Clarity Act Defeat: SEC and CFTC Take Crypto Control

How the Clarity Act’s Defeat Handed the SEC and CFTC the Wheel on Crypto

Efforts to pass the U.S. CLARITY Act have stalled in the Senate, leaving crypto market structure policy increasingly in the hands of regulators. With Congress unable to finalize the bill, both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have signaled they are prepared to move forward using existing authorities.

The CLARITY Act was designed to align how U.S. agencies approach crypto regulation and, in its latest draft, would have clarified oversight by effectively designating the CFTC as the primary regulator for mainstream crypto assets by classifying them as digital commodities. That allocation of responsibility has been one of the central issues for the industry, alongside ongoing disputes over how different types of tokens should be treated under federal law.

However, after passing Congress last June, the bill failed to advance in the Senate. The delay has reportedly centered on debate over whether to close a legislative loophole that would allow yield-bearing stablecoins, a point on which Coinbase has argued the loophole should remain open.

With the legislative path uncertain, regulators have increasingly positioned themselves as the next source of clarity. SEC Chairman Paul S. Atkins told CNBC on July 27 that the SEC stands ready to step in to support the digital asset market if Congress fails to act on the CLARITY Act.

CFTC Chairman Michael Selig has issued similar messages, emphasizing that market structure rules may come even without new legislation. Selig said he has directed CFTC staff to explore rules to codify a CFTC crypto market structure under the agency’s existing authorities, and to engage with developers of on-chain finance protocols to identify ways those developers can offer protocols in a legal and compliant manner.

“We’re going to give CLARITY its breathing room for a vote,” Selig said, adding that if lawmakers do not send a “fair version of the bill” to the president’s desk, he would direct staff to move swiftly to propose new rules for the industry.

The broader regulatory posture has also shifted toward joint work between agencies. The SEC and CFTC have highlighted “harmonization efforts” aimed at reducing friction created by legacy jurisdictional silos, and the agencies have rescheduled a joint event on harmonization and U.S. financial leadership in the crypto era, according to a Jan. 26, 2026 SEC release.

Even under a framework that leans toward the CFTC for primary oversight of major crypto assets, enforcement would still be shared where misconduct crosses traditional securities and commodities lines. One official involved in the discussion stressed that crypto-related wrongdoing would not escape scrutiny simply because it uses new technology, noting that where there is investment fraud “even if it’s dressed up in a crypto wrapper,” an enforcement action would still follow.

The political context remains active. On Sunday (Aug. 16), it was reported that Trump administration officials are meeting with cryptocurrency and prediction market executives this week as part of policy discussions on innovation in the U.S., including the Innovation Advisory Committee Conference and additional meetings.

The stalled CLARITY Act comes as Congress has already moved on stablecoins, with President Trump signing the GENIUS Act into law to regulate dollar-pegged tokens. With stablecoins now addressed separately, attention has turned back to broader “market structure” rules—how digital assets are issued, traded, and supervised—at a moment when regulators appear increasingly willing to set the direction if Congress cannot.

• What happened: The CLARITY Act failed to advance in the Senate after passing Congress last June.
• Why it matters: The bill aimed to clarify whether crypto assets fall primarily under the SEC or the CFTC, with drafts pointing to the CFTC as the main market structure regulator for mainstream tokens treated as digital commodities.
• What’s next: The SEC and CFTC say they are prepared to use existing authorities to develop rules and guidance, while maintaining enforcement focus on fraud and investor protection.

Dated: Aug. 20, 2026