medicine divide according to founders

The first question we explored is where neurotechnology industry executives draw the line between wellness and medicine, especially when developing products to ease anxiety, improve sleep, or enhance concentration. The criteria they apply can shape the regulatory path they choose, with some common views emerging:

• Widespread uncertainty about where the boundary between health and wellness lies, and most industry executives agree the distinction will remain unresolved for the foreseeable future even as more and more companies navigate the grey zone.
  
• Boundaries blur most when devices address symptoms that overlap with those of clinical conditions, such as brain fog, burnout, low mood, or insomnia.
  
• Certain applications are considered safer than others and therefore more appropriate for the consumer space – particularly those related to sleep and cognitive performance, because the metrics are more robust and physiologically validated. In contrast, some questioned measures of emotional valence such as happiness or sadness, which are more abstract, vary among individuals, and lack a single identifiable brain origin.
• Many consumer neurotechnology companies do engage with stress or emotional valence, though these dimensions are more subjective and less scientifically established. Often, these firms focus on neurostimulation to relieve stress and anxiety, improve mood, reduce migraines, or address digestive issues. The rationale for “staying consumer” is the perceived lack of harm of the devices they develop.
• One company draws the line in educational applications involving children (e.g for focus or concentration), citing potential and yet unknown long-term risks.
  

The business logic behind staying out of medicine

Following the uncertainty around where wellness ends and medicine begins, we explored why many companies choose to remain on the consumer side. We originally hypothesised that some neurotechnology firms remain in the wellness or health-adjacent sector primarily because medical certification processes are too complex and expensive. While this is true for some companies, our interviews suggest a more nuanced landscape.

• Mass-market access: Several companies deliberately choose not to enter the medical sector, not because of regulatory hurdles, but because they seek mass-market reach. Their goal is to bring brain metrics to as many people as possible – often framed as “democratising access to brain health”. For some, the most logical strategy is to partner with large companies that can integrate neurotechnology into their offerings (for instance, into already existing wearables such as headphones) and reach end users at scale.
  
• Mass data collection: Another key reason for staying in the consumer space is the ability to collect large volumes of data, both longitudinally and in real-world settings. Some companies noted that this data is essential for personalizing products, training AI models, and building the evidence base needed to address potential medical use cases in the future.
  
• Weak reimbursement incentives: Experts and industry executives also noted that a major deterrent to pursuing medical certification is the lack of clear incentives. Insurance reimbursement, for instance, is not guaranteed for low-risk neurotechnologies. As a result, after investing years in clinical trials and documentation, the business case for a medical device (particularly non-invasives) may still be weaker than that of a consumer product developed with fewer resources. In this sense, the lack of predictable return on investment can be as much of a deterrent as the regulatory process itself.
  
• Dual-track models: Some companies adopt a dual strategy, starting with consumer devices to build presence and gather data, while simultaneously developing medical products informed by consumer data and research partnerships. In these cases, developing borderline medical technologies can be even seen as part of the business model. In many cases, the core product remains largely the same; what changes are the intended use and the proven efficacy. Medical certification adds credibility, even when the underlying technology comes from the same family of devices, some industry executives noted.
  
• Regulatory complexity on the consumer side: Some industry executives suggested that, paradoxically, the medical sector provides a clearer and more structured regulatory pathway than the fragmented consumer space (several times described as a regulatory “wild west”). For certain companies, the medical route is seen as more straightforward, thanks to well-defined clinical needs and validated metrics. They did not necessarily view medical regulations as more complex, but emphasised that it requires more time and capital. In contrast, consumer neurotechnology lacks standardised validation methods and must work harder to prove value. As such, decisions are often shaped more by strategic vision, available resources, and market end-goals.
• Regulatory bottlenecks on the medical side: Those pursuing (or considering) a dual track did however acknowledge that navigating medical regulations is challenging in Europe, especially compared with the USA. Compliance with the Medical Device Regulation (MDR) requires extensive documentation and approvals that can be more demanding than in other regions. The lack of local infrastructure in some European countries, such as access to notified bodies, creates additional friction. In some cases, companies had to outsource laboratory infrastructure from European countries different to their own to facilitate audits related to the certification process. Moreover, notified bodies themselves were described as a “black box”: companies cannot engage in dialogue to clarify or fine-tune their applications, and outcomes are typically limited to a binary yes-or-no decision. This contrasts with the U.S. Food and Drug Administration, which offers more interactive processes. Combined, these hurdles can render the medical route practically unviable for some ventures and drive European companies to seek FDA approval instead.
  

Data as a strategic asset in the consumer space

One key advantage in the consumer path stood out: access to data. Data collection was often cited as one of the most valuable aspects of consumer neurotechnology. But what exactly does it enable?

• Data is lucrative: Data often holds more value for investors than the devices themselves, which are relatively inexpensive to produce and sell. Unlike medical pathways, the consumer approach allows companies to gather large volumes of real-world data in everyday settings. Data-centered business models are often more attractive than those based on selling devices or components exclusively. Many companies combine device sales with subscription models that provide ongoing access to data analysis for personalised insights, thereby generating recurring revenue. While some companies frame data use around added value for users, such as better algorithms or personalised insights, others hinted at a brain data market that is not always transparent.
• Data privacy is key: The ability to collect sensitive brain-related data introduces significant challenges around privacy, transparency, and data ownership. Companies are well aware of these issues and are actively exploring ways to address them, both to ensure compliance and to build consumer trust.
  
• Trust is essential: Some industry executives emphasised that protecting user data is not just an ethical obligation or regulatory requirement, but a fundamental business concern and a prerequisite for long-term sustainability. Consumer trust is seen as essential to both user adoption and market survival, and therefore key to business success.
• Transparency is an asset: Some companies are developing platforms that give users visibility into how their data is stored, who accesses it, and for what purpose. This becomes especially complex for B2B companies, which must enforce data protection standards across all clients.
  
• Regulations fall short: Several industry executives expressed frustration that current frameworks, including GDPR, do not adequately address the sensitivity or specificity of brain data. EEG data, in particular, was described as uniquely revealing and capable of indicating both identity and mental state.
  
• Guidance is needed: Many noted that the practical burden of compliance often falls on technical teams, who must design systems that enable opt-outs and respond to data access requests. One industry executive described this as a major challenge and called for clearer technical guidance. The problem, they noted, is not opposition to regulation, but the lack of stable standards in a space that evolves rapidly.

What companies would like to see from regulators

Many neurotechnology companies emphasised the need for closer, more structured dialogue with regulators.

• Visibility on regulatory developments: Industry executives stressed that greater visibility into upcoming regulations would help them make informed decisions on product design, consent processes, data deletion protocols, and even company structure and fundraising. Several noted that regulatory developments have far-reaching technical implications, from how databases are structured to how opt-out mechanisms are implemented. GDPR compliance, in particular, was described as technically demanding, especially when it involves sensitive brain data.
  
• Need for practical guidance: One of the most frequently cited needs was clear and practical technical guidance, particularly around how to build infrastructure that supports regulatory compliance. Companies want practical tools such as frameworks or codes of practice to help them embed privacy mechanisms from the ground up. Several also called for downloadable templates or examples of well-constructed consent forms and terms of service, tailored specifically to neurotechnology.
  
• Split over data classification: Some industry executives argued that EEG should be formally recognised and regulated as a biometric identifier, to establish clearer expectations for compliance, even if this means stricter oversight. Others warned against overregulation, which they believe could hinder access to data that is critical for improving product safety and efficacy, and for developing novel health applications. And a third group did not consider raw brain data as particularly problematic without contextual information and instead, expressed concern about the inferences made about the person when combining digital traces, sensor data and (but not necessarily) brain data.
  
• Definitional inconsistencies are challenging: A number of industry executives expressed frustration at the inconsistency in how different data types are treated. For example, EEG data collected in clinical trials may be restricted due to concerns about identifiability, while other forms of surveillance, such as facial recognition or street cameras, are widely deployed without equivalent scrutiny. This, they argued, reflects a deeper discomfort with brain data itself, which is policed not necessarily because of what is done with its data but because of what it symbolises – identity, agency, and consciousness.
  

Companies look ahead: trends shaping the neurotech market

Understanding how companies see the future can help policymakers anticipate priority areas for action. We asked what they think is coming and what developments they believe will shape neurotech the most.

• Embedding brain health metrics into familiar wearables: In wellness applications, the real value lies in brain health metrics. These include indicators such as focus, stress resilience, sleep quality, and cognitive age. A consistent theme across interviews was the importance of integrating neurotechnology with other consumer technologies. Embedding neurotech into everyday products, such as headphones or earbuds, was seen as a key factor in driving adoption.
• Preventive approach to brain health: Several interviewees advocated for a more proactive approach to brain health that includes neuromodulation as a first-line option or even for prevention. Longitudinal data collected in natural environments (as opposed to clinical ones) is a new source of data unlocked by wearable technologies. This new type of data could be used to identify functional biomarkers of disease, warn of early signs of neurodegeneration, or assess cognitive decline – particularly in combination with other wearables.
• Personalisation is the next frontier: A promising direction for the near term is personalised intervention. Devices that detect brain states and adjust stimuli through audio, light, or even scent are seen as the next major frontier. These developments suggest that hearables may soon be able to deliver audio neuromodulation tailored to users’ cognitive or emotional states. The technology stack is already in place; what remains is to bring all components together to enable personalised brain interventions through familiar devices like earbuds.
• Neurotech-enabled AI systems: There is also growing interest in combining brain signals and attention metrics with large language models to build more emotionally responsive AI. This does not necessarily mean more empathetic systems, industry executives cautioned, it may also mean more persuasive ones, capable of tailoring responses to inferred emotional or attentional states. This opens new forms of human-computer interaction, but also raises concerns about influence and manipulation.
• Big tech will move in soon: At present, small companies often act as component suppliers and early market movers, while most anticipate that larger players will enter later. Big tech and established medical firms will likely secure patents, acquire start-ups, or license technologies once clear signs of market adoption appear.
• A reality-check is needed: Several participants stressed the need to temper public expectations. In particular, they warned against overstating the capabilities of current technologies, especially in relation to so-called mind reading. Public education was seen as essential, both to dispel misconceptions and to build long-term trust, but also to guide the design of governance frameworks that are in line with the capabilities of the technology and with the uniqueness (or not – they noted) of brain data

Conclusion

The boundary between wellness and medicine remains blurred for many neurotechnology executives operating in this space. Some firms acknowledge regulatory burdens and unclear incentives (e.g. insurance reimbursement) in the medical pathway, but many primarily choose the consumer space to reach larger markets, accelerate deployment, and capture real-world data at scale. That data has become the sector’s key asset, driving personalisation, investment appeal, and, in some cases, becoming the catalyst of future clinical pathways.

Hence, consumer status is therefore less about dodging regulation and more about following strong market incentives or company visions, while maintaining the possibility to make wellness and even health-related claims. The persistence of a binary regulatory framework, developed when products were more clearly either medical or consumer, and with very different requirements, advantages and limitations, further reinforces this self-organisation: mass market reach belongs to consumer markets. This pushes companies to choose and commit to their segment early, and for small start-ups that are entering the field, it can mean choosing the pathway that offers the greatest commercial advantage as they continue to raise funds, and not necessarily the one that would make the most sense for their application.

 Companies would value additional guidance from regulators, such as consent templates, models of brain-data governance, and clarity on how existing rules like GDPR apply to neurotechnology. They also hint at the importance of public education around neurotechnologies, as well as maintaining public trust and fair treatment of consumers in a space where wellness branding can look very medical, yet marketing claims do not always need to be substantiated with evidence.