The CLARITY Act is a proposed U.S. market-structure bill designed to define digital assets, split oversight between the SEC and the CFTC, and create registration rules for crypto exchanges, brokers, and dealers.
The House passed the bill in July 2025, but the Senate has not approved it yet, so the framework is not law. This guide explains how the CLARITY Act works and why Congress proposed it.
KEY TAKEAWAYS
➤ The CLARITY Act, formally the Digital Asset Market Clarity Act of 2025, passed the House in July 2025 and sits before the Senate
➤ The bill sorts digital assets into three statutory buckets: digital commodities, investment contract assets, and permitted payment stablecoins.
➤ Digital commodities move to CFTC oversight once a blockchain system qualifies as mature under a four-part test.
➤ The SEC keeps authority over fundraising through investment contracts and retains anti-fraud power over certain digital-commodity trades.
➤ Crypto exchanges, brokers, and dealers would register with the CFTC and follow customer-fund segregation, custody, and disclosure rules.
- What is the CLARITY Act?
- Why U.S. crypto regulation still lacks clarity
- How the CLARITY Act classifies digital assets
- How the SEC and CFTC would split authority
- What the bill would mean for exchanges, brokers, and dealers
- How the market-structure framework would work in practice
- What the CLARITY Act would not settle
- Why this bill matters
- Frequently asked questions
What is the CLARITY Act?
The CLARITY Act is the short name for the Digital Asset Market Clarity Act of 2025, a U.S. market-structure bill introduced in the House as H.R. 3633 on May 29, 2025, by Representative French Hill of Arkansas. The proposal aims to create a federal regulatory framework for digital assets.
The House passed the bill on July 17, 2025, in a bipartisan vote of 294 to 134. The proposal then moved to the Senate, where lawmakers continue to review it as of April 2026. The legislation builds on the earlier Financial Innovation and Technology for the 21st Century Act (FIT21), which passed the House in 2024 but did not become law.
Congress proposed the CLARITY Act because the current regulatory system relies on decades-old securities law and court decisions that often conflict with each other. Lawmakers aim to replace that patchwork with a statutory framework that defines how digital asset markets should operate.
You can check the full bill text on Congress.gov.
Why U.S. crypto regulation still lacks clarity
U.S. regulation of crypto still rests on laws written for stocks and commodities in the 1930s and 1940s. It also leans on a Supreme Court ruling from 1946 known as the Howey test. Those frameworks were never designed for digital tokens, which often leads to inconsistent interpretations
The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have also claimed overlapping authority over the industry. The SEC has treated many tokens as securities and pursued enforcement actions against issuers and exchanges. The CFTC, meanwhile, argues that several tokens function as commodities and has sought broader authority over crypto spot markets.
Court decisions have added further uncertainty. For instance, a federal judge in the 2023 Ripple vs. SEC case held that XRP sales to institutions were securities transactions. However, programmatic sales on public exchanges were not. Weeks later, a different New York judge in the Terraform case rejected that distinction and ruled all token sales as securities transactions.
These conflicting interpretations left exchanges, developers, and token issuers with little regulatory certainty. The CLARITY Act attempts to address that problem by replacing case-by-case rulings with a statutory framework for digital asset markets.
How the CLARITY Act classifies digital assets
The CLARITY Act organizes digital assets into three statutory categories and introduces a separate test that determines when a blockchain network qualifies as sufficiently decentralized. This classification system forms the core of the bill’s regulatory framework.
The three statutory categories are:
1) Digital commodity: A digital commodity is a digital asset whose value is intrinsically linked to the use of a blockchain. That definition comes from the House section-by-section summary, and it excludes securities, derivatives, stablecoins, tokenized commodities, and digital collectibles. Bitcoin is the clearest example named in official committee materials.
2) Investment contract asset: An investment contract asset refers to a digital commodity that an issuer sells during a capital raise tied to an investment contract. The token itself does not automatically qualify as a security. However, the fundraising transaction receives securities treatment under federal law. Once the initial sale ends and the token circulates among ordinary market participants, secondary trading does not automatically carry the same securities classification.
3) Permitted payment stablecoin: A permitted payment stablecoin is a digital asset pegged to a national currency and redeemable at a fixed value. A regulated entity must issue the token and maintain backing reserves. Banking regulators hold primary authority over the issuer. The SEC and CFTC retain anti-fraud and anti-manipulation authority over trading activity that occurs on their registered venues.
| Asset bucket | Key trait | Primary regulator |
| Digital commodity | Value tied to use of a blockchain | CFTC |
| Investment contract asset | Token sold during a capital raise | SEC |
| Permitted payment stablecoin | Redeemable at a fixed currency value | Banking regulators |
Primary vs. secondary transactions
The bill draws a sharp line between these two transaction types. That line is what sends the same token to different regulators at different stages of its life.
- Primary transactions: The issuer sells new tokens to raise capital. The sale falls inside the SEC’s jurisdiction through the investment contract asset rules.
- Secondary transactions: The token trades between ordinary buyers and sellers after issuance. Once the token leaves the issuer’s hands, the securities label drops, and the asset is regulated as a digital commodity.
This structure means a token may fall under SEC oversight during its fundraising stage and later trade under CFTC market rules, even though the token itself has not changed.
The mature blockchain system test
The CLARITY Act introduces a concept called a mature blockchain system. A network may reach this status once it operates without meaningful dependence on a central issuer. At that stage, the issuer no longer needs to provide the same SEC-style disclosures tied to the original fundraising transaction.
This test is central to the bill because it determines when a blockchain network has developed enough independence to move beyond the issuer-focused disclosure regime.
To qualify as mature, a blockchain must satisfy four conditions described in the House committee primer.
- Function for transactions, service access, or governance.
- Run on open-source code.
- Operate under pre-established, transparent rules.
- Avoid control by any one person or group, including anyone holding 20% or more of the tokens.
An issuer, an affiliate, or a decentralized governance system may certify that a blockchain meets these conditions. Once the certification occurs, insiders may resume selling tokens in secondary markets.
A token can change regulatory category without changing its code. A digital asset launched through an investment contract sale may later trade as a digital commodity once ordinary buyers and sellers dominate the market. The issuer disclosure regime can fall away when the network itself becomes sufficiently decentralized.
This classification system sets up the jurisdictional boundary that the CLARITY Act later draws between the SEC and the CFTC.
How the SEC and CFTC would split authority
The split is narrower and more specific than the common “SEC for securities, CFTC for commodities” summary.
CFTC side: The CFTC would receive exclusive authority over spot markets in digital commodities that occur on or with CFTC-registered entities. This includes the registration and supervision of digital commodity exchanges, brokers, and dealers. The agency would also enforce anti-fraud and anti-manipulation rules in those markets. The CFTC would continue exercising its existing authority over derivatives such as Bitcoin futures.
SEC side: The SEC would retain authority over issuers that sell investment contract assets. That responsibility includes disclosure and registration requirements during capital raises. The bill also introduces a new exemption under Section 4(a)(8) of the Securities Act. The exemption allows certain digital-commodity offerings to raise up to $75 million over a twelve-month period.
Overlap and anti-fraud backstop: The SEC would continue holding anti-fraud and anti-manipulation authority when digital commodities or permitted payment stablecoins trade on SEC-regulated venues. These venues include brokers, dealers, alternative trading systems, and national securities exchanges. As a result, even after a token trades as a digital commodity, the SEC may still pursue misconduct occurring within markets under its supervision.
| Current system | CLARITY framework |
|---|---|
| Agency turf disputes and court-driven interpretations | Statutory asset definitions |
| Limited CFTC authority over spot markets | CFTC authority over digital-commodity spot markets |
| Unclear treatment of token sales and trading venues | Defined roles for SEC issuers and CFTC market oversight |
| No formal decentralization milestone | Maturity process for blockchain networks |
With the regulator lines set, the bill spells out who has to register with whom.
What the bill would mean for exchanges, brokers, and dealers
The CLARITY Act creates three new CFTC-registered categories for firms that handle digital commodities. These categories are digital commodity exchanges (DCEs), digital commodity brokers (DCBs), and digital commodity dealers (DCDs). Each entity must register with the CFTC and join a registered futures association, which in practice means the National Futures Association (NFA).
Provisional registration
The CFTC must open an expedited registration pathway within 270 days after enactment. Firms can apply while the full rulebook is still being written. Provisional status lets them keep listing previously traded digital assets until final rules take effect.
Customer disclosures
Registered intermediaries must give retail customers risk-appropriate disclosures before they trade. These disclosures must include the blockchain’s maturity status, references to the protocol’s source code, and key information about token supply and issuance history.
Customer fund segregation and custody
Any DCE, DCB, or DCD that holds customer funds must segregate those funds. They must also place them with a qualified digital asset custodian. The custodian must be supervised by a state or federal banking regulator, the CFTC, or the SEC.
Listing and recordkeeping
Exchanges can only list digital commodities whose issuers meet disclosure rules. They must also run trade surveillance, publish trading information, and keep records in line with longstanding Commodity Exchange Act principles.
Staking and services
Platforms may offer services such as staking to customers, but participation must remain voluntary. A trading platform may not require customers to stake tokens or use blockchain services as a condition for accessing the market.
Dual-registration bridge with the SEC
Some firms already operate as SEC-registered broker-dealers or run alternative trading systems. The bill allows these firms to register with the CFTC as well, creating a dual-registration pathway for digital commodity trading. A memorandum of understanding between the two agencies would coordinate oversight and reduce regulatory duplication.
These registration rules mesh with the asset categories from earlier, so it helps to trace what that combined framework actually looks like in practice.
How the market-structure framework would work in practice
If the bill becomes law, a new token’s life would run through a set of stages that follow the classification and registration rules above.
- Issuance: The project team launches a token and raises capital. Because the token is a digital commodity sold through an arrangement that resembles an investment contract, the sale is an investment contract asset under SEC jurisdiction.
- Disclosure and exemption: The issuer either registers the sale or uses the new Section 4(a)(8) exemption for raises up to $75 million over 12 months. Either path requires disclosures about the blockchain, source code, consensus mechanism, and insider holdings.
- Secondary trading: Once ordinary buyers and sellers trade the token after issuance, the securities label drops. The asset becomes a plain digital commodity. Trades move onto a CFTC-registered digital commodity exchange.
- Custody and intermediaries: Exchanges and brokers holding customer assets use qualified digital asset custodians. They segregate customer funds and publish trading information under CFTC and NFA rules.
- Maturity certification: The issuer, affiliates, or a decentralized governance system can certify the blockchain as mature once it meets the four-part test. Insider resale restrictions ease at that point. The asset then fully leaves the SEC issuer track.
- Ongoing oversight: The CFTC oversees spot-market activity. The SEC keeps anti-fraud authority over any trades happening on SEC-registered venues. Issuer obligations continue until the blockchain is certified mature.
This life cycle illustrates how the bill attempts to close what House committee materials describe as the “spot market gap.” Today, neither agency operates a full registration regime for digital-commodity spot markets. The CLARITY Act assigns that responsibility to the CFTC.
Even with this structure in place, regulators would still need to develop detailed rules after the law takes effect.
What the CLARITY Act would not settle
Several items remain open even under the bill’s own terms.
Still a proposal: The bill is not law (yet). The House passed it in July 2025, but the Senate has not approved it as of April 2026. Senators are also reviewing a separate framework known as the Responsible Financial Innovation Act, which means lawmakers may need to reconcile competing approaches before sending a final bill to the president.
Agency rulemaking: Much of the operational detail would come later through rulemaking by the SEC and CFTC. Regulators would need to develop joint rules covering definitions, exemptions, and dual-registration pathways. Until those rules appear, firms cannot fully plan how the framework would apply in practice.
State-regulator concerns: On Jan. 13, 2026, the North American Securities Administrators Association (NASAA) published a letter warning that parts of the bill’s first title could weaken state authority to fight fraud and abuse. NASAA said it could not support the bill in its current form. The group asked Congress to preserve state enforcement powers.
CFTC capacity: Some former CFTC officials have also raised concerns about resources. The agency would likely need additional funding and staff to supervise retail-facing digital commodity spot markets at scale. Historically, the CFTC has focused more on derivatives markets than retail trading platforms.
Note that these open questions do not change the core goal of the bill. They simply highlight that any new market structure would still require political agreement and detailed regulatory work after passage.
Why this bill matters
For years, U.S. crypto rules have been stitched together from older statutes and court rulings. The CLARITY Act replaces that patchwork with written definitions, explicit registration lanes, and a maturity test for blockchain systems. It also draws a boundary between the SEC’s issuer-side authority and the CFTC’s spot-market authority. Firms can then see which regulator applies to which activity.
The final U.S. market-structure law may ultimately resemble the CLARITY Act, the Senate’s alternative proposal, or a combination of the two. Regardless of the final form, the framework outlined here shows the direction lawmakers are exploring as they attempt to define how digital asset markets should operate in the United States.
