Washington has spent a decade unable to answer a single question about crypto: which agency between the CFTC and the SEC is in charge. The vacuum produced enforcement actions, contradictory court rulings, and a measurable exodus of builders to friendlier jurisdictions.

The CLARITY Act was meant to end that. It replaces improvised enforcement with a written test for when a token is a commodity, when it is a security, and who polices the venues where it trades. It has also spent a year running out of calendar.

Here is what the bill does, why it stalled, and what happens now. 👇

What is the CLARITY Act?

The CLARITY Act, formally the Digital Asset Market Clarity Act of 2025, assigns a federal regulator to every part of the US digital asset market and writes the boundary between them into statute.

Everything in the bill flows from one determination: does a given token, venue, or activity answer to the Securities and Exchange Commission or the Commodity Futures Trading Commission? Nearly every major US crypto legal battle since 2017 traces back to that unanswered question.

The bill descends from FIT21, which cleared the House in May 2024 before dying in the Senate. House Financial Services Chairman French Hill reintroduced the framework as H.R. 3633 in May 2025, and the House passed it 294-134 that July with 78 Democrats in support.

Everything since has happened in the Senate. The bill needs 60 votes there, then a return trip to the House, then a presidential signature, none of which has occurred.

Why the CLARITY Act Matters

Two agencies claiming the same territory is the underlying disease. The SEC and CFTC have historically classified identical assets differently, leaving companies to pick a rulebook and then defend that choice in litigation years later.

The cost of that ambiguity is now quantifiable. Industry analysis puts the US share of centralized exchange volume at roughly 12%, with the American share of crypto developers down to 19%, a decline of about half over the past decade.

Legislation would fix two separate problems at once. Builders and exchanges gain a defined registration route instead of guesswork, and because statute outranks agency guidance, the next administration cannot reverse it by memo.

Treasury Secretary Scott Bessent has framed the legislation as a national security matter, arguing the US should author global digital asset rules instead of importing them. Critics counter that loose definitions would thin out investor protections.

How the CLARITY Act Works

The bill sorts digital assets into categories, assigns each a regulator, and attaches obligations to each category. The pivot point is whether the underlying blockchain is decentralized enough to leave SEC supervision.

1. The SEC and CFTC Jurisdiction Split

Popular shorthand about securities versus commodities understates the precision here. The SEC retains authority over investment contract assets, covering tokens bound to a centralized team, a capital raise, or continuing entrepreneurial effort.

The CFTC takes primary responsibility for digital commodities, assets whose value derives intrinsically from blockchain use. The category excludes securities, derivatives, and stablecoins, capturing assets like Bitcoin and, subject to the maturity test, Ethereum.

Spot markets are where the split bites. The CFTC would hold exclusive jurisdiction over digital commodity spot trading on registered venues, while the SEC keeps anti-fraud reach over those same assets when they trade on SEC-registered platforms.

2. The Mature Blockchain Test

Everything depends on a certification the bill calls the "mature blockchain" test, which marks the point where a network has decentralized enough to leave SEC supervision. The House section-by-section summary sets out four statutory conditions.

• Functional: The system must actually operate for transactions, services, or validation and governance, rather than existing only as a roadmap promise.
• Open-source: The underlying code must be public, letting anyone inspect, run, or build on the network without permission from a controlling operator.
• Rules-based: Operation must follow pre-established, transparent rules applied consistently, not parameters one party can alter at its own discretion.
• Not controlled: No person or commonly controlled group may hold 20% or more of tokens or voting power, the bill's working threshold for decentralization.

Crucially, a token can change categories without a single code change. An asset first sold under an investment contract can later trade as a digital commodity once the network matures and ordinary market participants dominate.

3. Self-Certification and Registration

Nobody has to ask the SEC's permission first. An issuer, affiliate, or decentralized governance system can self-certify a blockchain as mature, which creates a rebuttable presumption the agency has 60 days to contest, with appeals heard in federal court.

On fundraising, a new exemption permits raising up to $75 million over 12 months without full securities registration, conditional on filing an offering statement covering the blockchain, source code, consensus mechanism, and insider holdings.

Venues face conventional obligations. Exchanges, brokers, and dealers handling digital commodities would register with the CFTC and meet standards on custody, customer asset segregation, qualified custodians, disclosure, and market surveillance drawn from traditional finance.

4. The DeFi and Developer Carve-Out

Software that never touches customer funds gets its own protections. Mirrored exclusions on both the SEC and CFTC side cover validating transactions, publishing code, building wallets, and running front-ends, while leaving anti-fraud enforcement fully intact.

A separate section exempts non-controlling blockchain developers and service providers from being treated as money transmitters purely for providing infrastructure. That provision has become one of the three live disputes, since decentralized exchange advocates argue any narrowing would make open-source development legally untenable.

It also commissions a joint SEC, CFTC, and Treasury study on DeFi's size, risks, and integration with traditional markets, deferring the hardest structural questions rather than resolving them.

CLARITY Act Timeline: From FIT21 to the Senate Floor

Understanding why the bill stalled requires tracking how long each step consumed. The record below draws on the official legislative actions and contemporaneous reporting.

The bill's path through Congress has hit these milestones:

• May 2024: Predecessor bill FIT21 passes the House with bipartisan support, then stalls in the Senate without receiving a floor vote.
• May 2025: Chairman French Hill reintroduces the framework as H.R. 3633, restructuring FIT21's approach into the CLARITY Act.
• July 2025: The House passes the bill 294-134, the most comprehensive crypto legislation ever to clear a chamber of Congress.
• January 2026: Senate Banking postpones its markup over stablecoin yield, while Senate Agriculture advances its companion bill on a 12-11 party-line vote.
• May 2026: Senate Banking advances the bill 15-9, with Democrats Ruben Gallego and Angela Alsobrooks joining all thirteen Republicans.
• June 2026: The bill is placed on the Senate Legislative Calendar under General Orders, making it formally eligible for full floor consideration.
• Early July 2026: The White House target of a 4 July signing passes unmet, and a first merged draft omitting ethics language draws formal opposition from three Democrats.
• 22 July 2026: Republicans circulate a merged text exceeding 600 pages containing an ethics provision that sunsets in 2029.
• 23 July 2026: Thune tells reporters the bill will not pass before the August recess, redirecting floor time to nominations and a Russia sanctions package.

Where the CLARITY Act Stands in 2026

As of late July 2026, the bill sits on the Senate calendar without a scheduled vote. No cloture motion has been filed, which is the procedural step that would start the clock toward passage.

The mechanics explain the delay. Thune must file cloture on a motion to proceed, triggering a 60-vote threshold, then up to 30 hours of debate, an amendment process, and a second cloture vote before final passage. The Senate handles one contested bill at a time.

Competing business consumed the runway. Leadership prioritized a nominations package and a Russia sanctions bill dedicated to the late Senator Lindsey Graham, whose funeral occupied the chamber during a critical week in July.

Thune has left a narrow opening, saying he would like to at least begin the process. "We will probably have a vote on the Clarity Act," he said, adding the caveat that it depends on whether Democrats supply the votes to proceed.

The Key Battlegrounds

Everything now hangs on three unresolved arguments. None of them splits neatly along party lines, which is exactly why nobody can confidently predict where the seven Democratic crossover votes would come from.

The Ethics Provision

This is the fight everything else waits on. The July draft bars the president, vice president, members of Congress, federal judges, and their spouses from issuing or sponsoring digital assets for compensation while in office, with penalties reported at up to $250,000 per day.

The dispute is about enforcement, not substance. The draft assigns civil enforcement to the Department of Justice, which Senator Alsobrooks called an unserious offer given the department's leadership. The provision also sunsets in 2029, effectively expiring with the current term.

Context sharpens the disagreement. Trump's 2025 financial disclosure showed roughly $1.4 billion in crypto-related income, including memecoin royalties and proceeds tied to World Liberty Financial token sales.

Both characterizations hold simultaneously. White House adviser Patrick Witt calls it the most sweeping ethics constraint a sitting president has accepted, while Senator Elizabeth Warren argues it does nothing to stop future earnings. Senators Thom Tillis and Ruben Gallego have since finalized a revised approach reportedly adding state attorney general enforcement.

Stablecoin Yield

The longest-running dispute concerns whether platforms may pay rewards on stablecoin balances. Banks argue interest-bearing stablecoins function as deposits and would drain funding from the traditional system.

The economics are substantial. Coinbase earns roughly $1.35 billion annually from USDC rewards and maintains these are not deposits. A compromise limiting reserve-based interest while permitting activity-linked rewards unlocked the committee vote.

Banks have not accepted it. The American Bankers Association wrote to Senate leadership in late July insisting the final text close any route to evading the GENIUS Act's prohibition through rewards or substantially similar arrangements.

DeFi and Illicit Finance

The quietest fight may prove decisive. Senator Catherine Cortez Masto has pushed to strengthen anti-money-laundering obligations reaching certain DeFi activity, which builders argue is unworkable for software holding no customer funds.

There has been movement here. Some law enforcement organizations withdrew earlier objections after developer protections were revised, and a major police union subsequently endorsed the bill. Whether that satisfies remaining holdouts is untested.

Prediction Market Odds for the CLARITY Act

Traders have turned the bill into one of 2026's most actively watched political contracts, and the price history maps the legislative story with unusual precision.

On Polymarket, the contract on 2026 enactment peaked above 80% in late February before deteriorating through spring. It hit a low near 24% in mid-July, recovered to the mid-40s when the merged text appeared, then fell to roughly 27% on 29 July.

Contract structure explains part of the spread between venues. Markets asking about enactment before 2027 price higher than those requiring action within weeks, a gap visible when comparing Polymarket and Kalshi listings on the same underlying question.

Professional forecasters have converged downward. Galaxy Digital cut its estimate to around 30%, and JPMorgan flagged the fading odds as a setback for institutional adoption, warning that delay could push tokenization toward traditional infrastructure instead of public blockchains.

Read these numbers as a live sentiment gauge, not a prediction. They swing hard on procedural headlines, and the message running through every venue is the same: process, not policy disagreement, is what now binds.

What Happens If the CLARITY Act Fails in 2026

Failure this year would not kill the framework, but it would change who writes the rules and how durable they are. Several fallbacks are already in motion.

The SEC has signalled it will not wait indefinitely. Chair Paul Atkins said the agency is ready to write crypto market rules itself if Congress stalls, while stressing that only a statute can future-proof a framework against changing administrations.

Agency rulemaking is the weaker substitute, which is precisely the industry's concern. Rules issued under existing authority can be revised or reversed by a successor administration, reproducing the instability the bill was drafted to end.

Stablecoin oversight would continue regardless. Implementation of the GENIUS Act carries its own 2026 deadlines for licensing, capital, custody, and anti-money-laundering standards, meaning payment tokens get a federal framework even if market structure does not.

The calendar narrows sharply from here. September offers a brief window competing with federal funding deadlines, the lame-duck session after November's midterms is considered a longshot, and a change in House control would likely send the effort back to the drafting table.

What the CLARITY Act Means for Crypto

A signature would start a long process rather than finish one. The bill hands extensive rulemaking to the agencies, and those obligations run on statutory clocks counted in months, not weeks.

Those clocks are specific. The CFTC would need to stand up expedited registration within 180 days of enactment, Title IV provisions take effect at 270 days, and the SEC and CFTC must complete required rulemakings within 360 days unless otherwise specified.

Practically, analysts expect main rules to land in late 2026 or 2027 even under a favorable timeline, with provisional registrations phasing in earlier. Citi has already cited the legislative uncertainty in revising its Bitcoin and Ether outlooks.

The substantive gains would be real for builders. A defined path for tokens to become commodities lifts the legal cloud over many existing assets, while federal registration replaces fragmented state licensing for exchanges and custodians handling tokenized real-world assets.

There is a cost side to weigh as well. A framework optimized for innovation may leave consumer protection thin, and with the ethics, stablecoin, and DeFi sections still in flux, the enacted text could look different from today's draft. None of this is investment advice.

Risks and Open Questions

The CLARITY Act has advanced further than any previous market structure bill, yet the remaining obstacles are structural rather than cosmetic.

The principal risks facing the legislation include the following:

• Calendar exhaustion: Only days remain before the recess, and leadership has conceded September's window competes with funding deadlines and campaign demands.
• The 60-vote wall: Passage requires roughly seven Democratic crossovers, and several committee supporters have declined to commit their floor votes without further concessions.
• Ethics enforcement: If negotiators cannot resolve who enforces conflict-of-interest rules, the coalition that carried the bill through committee may not reassemble on the floor.
• Republican defections: Leadership cannot assume a clean party-line base, with several Republican senators publicly uncommitted, narrowing the margin for Democratic negotiation.
• House reconciliation: Any Senate-passed text must return to a House that has struggled with internal cohesion, adding a further point where the effort could break down.
• Definitional uncertainty: The 20% control threshold and maturity test still require joint SEC and CFTC rulemaking, so effects on specific tokens stay unresolved until rules exist.
• DeFi exposure: Extending anti-money-laundering duties to certain decentralized activity may prove unenforceable against non-custodial software and could invite constitutional challenges.
• Electoral reset: A change in House control after November would likely require renegotiating a framework built largely by Republican drafters, restarting years of work.

Final Thoughts

The CLARITY Act remains the most serious attempt to replace regulation-by-enforcement with a written rulebook for American digital assets. Its jurisdictional split and maturity test give the market a concrete framework rather than an accumulating pile of court decisions.

Durability is the argument for urgency. As statute rather than agency guidance, it would survive changes in regulatory leadership in a way the current favorable posture cannot, which is why supporters treat every missed window as costly.

The substance is largely settled; the procedure is not. Whether Thune files cloture, whether the Tillis-Gallego ethics language holds, and whether September produces floor time are the 3 signals worth tracking through the rest of the year.