Should America regulate commercial manned spaceflight?

I love your tag line.

"In late December 2012, the world could change dramatically. No, not that."

I'd say that there clearly needs to be some sort of coordinating agency, the same way we do for any international shared resource like the radio spectrum or aircraft flight paths.

The FAA and corresponding international bodies should have jurisdiction over things inside the atmosphere that could affect aircraft flights. But not necessarily space.

Personally? I'd accept somewhat more possibility of danger in space than in an aircraft. I would certainly fly with a 99% chance of returning alive. Probably not if it were as low as 80%. Risk of an emergency like pressure loss requiring oxygen masks? Not even a factor. I'd expect non-fatal emergencies are just part of the experience.

These numbers would change as I aged. If I were 80 years old, I think I'd go into space with a 50/50 survival chance. Or considerably less.

Until there are actual commercial passengers, then there is no point to even more government organizations and waste of money.

Once commercial and anyone can board these flights, then they should fall in the FAA realm. As of right now, they are only slated to go to 'near space' which is still within the atmosphere of the earth and FAA jurisdiction.

Note that FAA and your congressional law you ask about is by and for the United States of America. Doesn't apply to other countries.

Legally. Spaceships don't stay in the territory of any single country.

Economically. Regulations usually require business ventures to pay more money, which reduces profit, which inhibits investment. Excessive regulation thus prevents economic activity, so nothing gets done.

Politically. Governments are composed of posturing buffoons who are experts only in shifting blame away from themselves when things go wrong. Otherwise, they are total fupucks. Letting them decide what ought to be legal and under what conditions is sure to cause one disaster after another until everything that can go wrong has happened at least once. And probably more than once. And for every necessary regulation, two unnecessarily hindering ones will be passed, so that that laws affecting the business will be at least as poisonous as they are medicinal until the errors in legislation are winnowed out after ANOTHER long, long period of political maneuvering.

There are jurisdictional issues. Space begins at 100km at which height claims of national sovereignty cease to be valid. So you can regulate aircraft all the way up to 328,000 feet but after that they would have no authority (especially if the vessel was not registered in the US), even if it flew from US territory.

Update: the law you cite applies to US registered vessels only. Simply using US airspace is not enough to assert jurisdiction, in the same way as foreign aircraft do not need US registrations to fly through US airspace.

The squawks from other countries would be loud and clear and they'd ignore any regulation from th US.