The CLARITY Act Explained: Rewriting SEC and CFTC Crypto Rules

Mid-July 2026 is turning into the decisive stretch for how the United States regulates crypto, and increasingly little of it is happening through enforcement actions. Two separate efforts, one running through Congress and one running through the Securities and Exchange Commission itself, are racing toward the same goal: replacing years of case-by-case litigation with something closer to a rulebook. Both are stuck, and both are running out of runway before lawmakers leave Washington for the August recess.

The vehicle getting most of the attention is the Digital Asset Market Clarity Act, known to nearly everyone as the CLARITY Act. It would decide which federal agency, the SEC or the Commodity Futures Trading Commission, has jurisdiction over a given token, and it would do so in statute rather than in a speech or a press release a future administration could reverse. This piece walks through what the bill actually does, why it has been stuck in the Senate for months, what the SEC is doing on a parallel track while it waits, and what changes for exchanges, builders and investors depending on which track wins the race.

What the CLARITY Act Actually Does

The Digital Asset Market Clarity Act (H.R. 3633) passed the House of Representatives by a lopsided 294 to 134 vote on July 17, 2025, with more than seventy Democrats crossing over, a rare bipartisan result for a crypto bill in a Congress that otherwise agrees on very little. The text runs to hundreds of pages, but the core idea is simple to state even if it is complicated to execute: split jurisdiction over digital assets between the SEC and the CFTC based on how decentralized a network has become, rather than leaving every token’s status to be fought out one lawsuit at a time under the decades-old Howey test, a framework this outlet has covered in detail.

Under the bill, a token sold as part of an investment contract, meaning an issuer raised money on the promise of future profits from its own managerial efforts, stays under SEC jurisdiction as a security for as long as that promise is still being fulfilled. Once the network meets a statutory definition of a mature blockchain system, the token can graduate into a digital commodity and fall under the CFTC instead. The four-part maturity test asks whether the network is actually functional for its stated purpose, whether its code is open source, whether it runs on pre-established and transparent rules, and whether it remains free of control by a single person or coordinated group, including anyone holding twenty percent or more of the outstanding tokens.

Issuers, affiliated developers or a decentralized governance process can self-certify that a network has cleared that bar. The certification carries a rebuttable presumption of maturity, and the SEC gets sixty days to challenge it, with any dispute resolved in federal court rather than left to agency discretion alone. Once a token clears that bar, trading is meant to move to a CFTC-registered digital commodity exchange, and platforms that want to list it have to work through a provisional registration process, keep their books open to the CFTC, join a registered futures association, and meet disclosure and customer-asset segregation rules under a new framework for digital commodity brokers and dealers. None of this touches the SEC’s or the CFTC’s ordinary authority to sue over fraud, which survives reclassification untouched.

From Regulation by Enforcement to Regulation by Statute

The reason Congress is doing this at all traces back to the enforcement era the SEC has spent the past eighteen months trying to leave behind. Under former chair Gary Gensler, the agency treated most token sales as unregistered securities offerings and sued first, using cases against Coinbase, Kraken, Binance and others to set policy through litigation rather than rulemaking. Chair Paul Atkins, sworn in during April 2025, has spent his tenure unwinding that approach, and as this outlet detailed in tracing that shift from lawsuits to rulemaking, the Commission has dropped or settled nearly every major crypto case it inherited.

The SEC’s own numbers show the scale of the pivot. The Division of Enforcement’s fiscal 2025 results, covering October 2024 through September 2025 and published on April 7, 2026, reported 456 total enforcement actions and headline monetary relief of 17.9 billion dollars, but 14.9 billion of that came from a single, decades-old Ponzi case unrelated to crypto; strip that out and the real total sits closer to 2.7 billion. Atkins framed the shift explicitly in that release, saying the agency had redirected resources “toward the types of misconduct that inflict the greatest harm, particularly fraud, market manipulation, and abuses of trust, and away from approaches that prioritized volume and record-setting penalties over true investor protection.”

The problem, from the industry’s perspective and from the perspective of the lawmakers who wrote the CLARITY Act, is that everything built on that pivot so far sits on soft ground. A chair’s speech, an interpretive release, a decision not to appeal a case: none of it binds a future Commission the way a statute would. The SEC’s own March 2026 interpretive release stating that most crypto assets are not themselves securities is guidance, not law, and a differently composed Commission could narrow or withdraw it much the way Acting Chair Mark Uyeda rescinded Gensler-era staff accounting guidance during his first week in office last year. Writing the jurisdictional line into the Commodity Exchange Act and the Securities Act is the only way to make the current approach outlast the current Commission.

The Bill’s Long Road Through Congress

Getting from a House floor vote to an actual law has taken a full year and involved two Senate committees that do not normally work together. The Senate Agriculture Committee, which shares jurisdiction because commodity derivatives fall under its purview, moved first: it advanced its own companion measure, the Digital Commodity Intermediaries Act, on a strict 12 to 11 party-line vote on January 29, 2026, with every Democrat-proposed amendment rejected along the way.

The Senate Banking Committee, which holds primary jurisdiction over securities law and therefore over the SEC side of the split, took a more bipartisan path. It advanced its title of the bill 15 to 9 on May 14, 2026, with Democratic senators Ruben Gallego and Angela Alsobrooks joining every Republican on the panel, the bill’s first genuinely bipartisan committee result. That split outcome, a party-line Agriculture vote and a bipartisan Banking vote, has defined the negotiation ever since: Banking Committee staff needed a text that could hold the crossover Democrats without losing the Agriculture Committee’s more partisan majority.

Merging the two committees’ bills into one unified text, reconciling different approaches to decentralized finance, market structure and enforcement authority, has eaten up most of the two months since. A unified draft was expected to surface the week of July 13, 2026, according to people briefed on the talks, putting more weight on consumer protections than either standalone committee version, but leaving the hardest disputes for last.

The Three Fights Still Blocking a Vote

As of mid-July, three disputes stand between the merged bill and the sixty votes it needs to survive a Senate filibuster.

• An ethics provision that would bar senior government officials, including the president, from personally dealing in crypto while in office. Democrats treat this as non-negotiable; Republicans have resisted writing it into the merged text.
• Federal preemption of state-level crypto and money-transmitter rules, which state regulators and some Democrats worry would wipe out consumer protections, like New York’s BitLicense regime, that currently exist only at the state level.
• Vacant seats at the SEC and the CFTC, which several Senate Democrats want filled, or at least guaranteed to be filled on a bipartisan basis, before either agency receives sweeping new rulemaking authority under the bill.

Any one of the three could sink a floor vote on its own. Together, they have kept a bill with genuine bipartisan support at the committee level from ever reaching the floor, even with the House version having cleared its own chamber a full year ago.

The Ethics Provision and Trump’s Crypto Income Problem

The ethics fight is not abstract. President Trump’s own financial disclosure, filed around July 1, 2026, showed roughly 1.4 billion dollars in 2025 crypto-related income, according to NBC News‘s review of the filing: more than 635 million dollars tied to the $TRUMP memecoin, over 550 million from World Liberty Financial token sales, and roughly 260 million from selling a stake in the World Liberty Financial business itself. That disclosure landed in the middle of the CLARITY Act negotiations and hardened the Democratic position considerably.

Three Democratic senators, Chris Murphy of Connecticut, Chris Van Hollen of Maryland and Jeff Merkley of Oregon, held a Capitol Hill press conference on July 14, 2026 to say they could not support the bill without binding ethics language. Van Hollen called it plainly “a corrupt piece of legislation that will do a lot of harm.” Murphy went further, tying the bill’s entire value to that one provision in remarks reported by CoinDesk: “If this system does not stop Trump’s corruption of the entire industry, this bill is worthless.” He described the president’s token issuance as “a hidden avenue for mass scale bribery of the White House.”

Republicans counter that a workable market-structure bill should not be held hostage to a dispute about one family’s crypto holdings, and that ethics rules for federal officials belong in separate legislation. Neither side has moved publicly as of this writing, and negotiators reportedly still lack language that satisfies both the White House and the senators whose votes are needed to reach sixty.

The Commissioner Vacancy Standoff

The staffing fight gets less attention but is arguably more consequential for how the bill would actually function if it passed. The SEC currently operates with three sitting commissioners, Chair Paul Atkins, Mark Uyeda and Hester Peirce, all Republicans, after Democratic commissioner Caroline Crenshaw’s term expired in January 2026 with no successor yet confirmed; the two seats reserved for the minority party sit empty. The CFTC is thinner still: only its chair, Michael Selig, is seated, with four of the agency’s five seats vacant.

That matters because the CLARITY Act would put both agencies on a fixed clock to write comprehensive new rules once it passes. Senate Democrats, led in the complaint by Chris Van Hollen and Raphael Warnock, sent the White House a letter on June 10, 2026 arguing the administration had broken with the normal bipartisan practice of consulting Senate Democrats on minority-party nominees to independent agencies. The White House responded that it had already asked Democrats for names and received none, a standoff that has become one of the last hurdles to a merged bill text.

Senator Amy Klobuchar has proposed an amendment blocking any new CFTC rulemaking under the bill from taking effect until at least four commissioners are confirmed, a condition some Agriculture Committee Democrats say would satisfy them. The underlying worry is legal rather than purely political: a five-member commission trying to write sweeping new market-structure rules with only one seat filled is an obvious target for a lawsuit under the Administrative Procedure Act, and a successful challenge could unwind the very rules the bill exists to make durable, recreating the uncertainty CLARITY was supposed to end.

The Stablecoin Yield Wrinkle

A fourth dispute rarely makes headlines the way the ethics fight does, but it carries the largest dollar figure of any of them. Under current rules, most U.S. exchanges cannot pass yield generated by stablecoin reserves directly back to retail holders without running into securities or banking law questions. Coinbase alone reportedly books somewhere around 1.35 billion dollars a year from USDC-related rewards under the current arrangement, revenue that depends partly on how those rewards get legally characterized. How the merged CLARITY Act text treats stablecoin yield, whether it opens the door to paying holders directly, restricts it further, or punts the question to a separate rulemaking, has become its own lobbying battleground between exchanges, banks and consumer advocates.

Bank trade groups have pushed to keep any yield-like payments tightly restricted, arguing that paying interest on stablecoin balances functions like an uninsured bank deposit without the deposit insurance or capital requirements banks carry. Exchanges and stablecoin issuers counter that consumers already treat yield-bearing crypto products as ordinary savings tools, and that restricting them just pushes demand offshore to platforms with none of the disclosure requirements the CLARITY Act would otherwise impose. Negotiators have so far kept this dispute from blocking the bill outright, but it remains one more moving part that has to land correctly for a merged text to hold together long enough for a floor vote.

CLARITY Act Timeline at a Glance

The bill’s path from House passage to its current holding pattern spans exactly one year. The table below lays out the milestones that matter most.

Meanwhile, the SEC Is Writing Its Own Rules

Congress is not the only body trying to replace enforcement with rules. Since Atkins took over, the SEC has run its own parallel process under the banner of Project Crypto, first introduced in a July 31, 2025 speech and expanded in a November 12, 2025 keynote. The clearest articulation came on March 17, 2026, when Atkins laid out a three-part safe harbor: a startup exemption letting projects raise up to 5 million dollars a year for up to four years against whitepaper-style disclosure, a larger fundraising exemption for qualifying crypto investment contracts up to 75 million dollars, and a broader investment-contract safe harbor for networks winding down centralized control. Days later the Commission followed up with a formal interpretive release stating outright that “most crypto assets are not themselves securities,” with mining, staking and airdrops excluded from securities treatment on their own. Atkins summed up the goal simply: “This is what regulatory agencies are supposed to do: draw clear lines in clear terms.”

That framework is about to move from speeches to actual rule text. The SEC’s 2026 Unified Regulatory Agenda, updated July 7, lists three crypto rulemakings targeting a formal Notice of Proposed Rulemaking this month: Regulation Crypto itself, covering token offerings under RIN 3235-AN38, a companion rule on broker-dealer capital and customer-protection requirements for firms holding crypto under AN48, and market-structure amendments for exchanges and alternative trading systems under AN49. As of this writing the actual proposed text still has not been published; it remains under White House review, and once it does drop, a public comment period opens before anything becomes binding, a process CoinDesk reported is unlikely to produce a final, effective rule before 2027 even in the best case.

The staking piece of this is worth a specific mention, since it shows how much the SEC has already moved through guidance alone, without waiting on Congress. Staff statements in May and August 2025 concluded that solo, delegated, custodial and liquid staking generally are not securities transactions, treating staking rewards as compensation for a service rather than a share of profits, an approach this outlet has examined in the context of how validators actually get paid. That guidance already shapes how exchanges and staking providers operate today; the CLARITY Act would essentially write a version of the same logic into the broader digital commodity category, with the force of statute behind it instead of a staff statement a future Commission could withdraw at will.

Two Tracks Compared: Statute vs Agency Rulemaking

Both tracks are trying to solve the same underlying problem, but they differ in almost every practical respect. The table below lines them up side by side.

What Changes for Exchanges, Builders, and Investors

For exchanges, the practical shift is registration. Platforms listing digital commodities would need to move through the CFTC’s provisional registration process, keep books open to examiners, join a registered futures association, and meet capital and customer-asset segregation standards, a materially different compliance lift than most currently maintain for spot crypto trading. That would reshape competitive dynamics among the major venues, a comparison this outlet has mapped out in comparing Coinbase, Binance, Kraken and OKX, since the post-MiCA period in Europe already forced some of the same registration choices on those same platforms.

For builders and token issuers, the bill offers something the current SEC guidance cannot: a statutory off-ramp that does not depend on a friendly Commission staying in power. Instead of petitioning for a no-action letter or waiting out a multi-year lawsuit to learn whether a token is a security, a project could self-certify against the four-part maturity test and know, subject to a defined sixty-day SEC review window, where it stands. That is a meaningfully lower-risk path to a public listing than anything available during the Gensler years, when the absence of a clear framework itself functioned as a kind of enforcement.

For investors, the tradeoffs run in both directions. Digital commodity issuers would face new, CFTC-supervised disclosure obligations that do not exist today for most tokens trading on secondary markets, a genuine gain in transparency. At the same time, once a token exits SEC jurisdiction, investors lose the securities-law protections, and the private rights of action, that come with that status; recourse shifts toward CFTC enforcement and exchange-level compliance instead. Whichever agency ends up supervising a given token, both retain full authority to pursue outright fraud, so the basic backstop against theft and manipulation does not disappear either way.

What Happens If the Bill Fails

If the Senate cannot find sixty votes before the August recess, the practical effect is not that nothing happens, it is that everything reverts to the slower, more contested tracks already running. Token classification keeps getting resolved case by case under the Howey test rather than a bright statutory line, litigation the SEC has mostly stepped back from pursuing but has not permanently foreclosed. The SEC’s own rulemaking keeps moving on its separate schedule, but stays legally softer: an interpretive release or an exemptive rule is easier for a future, differently composed Commission to unwind than a law Congress would have to pass again to reverse.

Timing compounds the risk. Missing the August recess window all but guarantees the fight slides into 2027, after November’s midterm elections have had a chance to reshape the Senate math entirely. A chamber that flips control, or even shifts by a seat or two, could change which compromises are possible on ethics, preemption and the stablecoin-yield question, effectively restarting a negotiation that has already taken a full year to get this far.

The Global Backdrop: Why Washington Feels Behind

Part of what is driving the urgency in Washington is that other jurisdictions have not been waiting. In the European Union, MiCA’s licensing framework has moved from a multi-year transition period toward full, bloc-wide enforcement, with several member states’ transitional windows for crypto-asset service providers closing this summer; firms operating in Europe increasingly work under one passportable rulebook instead of a patchwork of national regimes. Hong Kong and the United Arab Emirates have both built out licensing regimes exchanges have used to relocate or dual-domicile parts of their business over the past two years.

That contrast is a recurring theme in industry testimony to Congress: a market-structure bill that has taken a full year to move from House passage to a contested Senate floor vote looks slow next to jurisdictions that have already finished the equivalent process. Whether that competitive pressure is enough to push a handful of undecided senators toward sixty votes before the recess is, as of mid-July, still an open question.

The Next Two Weeks: From the July 17 Hearing to Recess

The next real test comes on July 17, 2026, when the House Financial Services Committee holds a field hearing in New York titled “Building the Future of Finance: How CLARITY Act Unlocks Innovation.” A House committee cannot force a Senate vote, and the hearing itself changes nothing procedurally, but its timing is deliberate: it lands during the exact week Senate leadership is expected to set its floor schedule for the weeks before recess, giving the bill’s advocates a public platform to pressure undecided members right before that decision gets made.

Markets watching the bill have gotten more pessimistic as July has worn on. Polymarket’s contract on the CLARITY Act becoming law in 2026, which traded above seventy percent through the spring, has fallen well off those highs through June and July as the ethics dispute hardened, though it has swung considerably from week to week alongside the news cycle. Whatever the exact reading on a given day, the direction has been consistent: traders see a real chance the bill slips past its deadline.

Senators pushing the bill, including Wyoming’s Cynthia Lummis, have called publicly for a vote the week of July 20, giving negotiators roughly three working weeks after the hearing to land the merged text, resolve the ethics and vacancy disputes, and whip sixty votes before the chamber leaves town in early August. Missing that window would not kill the bill outright, but it would mean 2026 ends the way it started: with SEC crypto policy running mostly on agency discretion rather than statute.

Frequently Asked Questions

What is the CLARITY Act?

The CLARITY Act, formally the Digital Asset Market Clarity Act (H.R. 3633), is a bill that would split federal jurisdiction over crypto assets between the SEC and the CFTC. Tokens sold as part of an active capital raise stay under SEC securities rules, while tokens tied to sufficiently decentralized, functioning blockchain networks move to CFTC oversight as digital commodities once an issuer certifies the network meets a four-part maturity test. It passed the House of Representatives 294 to 134 in July 2025 and has been negotiated in the Senate ever since.

Is the CLARITY Act the same thing as the SEC’s Regulation Crypto rulemaking?

No, they are separate tracks aimed at a similar problem. The CLARITY Act is legislation that needs to pass both chambers of Congress and be signed into law, while Regulation Crypto is a set of rules the SEC is writing on its own authority, expected to reach a formal proposal stage in July 2026. Only a Congressional statute would bind a future SEC the way agency rulemaking cannot, since a later Commission can revise or withdraw its own rules far more easily than Congress can repeal a law.

Why is the CLARITY Act stuck in the Senate?

Three disputes have held up a Senate floor vote as of mid-July 2026: a Democratic demand for binding language barring senior officials, including the president, from personally profiting from crypto; disagreement over whether the bill should preempt state-level crypto and money-transmitter rules; and vacant SEC and CFTC commissioner seats that some Democrats want filled before either agency receives sweeping new rulemaking authority.

What happens to existing SEC crypto enforcement cases if the CLARITY Act passes?

Very little changes retroactively, since the SEC has already dropped or settled nearly all of its major crypto lawsuits under Chair Paul Atkins. Going forward, the bill would not remove SEC or CFTC authority to pursue fraud, market manipulation or abuses of trust. What it would end is the practice of using unregistered-securities lawsuits as the primary tool for deciding a token’s legal status in the first place.

When could the CLARITY Act actually become law?

Backers are targeting a Senate floor vote the week of July 20, 2026, with the chamber’s early August recess serving as the practical deadline for passage this year. If the Senate misses that window, the bill most likely slides into 2027, after midterm elections that could change the chamber’s composition and reopen the disputes currently blocking a vote.

Written by the HOGE Wire regulation desk.