We put this guide together inside the Foxian Research team to break down what the bill actually does, where it stands right now, and what changes for traders, builders, and exchanges if it becomes law. No fluff, just the information that matters.
Since the early 2010s, US crypto regulation has run almost entirely on enforcement actions rather than written rules. The SEC’s long-standing position was that existing securities law already covered most digital assets, so no new rulemaking was needed a stance that produced dozens of high-profile lawsuits against exchanges and token issuers instead of clear guidance issued in advance. The CFTC, by contrast, showed more willingness to treat certain digital assets as commodities, but lacked the statutory authority to regulate spot markets the way it regulates futures.
The result was a market where a company could not reliably tell, before launching a product, which federal agency it answered to or what rules applied. That uncertainty pushed some development offshore, fueled years of litigation, and left ordinary participants in spot crypto markets without the basic investor protections that exist in regulated securities and commodities markets.
The CLARITY Act formally the Digital Asset Market Clarity Act is Congress’s attempt to replace that case-by-case enforcement with a statutory test: a defined process for determining when a token is a security, when it becomes a commodity, and which agency supervises the venues that trade it.
The CLARITY Act was introduced in the House in May 2025 by Financial Services Committee Chairman French Hill and passed the House in July 2025. It then moved to the Senate, where the Banking Committee spent the better part of a year producing its own substitute version before advancing it by a 15-9 vote on May 14, 2026.
The bill’s central mechanism is a jurisdictional split that’s narrower and more specific than the common shorthand of “SEC for securities, CFTC for commodities.”
Under the CLARITY Act, the SEC retains authority over investment contract assets tokens whose value is tied to a centralized team, a fundraise, or a promise of future development. The CFTC gains exclusive authority over digital commodities digital assets whose value is “intrinsically linked” to the use of a blockchain network, once that network meets a decentralization standard described below. The digital commodity category explicitly excludes securities, derivatives, and stablecoins.
This produces something unusual in financial regulation: a single token can change regulatory category over its own lifetime without changing its code. A token sold through a centralized fundraising round starts life as an investment contract asset under SEC oversight. If the underlying network later becomes sufficiently decentralized, the security label can drop away, and the same token continues trading as a digital commodity under CFTC oversight instead.
The CFTC’s new role would include exclusive authority over spot markets in digital commodities traded on CFTC-registered exchanges, brokers, and dealers, along with anti-fraud and anti-manipulation enforcement in those markets a function it has never had for spot crypto before.
The bill’s drafters built in a coordination requirement: the SEC and CFTC must conduct joint rulemaking to further define asset categories, establish delisting criteria for noncompliant tokens, and harmonize oversight where the two agencies’ jurisdictions touch. That joint-rulemaking design is itself a response to years of public friction between the two regulators over which one actually had the final word on crypto.
The mechanism that decides which side of the SEC/CFTC line a token falls on is what the bill calls a “mature blockchain system” test. To qualify as mature, a blockchain network must meet four conditions: it must be functional for executing transactions or participating in governance and validation; it must run on open-source code; it must operate under pre-established, transparent rules; and it must not be under the control of a single person or group including any party holding 20% or more of the outstanding tokens.
To move from one category to the other, the bill creates a “Certification of Decentralization” process. An issuer can file a certification with the SEC asserting that its network meets the maturity standard across governance, token distribution, and development control. Once filed, the asset receives a rebuttable presumption that it qualifies as a digital commodity meaning the SEC can challenge the certification, but the default assumption favors the issuer unless the agency successfully rebuts it.
This certification pathway is the part of the bill most directly aimed at assets like Bitcoin and Ethereum, which derive their value from decentralized protocol activity rather than a centralized issuer’s ongoing promises, while leaving newer, centrally-controlled token launches under SEC oversight until they can demonstrate genuine decentralization.
The 20%-ownership concentration threshold in the maturity test means a network with a single large holder a founding team, a treasury, or an early investor controlling a fifth or more of token supply cannot certify as decentralized under the bill as currently written, regardless of how active or open its development community is. That detail alone will shape how future token launches structure their initial distribution.
Beyond the SEC/CFTC split, the Senate’s substitute version of the bill which now carries most of the weight in negotiations addresses several other areas directly relevant to how crypto businesses operate day to day.
Stablecoins are explicitly excluded from the “digital commodity” category and instead fall under a separate “permitted payment stablecoin” framework, building on the GENIUS Act passed earlier. The most contested piece here is whether stablecoin issuers can pay yield or rewards to holders simply for keeping a balance a fight detailed in Section 06.
DeFi gets its own title in the Senate substitute, directing regulators to clarify how a person or “control group” behind a trading protocol could register, and what disclosure, recordkeeping, and Bank Secrecy Act compliance would apply. The bill also directs the SEC to use its existing exemptive authority to carve out certain DeFi activity that doesn’t fit a traditional intermediary model an attempt to avoid forcing genuinely non-custodial software into a regulatory box built for centralized exchanges.
Custody and bankruptcy protections require exchanges and brokers holding customer assets to use qualified digital asset custodians, with customer property protections meant to prevent the kind of commingling that contributed to past exchange collapses.
Banks and credit unions would gain explicit authority to use digital assets and distributed ledger systems in activities they’re already permitted to conduct a provision aimed at integrating crypto into traditional banking rather than walling it off.
The substitute bill also includes a voluntary, NIST-based cybersecurity program and temporary emergency measures for protocols facing active exploits provisions added after a string of 2025 DeFi hacks made cybersecurity a harder line item for lawmakers to skip.
As of this guide, the CLARITY Act has cleared the House and is partway through the Senate. Here’s the actual sequence: the House passed its version in July 2025. The Senate Banking Committee then spent months producing its own substitute text, releasing successive discussion drafts in July 2025, September 2025, and January 2026, before advancing a final substitute by a 15-9 committee vote on May 14, 2026. Two Democrats Senators Ruben Gallego and Angela Alsobrooks joined all Republicans on the panel to advance it, though both indicated their committee votes didn’t guarantee floor support.
On June 1, 2026, an updated version of the bill was formally placed on the Senate Legislative Calendar, making it eligible for a full floor vote. But calendar placement is a procedural step, not a vote. Before becoming law, the bill still needs to be reconciled with the Senate Agriculture Committee’s separate “Digital Commodity Intermediaries Act,” clear a 60-vote Senate floor threshold, be reconciled again with the House’s original CLARITY Act, and be signed by the president.
That 60-vote requirement is the real obstacle. With 53 Republican senators, the bill needs seven Democratic votes to overcome a filibuster a higher bar than the committee’s bipartisan-but-narrow advancement suggests.
Prediction markets have been pricing this in real time. Polymarket traders put 2026 passage odds near 48% as of this guide, down sharply from 74% a month earlier. Galaxy Research has estimated roughly 50-50 odds for the year, while law firm Astraea Law projected enactment around August 2026 if talks hold together all converging on the same conclusion: this is genuinely uncertain, not a formality.
Three specific disputes are standing between the current bill and a floor vote, and all three are live as of this guide.
Stablecoin yield. Banking groups and some stablecoin companies disagree over whether issuers can pay rewards or yield to users for holding a stablecoin balance. Coinbase reportedly pulled its support from an earlier version over a proposed ban on such rewards. Senators Thom Tillis and Angela Alsobrooks have since negotiated a compromise allowing activity-linked incentives while barring pure interest-for-holding arrangements but bank lobbying groups argue even that compromise favors stablecoin issuers too heavily.
Section 604 the Blockchain Regulatory Certainty Act. This provision states that non-custodial software developers people who write code for blockchain tools without controlling user funds are not “money transmitters” under existing law, and therefore aren’t subject to the same compliance burden as banks. Developer advocacy groups call this essential protection for people who never touch customer funds. Law enforcement groups, including the National District Attorneys’ Association, have argued the provision “would severely impede the ability of law enforcement and prosecutors to investigate, trace, and prosecute criminal activity involving cryptocurrency.” The White House Crypto Council convened representatives from sheriffs’ and prosecutors’ associations specifically to address this objection, and as of this guide the talks had reportedly broken down at least once.
Ethics provisions. Senate Democrats are pushing for guardrails addressing the Trump family’s crypto-related business activities. A Van Hollen amendment that would have barred the president, vice president, and members of Congress from issuing or promoting digital commodities failed in committee by a party-line 13-11 vote. A separate, narrower bipartisan framework on ethics had reportedly been tentatively agreed in May, only for those talks to collapse again in June.
Stifel’s chief Washington policy strategist wrote that the bill “probably needs to get through the Senate by the end of July, preferably in June” to have a realistic shot at enactment in 2026, warning that prospects “would deteriorate materially” if it slips past the August recess. With roughly eight weeks of
Senate floor time remaining and several other priority bills including a war-powers resolution and the farm bill competing for the same calendar, the math is genuinely tight regardless of where the policy disputes land.
If the CLARITY Act clears the Senate, gets reconciled with the House version, and is signed into law, the practical changes would unfold over months as agencies write implementing rules but the direction of travel is already clear from the bill’s text.
For exchanges and brokers: spot trading in digital commodities would require registration with the CFTC, something that doesn’t currently exist for most of the market. Exchanges would face new custody requirements, recordkeeping standards, and anti-fraud obligations specific to spot crypto markets rather than the patchwork of state money-transmitter licenses and SEC enforcement theories currently in use.
For token issuers and builders: the certification of decentralization process gives projects an actual pathway to exit SEC oversight over time, rather than living indefinitely under the threat of a securities enforcement action. The new Regulation Crypto exemption would also let companies raise capital from everyday investors up to $75 million over 12 months under one version of the bill without the full securities registration burden, provided they meet disclosure requirements.
For DeFi protocols: genuinely non-custodial software would gain clearer legal footing, assuming Section 604 survives in something close to its current form, while protocols with an identifiable “control group” would face new registration and compliance expectations.
For everyday holders: the most visible change would likely be more regulated venues offering clearer protections, alongside potentially narrower stablecoin yield products than some platforms currently market, depending on how the Tillis-Alsobrooks compromise lands in final text.
For banks: explicit authority to engage in digital asset activities they’re already otherwise permitted to conduct would open a pathway for traditional financial institutions to integrate crypto services without separate, asset-specific approval fights.
None of this happens automatically or immediately. Even after passage, the SEC and CFTC would need to complete joint rulemaking to operationalize the bill’s definitions a process that historically takes months to years, not weeks.
Law firm Davis Wright Tremaine advised firms to start “mapping token and product lines to the substitute bill’s taxonomy” now, before final passage, specifically because the disclosure and certification requirements will determine which products can keep operating under current structures and which will need to adjust once implementing rules take effect.
The CLARITY Act represents the most serious legislative attempt yet to answer a question the crypto industry has been asking for over a decade: which regulator is actually in charge, and what are the rules. The substance the SEC/CFTC split, the mature blockchain test, the certification pathway is real, detailed, and already shaping how serious projects think about token design.
But substance and passage are two different questions. A bill can clear committee by a comfortable bipartisan margin and still die on a 60-vote floor threshold if a handful of unresolved disputes stablecoin yield, developer liability, ethics guardrails don’t get resolved in time. Prediction markets moving from 74% to 48% odds in a single month is the clearest signal that this outcome is genuinely contested, not a formality waiting for a ceremonial vote.
The right posture for now is informed attention rather than positioning around an assumed outcome. Watch the Senate calendar, watch whether Section 604 gets resolved, and treat any “it’s basically done” framing with the same skepticism you’d apply to any other unresolved legislative fight.
