What Is the CLARITY Act? The Bill That Would Split Crypto Between the SEC and CFTC

For most of the past decade, the central question in US crypto regulation has not been what the rules are but who writes them. Is a given token a security, overseen by the Securities and Exchange Commission, or a commodity, overseen by the Commodity Futures Trading Commission?

That question has been answered case by case, in court, at considerable expense. The Digital Asset Market Clarity Act — H.R. 3633, generally called the CLARITY Act — is an attempt to answer it in statute instead.

Why the question matters so much

The two regimes are not variations on a theme. They are different worlds.

Securities regulation is built around disclosure. An issuer registers, publishes audited financials, and accepts ongoing reporting obligations. The framework assumes an identifiable company whose management can be held responsible.

Commodity regulation is built around market integrity — preventing manipulation and fraud in trading — rather than around issuer disclosure. It does not assume there is an issuer at all.

A token with no company behind it fits the second model far better than the first. But under existing US law, whether it is a security depends on a decades-old judicial test applied to facts that look nothing like the cases that produced it. The result has been enforcement actions rather than rules, and firms operating without knowing which regulator they answer to.

What the bill does

The CLARITY Act draws the line in statute.

The CFTC gets digital commodities. The bill defines a digital commodity as a digital asset whose value derives from the use of a blockchain — as distinct from an instrument representing a claim on a business or its profits. The CFTC would regulate trading in these assets and the exchanges, brokers and dealers that handle them.

The SEC keeps digital securities. Assets that genuinely function as investment contracts in a business remain within the securities regime.

The practical effect is to narrow the SEC's reach over the crypto market while giving the CFTC a market it has not previously had explicit authority over.

The test that decides

The interesting part is not the definition but the qualifying condition attached to it.

For a digital commodity to trade on a regulated exchange, the bill generally requires that it sits on a blockchain the legislation treats as mature — broadly, one where control is sufficiently decentralised — or that the issuer files specified reports and disclosures.

This is a genuinely clever construction, and it encodes a specific theory: that the securities framework exists to address the risk created when insiders know more than investors. Where control is dispersed and no one holds that informational advantage, the disclosure regime has less to do. Where a small group still controls the network, disclosure obligations attach.

Whether decentralisation can be assessed reliably enough to carry that weight is the principal technical criticism of the bill, and it is a fair one. Decentralisation is a spectrum, it changes over time, and measuring it is contested.

The other provisions

The bill is broader than the SEC-CFTC split.

Stablecoin yield. As drafted, it prohibits digital asset service providers from paying interest or yield to customers merely for holding a stablecoin balance, while permitting rewards tied to activity. Banking groups have supported restricting yield on stablecoins; parts of the crypto industry have opposed it. This provision has been among the most contested.

DeFi. A separate title addresses how a person or control group operating a trading protocol could register, and covers disclosure, recordkeeping, supervision and obligations under anti-money-laundering and sanctions rules.

Developer protections. Provisions intended to distinguish writing and publishing software from operating a financial business.

Customer property in bankruptcy. Provisions addressing whether customer assets held by a failed platform belong to customers or to the estate — a question that mattered enormously in past exchange failures, where customers discovered they ranked as unsecured creditors.

Where it stands

Stage	When
Passed House committees	June 2025
Passed the House	17 July 2025
Advanced by Senate Banking Committee	May 2026
Updated Senate text released	July 2026
Senate floor vote	Not held before the August 2026 recess

As of early September 2026 the bill has not become law, and the Senate text differs from the House version. Anything that eventually passes may differ materially from what is described here, which is the normal course for legislation of this scope.

What it would and would not settle

It would settle which agency supervises which asset, giving firms a registration path that currently does not exist, and giving exchanges a basis for listing decisions other than legal risk appetite.

It would not settle whether any particular token is a good investment, whether a project is solvent, or whether a platform is honest. Regulatory clarity is about jurisdiction and process. It is not a quality assessment, and it should not be read as one.

That distinction is worth holding onto, because a common misreading of regulatory progress in this sector is that legal recognition implies endorsement. It does not. Regulated markets contain plenty of bad investments; the regulation governs conduct and disclosure, not merit.

What to watch

• Whether the Senate schedules and passes a floor vote, and what the final text says.
• How the maturity and decentralisation test is defined in any final version, since that determines which assets qualify.
• Whether the stablecoin yield restriction survives, given the opposition on both sides.
• What the CFTC is funded to do, because a mandate without resources produces a regime that exists on paper.

The bottom line

The CLARITY Act is an attempt to replace a decade of case-by-case enforcement with a statutory boundary between two regulators. Its central idea — that disclosure obligations should attach where control is concentrated, and fall away where it is genuinely dispersed — is a reasonable answer to a hard question.

It is also not law, and the version that might become law is still being negotiated. Coverage that treats its passage as settled is running ahead of the facts.

This article is educational and is not financial advice, nor is it legal advice. Legislation described here had not been enacted at the time of writing.