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The CLARITY Act: What the Emerging U.S. Digital Asset Framework Means for Crypto Businesses
By: Mohammad H. Heidarpour & Negar Modirrousta (Head of Compliance)
For much of the past decade, one of the central legal problems facing the U.S. crypto industry has been deceptively simple: when is a crypto asset a security, when is it a commodity, and which regulator has jurisdiction over it?
The Digital Asset Market Clarity Act of 2025, commonly known as the CLARITY Act (H.R. 3633), represents the most significant congressional attempt to provide a comprehensive answer to that question.
The legislation has progressed considerably but has not yet become final law. The House of Representatives passed H.R. 3633 in July 2025. In May 2026, the Senate Banking Committee advanced an amended version by a bipartisan 15–9 vote, and in July 2026 an updated text was released combining the work of the Senate Banking and Agriculture Committees. Accordingly, the framework discussed below remains subject to further amendment before enactment.
1. What Does the CLARITY Act Seek to Change?
At the heart of the CLARITY Act is an attempt to establish a clearer jurisdictional boundary between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).
Under the proposed framework, securities and investment contracts would remain within the SEC’s jurisdiction, while the CFTC would acquire substantially greater authority over digital commodities and their spot markets.
This matters because the CFTC historically exercises comprehensive regulatory authority primarily over derivatives markets, while its authority over commodity spot markets has generally been more limited, particularly to policing fraud and manipulation. CLARITY would therefore fill an important regulatory gap by creating a federal framework for digital commodity spot markets and the intermediaries operating within them.
The legislation also seeks to address a particularly difficult issue in U.S. crypto jurisprudence: the relationship between a digital asset itself and the transaction through which it is sold.
A crypto asset may, for example, initially be offered as part of an investment contract without necessarily remaining a security in every subsequent secondary-market transaction. This distinction could significantly affect the legal treatment of tokens whose networks become more developed or decentralised over time.
2. A New Regulatory Perimeter for Crypto Businesses
CLARITY should not simply be understood as legislation designed to remove crypto assets from SEC supervision.
Instead, it would create a new and more comprehensive regulatory perimeter around digital commodity markets.
Digital commodity exchanges, brokers and dealers would generally become subject to CFTC registration and regulatory requirements. The framework introduces requirements concerning customer asset protection, segregation of funds, financial resources, recordkeeping, conflicts of interest, market integrity and operational standards.
Anti-money laundering compliance would also remain central. The framework extends Bank Secrecy Act requirements to relevant digital asset intermediaries, bringing obligations concerning AML/CFT programmes, customer identification, suspicious activity reporting and sanctions compliance more clearly within the regulatory architecture.
For crypto businesses, therefore, greater regulatory clarity does not necessarily mean lighter regulation. A business falling outside securities regulation may instead find itself operating within a detailed CFTC registration and compliance regime.
3. Does CLARITY End the Howey Debate?
No. The distinction between a digital commodity and an investment contract does not eliminate the importance of U.S. securities law or the Howey test.
The economic substance of a transaction remains important. Projects must therefore continue to examine how capital is raised, how tokens are distributed, what representations are made to purchasers, what role founders and developers retain, and whether purchasers are effectively relying upon the managerial or entrepreneurial efforts of an identifiable group.
This is particularly relevant to token launches.
Calling an asset a “utility token”, “governance token” or “digital commodity” cannot itself determine its legal classification. The contractual arrangements, economic reality of the transaction, degree of managerial involvement and expectations created among purchasers remain legally significant.
For founders, this means that token classification must become part of legal architecture from the design stage rather than a compliance question addressed after launch.
4. What About Stablecoins and DeFi?
Stablecoins require a separate legal analysis.
The principal federal framework governing payment stablecoins is now the GENIUS Act, signed into law on 18 July 2025. It created a federal regulatory system for payment stablecoins, including reserve, disclosure and compliance requirements.
CLARITY therefore should not be described as the legislation that creates the U.S. stablecoin regime. Rather, it operates alongside the GENIUS Act as part of the broader emerging U.S. digital asset regulatory architecture.
DeFi presents a more difficult question.
One of the most important legal challenges will be distinguishing genuinely decentralised protocols from arrangements that are decentralised primarily in name. Developers who merely publish software present a different regulatory profile from founders, governance participants, multisig holders or other actors who retain effective control over a protocol or its operations.
This distinction between technical decentralisation and legally relevant control is likely to become increasingly important if the legislation is enacted.
5. What Should Crypto Businesses Prepare For?
The practical consequence of CLARITY is that the traditional question “Is our token a security?” is no longer sufficient.
A proper regulatory analysis would increasingly need to consider several interconnected questions:
- What is the legal classification of the asset?
- How was it issued, marketed and distributed?
- Who exercises actual control over the network or protocol?
- Does the business perform exchange, brokerage, dealing, advisory or custody functions?
- What disclosures and restrictions apply to founders, affiliates and insiders?
- What AML, sanctions, custody and customer-protection obligations arise?
- Does the project have sufficient connection with the U.S. market to trigger U.S. regulatory exposure?
For crypto businesses, this means that tokenomics, governance design, corporate structuring and regulatory compliance can no longer be treated as separate exercises.
They are increasingly components of the same legal architecture.
6. Does the CLARITY Act Matter for European and Other Non-U.S. Projects?
Potentially, yes but not simply because a project uses blockchain technology.
CLARITY is U.S. legislation. A company incorporated and operating in Switzerland, France, Germany or elsewhere in Europe would not automatically become subject to SEC or CFTC registration merely because the legislation is enacted.
However, incorporation outside the United States does not by itself eliminate U.S. regulatory exposure.
A European project may require a much closer U.S. regulatory analysis where, for example, it actively solicits U.S. customers, markets or distributes tokens to U.S. persons, provides access to U.S. users, relies upon U.S.-regulated intermediaries, operates trading or custody infrastructure connected with the U.S. market, or otherwise establishes a legally significant U.S. nexus.
For international projects, the relevant question therefore becomes less:
“Are we a U.S. company?”
and more:
“Do our issuance, marketing, trading, custody or intermediary activities create sufficient U.S. regulatory exposure?”
For European businesses, this analysis will increasingly need to operate alongside the EU’s Markets in Crypto-Assets Regulation (MiCA) and other applicable European financial-services legislation.
This creates an important cross-border challenge. A token or service structured to satisfy MiCA cannot automatically be assumed to satisfy U.S. requirements. Conversely, a classification reached under the emerging U.S. framework does not determine the asset’s regulatory status in the European Union.
International crypto projects may therefore increasingly require regulatory mapping across jurisdictions before launch, rather than attempting to address regulatory exposure market by market after operations have begun.
Conclusion
The significance of the CLARITY Act lies less in whether it is characterised as “pro-crypto” or “anti-crypto” and more in the structural change it represents.
The United States is moving toward a system in which digital asset regulation is increasingly based on classification, registration and defined regulatory responsibilities, rather than relying predominantly on enforcement actions and the application of legacy categories to new technologies.
For the industry, that transition could provide greater legal certainty. But certainty should not be confused with deregulation.
Exchanges, brokers, dealers, token issuers and other market participants may gain clearer rules while simultaneously becoming subject to more explicit obligations concerning registration, disclosure, custody, market conduct, AML, cybersecurity and consumer protection.
For international projects, the broader lesson is equally important: technological decentralisation does not necessarily produce legal decentralisation.
As U.S., European and other regulatory frameworks mature, legal and regulatory architecture will increasingly need to be considered at the same stage as protocol architecture, token economics and governance design.
References
- US Congress, Digital Asset Market Clarity Act of 2025, HR 3633, 119th Congress (2025–2026).
- Congressional Research Service, Crypto Legislation: An Overview of H.R. 3633, the CLARITY Act (7 July 2025).
- US Senate Committee on Banking, Housing, and Urban Affairs, Chairman Scott, Senate Banking Committee Advance CLARITY Act in Historic Bipartisan Vote (14 May 2026).
- Senator Cynthia Lummis, Lummis Releases Updated CLARITY Act Text (22 July 2026).
- US House Committee on Financial Services, Digital Asset Market Clarity (CLARITY) Act of 2025: Overview and Section-by-Section Analysis (2025).
- Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), S 1582, signed into law 18 July 2025.
