What Is the CLARITY Act? Full Guide to US Crypto Regulation

The Digital Asset Market Clarity Act of 2025, more commonly known as the CLARITY Act, is proposed US legislation intended to create a clearer federal framework for digital assets. It addresses a central question in US cryptocurrency regulation: when should a crypto asset be regulated by the Securities and Exchange Commission (SEC), and when should the Commodity Futures Trading Commission (CFTC) oversee it?

The House passed the bill in July 2025, and a revised version cleared the Senate Banking Committee in May 2026. However, the US CLARITY Act is not yet law. If enacted, it would establish rules for asset classification, trading platforms, intermediaries, customer protection, DeFi, and regulatory coordination. This guide explains what the US CLARITY Act proposes and what it could mean for digital asset businesses and users if enacted.

Why Congress created the CLARITY Act

US digital asset regulation developed through securities and commodities laws, court decisions, agency guidance, and enforcement actions that were not specifically designed for blockchain assets. This created uncertainty about how particular tokens and market activities should be classified, leaving a regulatory gap: the SEC regulates digital assets that qualify as securities, while the CFTC can police fraud and manipulation involving commodities but cannot comprehensively regulate commodity spot exchanges.

Congress developed the crypto CLARITY Act with the aim of replacing that fragmented approach with a statutory market structure. The proposed crypto legislation would divide responsibilities between the SEC and CFTC and set requirements for exchanges, brokers, dealers, and token issuers.

From FIT21 to the CLARITY Act

The CLARITY Act crypto legislation developed from the Financial Innovation and Technology for the 21st Century Act, or FIT21. FIT21 proposed dividing digital asset oversight between the SEC and CFTC according to an asset’s characteristics. The House passed FIT21 in May 2024, but it expired when the Senate did not act before the end of the 118th Congress.

Lawmakers returned to the issue in 2025 with the CLARITY Act. The new bill retained FIT21’s dual-agency model while revising its definitions, disclosure pathways, registration rules, and treatment of assets initially sold through investment contracts. 

Suggested read: Crypto Regulation in 2026: What Changed and What’s Ahead

The SEC and CFTC: Their roles in crypto

The United States divides digital asset oversight according to the nature of the asset, transaction, and service involved. The SEC regulates securities markets, while the CFTC oversees commodity derivatives and has certain enforcement powers in spot commodity markets. 

The CLARITY Act’s crypto framework would draw a clearer boundary between the two agencies. The SEC would remain responsible for securities and securities-related offerings. In crypto, the CFTC would become the principal regulator of spot markets for digital commodities, in addition to retaining its existing authority over derivatives.

SEC: Investor protection and securities

The SEC regulates the offer and sale of securities, including transactions involving crypto assets when they fall within the federal definition of a security. Its responsibilities include disclosure, market integrity, investor protection, and the supervision of regulated securities intermediaries such as exchanges and broker-dealers. Under the Howey test, established by SEC v. W.J. Howey Co., an investment contract generally exists when there is:

• An investment of money
• In a common enterprise
• With a reasonable expectation of profit
• Based on the essential managerial efforts of others.

This means a non-security asset can be sold through an investment contract. CLARITY would preserve SEC authority over securities, tokenized securities, investment-contract offerings, disclosures, and securities fraud while defining when an underlying asset may trade separately from its original fundraising arrangement.

CFTC: Commodities and derivatives authority

The CFTC regulates commodity futures, options, swaps, and registered derivatives markets. Under the proposed CLARITY Act cryptocurrency framework, a digital commodity spot exchange, broker, or dealer would have to register with the agency and meet rules for custody, customer assets, surveillance, reporting, conflicts of interest, and operational resilience.

The two agencies would need to coordinate on assets and transactions crossing regulatory categories. The intended division is nevertheless clearer, with the SEC leading on securities and investment contracts and the CFTC supervising digital-commodity spot markets and continuing to oversee derivatives. However, this clarity only comes if the legislation is enacted.

Current status of the CLARITY Act

Last updated: July 30, 2026

The CLARITY Act's status as of late July 2026 is that it has passed the House but has not received a full Senate vote, and the window for 2026 passage is closing. The Senate Banking Committee version advanced in May 2026 and was placed on the Senate Legislative Calendar on June 1 as Calendar No. 423, making it eligible for floor consideration. On July 22, Senator Cynthia Lummis released a consolidated draft merging the Senate Banking and Agriculture Committee versions—a step needed before a floor vote can proceed.

However, the ethics fight has hardened Democratic opposition rather than resolved it, and it played out in two stages. In mid-July, a group of Democrats publicly opposed the bill because the draft then circulating contained no anti-corruption provisions at all. The July 22 draft tried to answer that by adding an ethics title—barring senior officials from issuing or sponsoring digital assets—but it was enforceable only by the Department of Justice and set to expire in 2029. A separate group of Democratic negotiators, whose votes the bill actually needs, called that version insufficient, objecting in particular to the lack of independent enforcement. On July 23, Senate Majority Leader John Thune cast doubt on passing the bill before the August recess.

By late July 2026, Senate leadership had effectively deprioritized the bill. Thune filed cloture on federal appointments and a Russia sanctions package instead, and reports from July 28 indicate the CLARITY Act has been shelved ahead of the August recess. Prediction markets currently price 2026 passage at around 33–37%, down from above 80% in February.

Although final passage requires only a simple majority, the bill needs 60 votes to end debate and overcome a filibuster. With Republicans holding 53 seats and Senators Josh Hawley and Rand Paul expected to vote no on substantive grounds, between seven and nine Democratic votes would be needed to reach cloture. Negotiations continue over DeFi, stablecoin rewards, AML safeguards, consumer protections, and ethics restrictions concerning senior public officials' and their families' crypto interests.

If the Senate passes an amended bill, the House must approve the Senate's changes, or both chambers must resolve their differences and pass identical final text before the bill can be sent to the president. If the CLARITY Act misses the August recess window, its next viable path is either the September session before the November midterms—a period typically dominated by must-pass appropriations—or a lame-duck session after the elections. Both paths carry materially lower odds of success, and failure in 2026 would likely push final passage into 2027.

CLARITY Act: Key legislative milestones

The principal CLARITY Act vote milestones are:

• May 29, 2025: Representative French Hill introduced H.R. 3633, the Digital Asset Market Clarity Act.
• June 10, 2025: House Financial Services approved it 32 to 19 and House Agriculture 47 to 6.
• July 17, 2025: The House of Representatives passed it 294 to 134.
• May 14, 2026: The Senate Banking Committee approved its revised version 15 to 9.
• June 1, 2026: The bill was added to the Senate Legislative Calendar as Calendar No. 423.
• July 14, 2026: Senators Murphy, Van Hollen, and Merkley publicly opposed the bill, which at that point contained no anti-corruption provisions.
• July 22, 2026: Senator Cynthia Lummis released a consolidated draft merging the Senate Banking and Agriculture Committee versions, adding provisions on crypto ATM fraud, suspicious-asset freezes, AML compliance, and a new ethics title. A group of seven Democratic negotiators said the text "falls short," objecting in particular to the ethics provision's DOJ-only enforcement and 2029 sunset.
• July 23, 2026: Majority Leader Thune publicly cast doubt on passage before the August recess.
• Late July 2026: Senate leadership prioritized federal appointments and a Russia sanctions package on the floor calendar, shelving the CLARITY Act ahead of the August recess. The bill remains on the Senate Legislative Calendar with 2026 passage in serious doubt.

How the CLARITY Act classifies digital assets

The bill’s token classification framework considers an asset’s characteristics, what it represents, how it was issued, and how it is sold. A central feature of the CLARITY Act cryptocurrency model is that a token and the investment contract used to sell it can receive different legal treatment.

Terminology differs between versions. The House-passed bill refers to “investment contract assets,” while the CLARITY Act 2026 Senate text introduces the related category of “ancillary assets.” These definitions could change again before enactment.

Digital commodities

Under the House bill, a digital commodity is a digital asset intrinsically linked to a blockchain and deriving value from the blockchain’s use. The CLARITY Act crypto framework would generally put spot trading in these assets under CFTC oversight, with exchanges, brokers, and dealers subject to registration and customer-protection rules.

Investment contract assets

The House bill defines an investment contract asset as a digital commodity that can be exclusively possessed and transferred person to person without necessary reliance on an intermediary, is recorded on a blockchain, and is sold or otherwise transferred pursuant to an investment contract. 

The CLARITY Act 2026 Senate version instead uses “ancillary asset” for a network token whose value depends on the entrepreneurial or managerial efforts of an originator or related person. It would apply tailored SEC disclosures to ancillary assets while allowing non-security treatment when an originator’s managerial efforts are no longer a primary source of value.

Stablecoins

Payment stablecoins are treated separately from digital commodities and securities. Their principal regulatory framework comes from the GENIUS Act, which became law in July 2025. The GENIUS Act stablecoin framework governs issuer authorization, one-to-one qualifying reserves, redemption, disclosures, and AML and sanctions compliance. The CLARITY Act addresses how intermediaries handle GENIUS Act stablecoins.

Tokenized securities

Tokenization does not turn a security into a commodity. A blockchain-based share, bond, fund interest, or other security would remain subject to federal securities laws and SEC oversight in cryptocurrency regulation.

Suggested read: US Crypto Regulations: Federal and State Rules (2026)

The mature blockchain test

In the House bill, a blockchain is “mature” when the network is sufficiently functional and decentralized for its asset to be regulated as a digital commodity. Indicators include an operational network that can transfer value, run applications, validate transactions, or support governance; transparent rules; no unilateral controller or special insider privileges; and issuer or affiliate holdings below 20% of voting power and supply. An issuer or decentralized governance body could certify maturity, subject to an SEC challenge generally within 60 days.

The version of the bill advanced by the Senate Banking Committee instead asks whether a network is under “coordinated control” and whether an originator’s managerial efforts remain central to value, generally allowing the SEC 90 days to object to certification. These approaches overlap with, but do not replace, the long-standing Howey test used for crypto analysis to determine whether a transaction involves an investment of money in a common enterprise with profits expected from others’ essential managerial efforts.

For blockchain regulatory compliance, mature status is important because it can allow certain token transactions to use the bill’s exemptions and enter the CFTC-regulated digital-commodity framework.

What the CLARITY Act covers

While much of the news about the CLARITY Act has focused on its potential to define which digital assets fall under SEC or CFTC jurisdiction, the bill also proposes rules for intermediaries, trading venues, customer assets, disclosures, illicit-finance controls, DeFi, and regulatory coordination.

The Senate is considering the framework through two connected legislative tracks. The Senate Banking Committee’s version addresses securities regulation, stablecoins, illicit finance, and banking, while the Senate Agriculture Committee’s Digital Commodity Intermediaries Act covers CFTC regulation of spot digital-commodity markets. These provisions would need to be combined and reconciled with the House bill before becoming law.

Stablecoin provisions

The CLARITY Act would complement the GENIUS Act’s stablecoin regulation regime. The House CLARITY Act proposes excluding permitted payment stablecoins from several securities-law definitions and allowing them to be traded through regulated intermediaries. The Senate text proposes prohibiting service providers from paying passive interest solely for holding a payment stablecoin, while permitting qualifying transaction-, loyalty-, payment-, or liquidity-based rewards.

Exchange registration

This crypto market structure bill would require spot digital-commodity exchanges, brokers, and dealers to register with the CFTC; securities platforms would remain under SEC rules. Obligations would cover customer-asset segregation, qualified custody, surveillance, conflicts, disclosures, recordkeeping, governance, and financial resources. The Senate Agriculture proposal also allows expedited registration and provisional status while the CFTC completes its rules.

AML and KYC obligations

The CLARITY Act would reinforce crypto Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements by bringing digital commodity brokers, dealers, and exchanges expressly within the Bank Secrecy Act framework. Under the Senate proposal, covered intermediaries would be required to maintain risk-based AML/CFT programs, monitor and report suspicious activity, implement customer identification programs, and comply with US sanctions. Many centralized crypto businesses already have Bank Secrecy Act obligations because they operate as money services businesses or other regulated financial institutions. 

Tax reporting

Crypto tax reporting would remain governed by the Internal Revenue Code and Treasury and IRS rules, including Form 1099-DA reporting by covered brokers for reportable transactions beginning in 2025 under final IRS regulations.

How the CLARITY Act treats DeFi

The CLARITY Act’s approach to DeFi regulation focuses on control, custody, and the financial functions a person actually performs. The House-passed bill defines decentralized finance as blockchain applications that let users conduct transactions themselves, without a third-party intermediary executing the transaction or taking custody of their assets. It generally exempts activities such as publishing code, validating transactions, operating nodes or oracle services, providing blockchain data interfaces, and developing non-custodial protocols from SEC or CFTC registration requirements. Securities, commodities, sanctions, anti-fraud, and other laws could still apply where a person performs a regulated function.

The Senate text establishes a more detailed distinction between decentralized and non-decentralized finance trading protocols. A protocol could be considered non-decentralized when operators can alter functionality, exercise discretion beyond transparent code, restrict access, or perform brokerage, execution, clearing, or custody.

Where identifiable controllers perform securities-related functions, the SEC would develop activity-based rules governing registration, disclosures, recordkeeping, supervision, and conduct. Applicable Bank Secrecy Act obligations could also follow where registration causes the controller to be treated as a financial institution.

The Senate version also introduces separate compliance expectations around the DeFi ecosystem:

• The Treasury would issue sanctions and AML guidance for US-operated web front ends that transmit users’ instructions to DeFi protocols.
• Regulated digital asset intermediaries routing transactions through DeFi would need to assess money laundering, sanctions, fraud, market manipulation, operational, and cybersecurity risks.
• Those intermediaries would have to disclose material risks to customers and maintain controls for detecting, rejecting, or suspending higher-risk transactions.
• NIST would establish a voluntary program for assessing DeFi cybersecurity, auditing, and code-transparency practices.
• Non-controlling developers and infrastructure providers would generally not be treated as money transmitters solely for publishing software or supporting self-custody.

CLARITY Act vs. GENIUS Act: Key differences

Suggested read: Global Stablecoin Compliance: GENIUS Act, MiCA, Hong Kong, Singapore, and More Key Rules

CLARITY Act vs. MiCA: US-EU comparison

The CLARITY Act and the EU’s Markets in Crypto-Assets Regulation (MiCA), for example, both seek to reduce uncertainty in crypto markets, but they take different approaches. MiCA crypto regulation creates a unified licensing and conduct framework across the EU, whereas the CLARITY Act primarily divides responsibility among existing US regulators.

There is also a fundamental difference in legal status. MiCA is already in force, and its final transitional period for existing crypto-asset service providers (CASPs) ended on July 1, 2026. After that date, CASPs serving EU clients without a MiCA authorization are expected to cease such services and wind down in line with ESMA’s supervisory expectations. 

MiCA covers crypto-assets and related services not already regulated under other EU financial-services legislation. Its three principal categories are asset-referenced tokens, e-money tokens, and other crypto-assets. Assets qualifying as financial instruments, deposits, or other regulated financial products remain outside MiCA. The European Commission describes MiCA as a harmonized framework for crypto-asset issuance and related services.

Controversies and criticisms of the CLARITY Act

Cryptocurrency regulation news coverage has centered on whether the bill will pass, but several substantive objections have shaped the negotiations.

Investor protections. Critics argue that the bill's classification framework (particularly the digital commodity category) could allow assets to bypass the disclosure and investor-protection standards that traditionally apply to securities offerings. The concern is that once an asset qualifies as a digital commodity under the CFTC-supervised framework, retail investors would receive weaker mandatory disclosures than they get under SEC rules, even where the risks are functionally similar. This may present an issue for tokens that transition from investment-contract offerings into digital commodity status once their underlying blockchains are certified as mature.

CFTC capacity. The bill would substantially expand the CFTC's remit at a time when the agency is under acute resource pressure. Some reports have highlighted that the CFTC has recently lost around 21% of its staff, which raises doubts about whether the agency has the capacity to supervise spot digital commodity markets on top of its existing derivatives responsibilities. Critics argue that assigning the CFTC oversight of an entirely new market segment without corresponding funding and headcount increases risks creating regulatory gaps in practice, regardless of what the statute prescribes on paper.

DeFi and illicit finance. The Senate Banking Committee's Democratic minority issued a national security advisory arguing that the bill fails to close vulnerabilities exploited by criminals, terrorists, and foreign adversaries. The core concern is that the bill's DeFi carve-outs, while intended to protect non-custodial developers and infrastructure providers, could also shield activities that facilitate sanctions evasion, ransomware payments, and other illicit finance. Law enforcement groups, including the National District Attorneys Association, have separately warned that certain provisions could impair criminal investigations by limiting the classification of software developers as money transmitters. Senators Mark Warner and Catherine Cortez Masto have publicly tied their floor votes to law enforcement's sign-off on the final language.

Stablecoin rewards. The Senate text's treatment of stablecoin yield has drawn opposition from an unexpected coalition of community banks, credit unions, and consumer advocates. As reported by the Guardian, local lenders argue that allowing crypto platforms to offer yield-like rewards on stablecoin holdings, even structured as transaction, loyalty, or liquidity incentives rather than direct interest, could effectively enable deposit-substitute products that draw funds away from insured community banks without the corresponding consumer protections. Proponents of the current text counter that the bill explicitly prohibits passive interest and that permitted reward structures are functionally different from bank deposits.

Complexity and ethics. The bill's complexity has also drawn criticism. It divides oversight among the SEC, CFTC, Treasury, FinCEN, and federal banking regulators and introduces new categories such as ancillary assets and mature blockchains. Critics argue that this framework will be difficult to administer consistently. But the more politically charged criticism concerns ethics. Several Senate Democrats have called the bill "corrupt" over the absence of provisions restricting senior public officials and their families from profiting from crypto interests while in office. The July 22 consolidated draft first included ethics provisions, but Democrats rejected them within hours as insufficient. They argued enforcement would rest with the Department of Justice rather than an independent mechanism. The ethics dispute has become the single most consequential obstacle to Senate passage, with Democrats making an independently enforceable ethics regime a stated condition of their floor votes.

What the CLARITY Act means for crypto users

As of publication, the bill is not law.

If enacted, however, the CLARITY Act could affect several parts of the user experience.

• More regulated trading platforms. Crypto exchanges and other digital asset platforms would face clearer federal oversight and compliance requirements.
• More standardized token disclosures. Issuers of qualifying digital assets would have to provide more consistent information about their projects and risks.
• Stronger custody rules. Firms holding customer assets would need to meet stricter standards for safeguarding digital assets.
• No automatic government insurance. The Act would not provide FDIC-style protection for crypto assets, so customers would still bear market and platform risks.
• Changes to stablecoin rewards. Depending on the final legislation and related regulations, some stablecoin-related products and yield offerings could face new restrictions.
• More consistent KYC and AML controls. Crypto businesses would likely implement more standardized identity verification and anti-money laundering procedures across the industry.

The practical outcome would depend heavily on the final legislation and the SEC, CFTC, Treasury, and FinCEN rules that follow.

FAQ: CLARITY Act key questions

• What is the CLARITY Act?

  The CLARITY Act is proposed US legislation that would establish a federal regulatory framework for digital assets and divide oversight between the SEC and CFTC.

• How does the CLARITY Act differ from the GENIUS Act?

  The CLARITY Act’s crypto provisions address the wider market, including asset classification, exchanges, intermediaries, and SEC/CFTC jurisdiction. The GENIUS Act focuses specifically on payment stablecoins, including issuer authorization, reserves, disclosures, and redemption requirements.

• How does the CLARITY Act classify digital assets?

  Its token classification framework distinguishes among digital commodities, assets offered through investment contracts, permitted payment stablecoins, and securities such as tokenized stocks or bonds. Under the CLARITY Act cryptocurrency framework, classification can depend on both the asset’s characteristics and how it is offered or sold.

• Does the CLARITY Act apply to DeFi protocols?

  The bill provides targeted exclusions from registration for qualifying non-custodial DeFi protocols, software developers, and certain decentralized activities. However, its DeFi regulation protections would not necessarily cover businesses that control customer assets, operate intermediated services, or engage in fraud or market manipulation.