What Is the CLARITY Act? The Crypto Market Structure Bill Explained

The CLARITY Act — formally the Digital Asset Market Clarity Act of 2025 (H.R. 3633) — is the most ambitious attempt yet to write federal market-structure rules for crypto in the United States. Its core question: when does a digital asset fall under the Securities and Exchange Commission, and when does it belong to the Commodity Futures Trading Commission instead?

The bill passed the House in July 2025 with bipartisan support, but its Senate journey ended — for now — in a failed procedural vote on September 15, 2026. This guide explains what the CLARITY Act proposes, where it stands, and what its stall means for markets.

What the CLARITY Act Is
Introduced on May 29, 2025, by Representative French Hill of Arkansas, the CLARITY Act is "market structure" legislation: rather than banning or blessing crypto, it assigns jurisdiction — ending a decade in which the SEC treated many tokens as securities while the industry argued they were commodities, leaving exchanges exposed to enforcement and institutions on the sidelines.

The bill's answer is a three-way sorting system: digital assets classified into distinct buckets, each with its own regulator and rulebook. The goal is durable statutory authority — rules written by Congress that cannot be reversed by a future administration the way agency guidance can.

How the Bill Divides Oversight: SEC vs. CFTC

• Digital commodities — tokens linked to decentralized blockchain systems — would fall under the CFTC, which would gain new authority over spot (non-derivatives) crypto markets.
• Investment contract assets — tokens sold as part of an investment contract — would remain under the SEC, with registration and disclosure obligations familiar from stock markets.
• Payment stablecoins — dollar-pegged tokens — would be carved out of both categories and governed by the separate stablecoin framework described below.

Crucially, the bill distinguishes the contract from the asset: a token sold in an initial offering might be a security at launch, but once it trades on secondary markets apart from the issuer, the asset itself could be reclassified — letting exchanges list tokens without treating every listing as an unregistered securities sale.

The definitional heart of the bill is the "digital commodity": a digital asset intrinsically linked to a blockchain system, excluding securities, stablecoins, and most NFTs. Bitcoin and Ethereum would be formally classified that way from day one.

Tokens that do not qualify remain "investment contract assets" under SEC oversight, judged by the familiar Howey test — a large practical difference, since securities registration demands detailed disclosures and broker-dealer intermediaries, while CFTC-style oversight centers on market integrity, anti-fraud rules, and custody safeguards.

The "Mature Blockchain" Test and Decentralization Criteria
The most innovative provision is the "mature blockchain system" standard — a certification path for tokens to graduate from SEC to CFTC jurisdiction as their networks decentralize.

To qualify, a network would need to demonstrate criteria such as:

No single person or group controlling the system (one cited benchmark: no group holding 20% or more of voting power or token supply)
Open-source code and a fully operational network
Widely dispersed token ownership and governance

Early-stage projects would remain under securities law but could file notice with the SEC of expected maturity.

A fundraising exemption would let qualifying projects raise up to $75 million in 12 months through a streamlined filing rather than a full public offering registration.

Registration Paths for Exchanges and Brokers
The bill would require trading platforms, brokers, dealers, and custodians handling digital commodities to register with the CFTC, with requirements including minimum capital, risk management, record keeping, reporting, and strict customer-asset segregation — customer funds could not be commingled with the firm's own assets.

Firms handling both would register with both agencies; provisional registration would let businesses operate while regulators finalize rules. The bill also contains an explicit DeFi safe harbor: developers of non-custodial software, node operators, and validators would be excluded from the federal definition of "financial intermediary."

How Stablecoins Are Treated (and the GENIUS Act)

Payment stablecoins are largely excluded from the CLARITY Act's framework because Congress already passed dedicated stablecoin legislation: the GENIUS Act, signed into law on July 18, 2025, sets reserve, audit, and licensing standards for dollar-backed stablecoin issuers, and the CLARITY Act defers to it.

Where the CLARITY Act Stands Now

The verified timeline:

• May 29, 2025 — Rep. French Hill introduces the Digital Asset Market Clarity Act (H.R. 3633).
• July 17, 2025 — The House passes the bill 294–134, with 78 Democrats in favor.
• July 18, 2025 — The GENIUS Act is signed into law, establishing the federal stablecoin framework.
• January 2026 — A planned Senate Banking Committee markup is postponed after industry pushback; Coinbase CEO Brian Armstrong says the company cannot support the bill in its then-current form, citing stablecoin yield, tokenized-equity, and DeFi provisions.
• May 14, 2026 — The Senate Banking Committee advances the bill 15–9, with Democratic Senators Angela Alsobrooks and Ruben Gallego the only Democrats voting yes.
• September 13, 2026 — Lead Senate negotiators release a final substitute draft, their "last, best and final" offer, with what sponsors called 126 substantive changes requested by Democrats — including ethics restrictions and a stablecoin-yield compromise.
• September 15, 2026 — The Senate rejects cloture on the motion to proceed to H.R. 3633 by 49–50; 60 votes were required. Every Democratic senator present voted no, joined by four Republicans (Susan Collins, Josh Hawley, Jerry Moran, and Thom Tillis); one Democrat did not vote. This was a procedural vote on whether to begin debate, not a final vote on the bill. Senator Tillis entered a motion to reconsider, technically keeping the bill eligible to return to the floor.

As of this writing, no new vote is scheduled, and with November midterms approaching, analysts widely expect any revival to wait for the lame-duck session — or the next Congress.

What Happens Next: Regulators Move Without Congress

Within 48 hours of the failed vote, both regulators acted under existing authority: the SEC opened a five-year exemption window for tokenized stock trading, and the CFTC submitted a crypto rulemaking package — "Regulation Crypto Asset Transactions and Regulation Crypto Asset Markets" — to the White House Office of Information and Regulatory Affairs on September 17.

This followed a joint SEC–CFTC interpretation on March 17, 2026, naming sixteen major tokens — including Bitcoin, Ether, Solana, and XRP — as digital commodities rather than securities. That already lowers legal risk for banks and underpins crypto ETFs, but it is agency guidance, not statute: a future leadership could reverse it. The CLARITY Act's value was always making that treatment permanent.

Potential Market Impact

Institutional clarity. The bill's clearest payoff would be durability: institutions that stayed away because enforcement policy could change with each administration would get statute-level certainty about which regulator governs which asset — and exchanges could list tokens through defined registration paths instead of guessing.

The regulator-led alternative. With Congress stalled, the market is watching the SEC and CFTC rulemaking track: faster, but narrower, reversible, and vulnerable to court challenge — the opposite trade-off from legislation.

Criticisms and Open Questions

• Ethics provisions. Democrats demanded restrictions on public officials' crypto activity. The final draft barred officials, employees, and their spouses from issuing or sponsoring digital assets while in office, with a 2029 sunset — but critics called it too narrow, and it remained a deal-breaker.
• Stablecoin yield. Whether crypto firms could pay yield on stablecoin balances pitted banks against parts of the crypto industry and was never fully resolved.
• Industry division. Coinbase's public opposition — arguing the draft weakened the CFTC and restricted DeFi — showed the industry itself was split on whether a flawed bill beat no bill at all.
• Technical ambiguity. The decentralization criteria leave hard questions: exactly when does a network become "mature," and who certifies it?

FAQ

Did the CLARITY Act pass? No. The House passed it in July 2025 and the Senate Banking Committee advanced it in May 2026, but the full Senate rejected cloture 49–50 on September 15, 2026 — eleven votes short of the 60 needed to begin debate. A motion to reconsider was filed, so the bill is stalled, not formally dead.

What is the difference between the CLARITY Act and the GENIUS Act? The GENIUS Act, signed in July 2025, governs payment stablecoins — reserves, licensing, and issuer rules. The CLARITY Act is broader market-structure legislation covering how other digital assets are classified and which regulator oversees their trading.

Would the CLARITY Act make all crypto legal in the US? No. It would not legalize or ban crypto; it would assign clear regulators and registration paths. Tokens deemed securities would still face SEC registration, and anti-fraud and anti-money-laundering rules would still apply.

What happens to crypto regulation now that the bill stalled? The SEC and CFTC are advancing crypto rules under existing authority — the March 2026 joint interpretation, a tokenized-stock exemption window, and a CFTC rulemaking package under White House review. Congress could revisit the bill in a lame-duck session or the next Congress.

Sources:

• https://www.cryptotimes.io/2026/09/20/clarity-act-fails-49-50-in-us-senate-as-sec-cftc-move-ahead-on-crypto-rules-within-48-hours/
• https://WWW.FOOL.COM/investing/2026/09/24/the-clarity-act-fails-to-pass-in-senate-heres-the/
• https://www.gate.com/blog/clarity-act-bank-committee-approval-crypto-market-regulatory-framework-sec-cftc-jurisdiction-realignment
• https://www.ainvest.com/news/clarity-act-crypto-legal-identity-price-2609/

Not financial advice.