U.S. crypto market structure legislation is once again stuck in Congress.
On September 15, the U.S. Senate failed to pass the procedural motion needed to advance the Digital Asset Market Clarity Act (CLARITY Act). The final vote was 49 in favor and 50 against, falling short of the 60-vote threshold needed to end debate.
This does not mean the CLARITY Act has been definitively rejected, but with the November midterm elections approaching, the difficulty of advancing the bill in the short term has clearly increased.
For the crypto industry, a more practical question follows: if Congress cannot legislate in time, who will regulate next?
The answer may be the SEC and CFTC.
Over the past few months, the two U.S. financial regulators have already been preparing for this scenario. SEC Chairman Paul Atkins previously made clear that before Congress completes market structure legislation, he and CFTC Chairman Michael Selig plan to provide the market with a "bridge" to formal legislation through Project Crypto, which they are jointly advancing. In March of this year, the SEC and CFTC also jointly released an interpretive document on the application of securities laws to crypto assets, seeking to draw some regulatory boundaries first.
After CLARITY became temporarily unable to advance, this regulatory route originally intended as a transitional solution may become even more important.
Congress Won't Give Answers, So the SEC and CFTC Are Starting to Set Rules First
One of the core issues the CLARITY Act seeks to resolve is the question of regulatory jurisdiction that the U.S. crypto industry has debated for years.
Which digital assets are securities? Which are digital commodities? Should trading platforms register with the SEC or the CFTC? Where exactly is the regulatory boundary between the two agencies? Ideally, these questions ultimately need to be clarified by Congress through statutory law. But regulators are no longer prepared to keep waiting.
Just one day before the Senate vote, SEC Chairman Paul Atkins publicly endorsed CLARITY while stating that even without congressional legislation, the SEC will continue to advance its crypto regulatory agenda. According to Atkins, crypto asset issuance, custody, and related market infrastructure reforms will all remain priorities in SEC rulemaking.
In fact, the SEC has already begun doing so this year.
In March, the SEC released an interpretive document on crypto assets, further explaining how federal securities laws apply to different types of tokens, and proposed classifications including digital commodities, digital collectibles, digital tools, stablecoins, and digital securities. The CFTC joined this interpretation, stating it would align with the relevant framework when enforcing the Commodity Exchange Act.
In August, Atkins also stated that the SEC is pushing for "tailored" rules and exemption regimes for crypto asset markets, including making capital formation, on-chain transactions, and other activities more compatible with the existing regulatory system. But he simultaneously emphasized that congressional legislation remains "indispensable," one reason being that formal legislation can make rules more durable and less susceptible to being overturned as future regulatory leadership changes.
On the other side, the CFTC is likewise preparing to expand its own role.
According to the original text, CFTC Chairman Michael Selig has asked staff to study how the agency could use its existing authority to regulate crypto asset markets if Congress fails to pass a market structure bill. Possible directions include establishing a CFTC regulatory pathway for certain crypto markets offering leveraged or margin trading, and studying how DeFi protocols can operate under the U.S. regulatory framework.
This means that some of the market rules the CLARITY Act originally sought to establish through a single law may first be pieced together bit by bit by the SEC and CFTC through regulatory interpretations, rulemaking, and exemption mechanisms.
From "Congressional Legislation" to "Regulators Going First"
This shift could push U.S. crypto regulation into a different phase.
Previously, the market's focus was on when CLARITY would pass and how Congress would ultimately divide authority between the SEC and CFTC. Now the question may become: before CLARITY arrives, how far can the two agencies go using existing laws?
The SEC mainly holds securities market regulatory authority, so it can adjust existing rules around digital securities, token issuance, crypto asset custody, and securities tokenization.
The CFTC has long been responsible for commodity derivatives markets and also has partial regulatory authority over markets related to digital commodities such as Bitcoin. In the absence of new congressional authorization, it can also use existing laws such as the Commodity Exchange Act to establish new regulatory pathways in areas it can cover.
The two agencies can also act jointly.
When the SEC released its crypto asset interpretive document in March this year, the CFTC participated in tandem; Atkins previously said in congressional testimony that the two agencies would jointly study token classification and related exemption mechanisms through Project Crypto, hoping to make it clearer to investors and the industry what regulatory obligations each bears.
Therefore, CLARITY being blocked does not mean the U.S. crypto industry returns to a state with no rules at all. On the contrary, regulatory rules may continue to increase, except that the main producer of rules has temporarily shifted from Congress to the regulators.
But the SEC and CFTC cannot fully replace CLARITY
However, there is still a key difference between "regulators taking over" and "congressional legislation."
What the SEC and CFTC can answer is: under the premise that existing laws remain unchanged, how should crypto assets be regulated?
What CLARITY attempts to answer is: what kind of crypto market legal system should the United States establish in the future?
These two things are not exactly the same.
The SEC can interpret securities law, can modify registration rules, and can grant certain exemptions; the CFTC can also establish market regulatory systems within its own statutory authority. But the two agencies cannot completely redraw the powers Congress granted them solely through administrative rules.
This is also why Atkins, while actively advancing SEC crypto rule reform, still emphasizes that market structure legislation is "indispensable." He previously said that regulators can first build a "bridge," but to form more lasting rules, congressional action is ultimately still needed.
This also offers another angle for understanding why CLARITY stalled this time.
In the short term, the market may not need to wait for Congress to see more regulatory rules: the SEC and CFTC have already begun to act, and as CLARITY's legislative window narrows, the importance of the two agencies may rise further.
But in the long term, how digital assets are ultimately classified, what exactly the SEC and CFTC each regulate, and what kind of institutional framework the U.S. crypto trading market ultimately adopts will still be difficult to fully resolve without Congress.
Therefore, the fact that CLARITY has not advanced does not mean that U.S. crypto regulation has pressed the pause button. What is more likely to happen is that the SEC and CFTC first take up the baton and continue to push the rules forward within the limits allowed by existing law.
What is truly worth watching next is not only when CLARITY will enter the Senate again, but also what rules the SEC and CFTC will introduce first, and how far they can go without new legislation.
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