Clarity Act's Senate Failure Leaves U.S. Crypto Oversight to SEC and CFTC
Clarity Act fails in Senate, agencies move to fill the gap
The Digital Asset Market Clarity Act failed to advance in the U.S. Senate. With the bill stalled, the next phase of crypto regulation now falls to the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Both agencies have introduced proposals and exemptions aimed at expanding regulated crypto trading, but experts say the picture remains incomplete.
The central question is how much certainty regulators can deliver without congressional action. Interviews with senior executives and legal experts point to broad agreement that regulation will continue moving forward. Their expectations diverge on whether agency action can become a durable foundation or will leave businesses adapting to rules vulnerable to political and legal change.
Key regulatory moves from late September to early October
- The SEC issued a five-year "Innovation Exemption" on September 17, allowing qualifying venues to trade tokenized U.S. stocks — digital versions of traditional shares on a blockchain — through blockchain liquidity pools.
- The CFTC opened a public comment period on October 5 for rules covering leveraged retail crypto trading and a new registration category for crypto markets.
- The SEC filed a custody proposal on October 1 that would let state-licensed trust companies safeguard client crypto assets and allow investment advisers and funds to hold crypto under certain conditions.
- Ordinary, unleveraged spot trading — buying and selling crypto at current market prices without borrowed money — still lacks comprehensive federal oversight.
What the agency actions actually cover
The SEC's Innovation Exemption is a temporary framework. It lets eligible trading venues use blockchain-based liquidity pools to facilitate tokenized stock trading while the agency works on permanent rules. The five-year term signals that the SEC views this as a bridge rather than a final solution.
The CFTC's October 5 proposal does not put any rules into effect immediately. It launches a comment and rulemaking process, which typically involves public feedback, revisions, and a final rule. The proposal covers two areas: rules for leveraged retail crypto trading and a new registration category for crypto market participants.
The SEC's custody proposal addresses how investment advisers and funds can hold crypto assets. Under the proposal, state trust companies would be permitted to safeguard client crypto, and in some cases advisers and funds could hold crypto assets themselves.
What experts and executives say about the path ahead
Lev Breydo, an assistant professor of law at William & Mary Law School, noted that the Clarity Act exposed divisions within the crypto industry, from ethics provisions to conflicts with community banks over yield rules. "A coalition that looked unified against Gensler found out definitions create winners and losers," he said.
Breydo expects the SEC to focus in 2027 on completing offering and custody rules and building on the tokenized-stock exemption. He views the SEC and CFTC joint interpretive release from March as an important foundation that supersedes earlier guidance and allows the two agencies to coordinate within existing law.
Interviews with senior executives, as reported by CoinDesk, suggest some see the legislative setback as an opening. They point to opportunities in DeFi — decentralized finance built directly on blockchain without traditional intermediaries — in tokenization, and in dealmaking activity. However, established exchanges are expected to retain a competitive advantage over newer entrants.
The spot trading gap that Congress is not closing for now
The biggest unresolved issue is ordinary, unleveraged spot crypto trading. This type of trading currently lacks comprehensive federal oversight beyond the CFTC's existing anti-fraud and anti-manipulation authority. The Clarity Act was designed to close this gap by creating a clearer regulatory framework for crypto exchanges.
Legal experts warned that agency action may not provide lasting certainty. Breydo acknowledged that gaps Congress must address still exist, and that rules established without legislative backing could be vulnerable to future political or legal shifts. Until Congress acts, businesses and investors will continue operating in an environment where rules are still being shaped and could change.
Sources
Newisty Editorial Team covers technology, cryptocurrency, digital products, online platforms, developer tools and the wider digital economy. Our content is researched from official sources, company announcements, public documentation, market data and other primary or reputable sources. Articles are reviewed and edited before publication for clarity, accuracy and useful context.