Now or Never: Inside the Fight to Pass the CLARITY Act

The CLARITY Act defines which tokens count as securities versus commodities, who must register with which regulator, and what builders can do without facing criminal liability. The combined Senate draft merging the banking and agriculture committee halves was released for the first time this week, adding a Title IX law enforcement section and an ethics provision as two major new elements. The Fraternal Order of Police endorsed the bill the same day the combined draft dropped, and 25 provisions addressing illicit finance have been added since the September banking draft, with Title II, Title III, and Title IX entirely focused on law enforcement tools. The bill defines pig butchering, addresses digital asset kiosks, and targets complex cyber fraud.

The bill designates all tokens as commodities and then sorts them into categories based on network characteristics. Tokens used to raise money for building something are called ancillary assets and carry securities-like disclosure obligations including audited financials, use-of-funds disclosures, and management team disclosures, which one participant described as the most disclosure-heavy bill he has seen. Tokens like Bitcoin where the original team is no longer in meaningful control are called network tokens and must pass a two-part decentralization test before those disclosure obligations fall away. A separate provision within the bill states that software developers who do not custody or control other people's money will not be classified as money transmitters, and activities such as running a validator, operating a node, creating an oracle service, or providing a user interface are explicitly excluded from money transmission.

On tokenized real-world assets, the bill largely directs agencies to conduct rulemaking rather than establishing direct rules, and the SEC must determine how secondary trading of those assets works on public blockchains. One participant argued that a statutory mandate for the SEC to create an on-chain trading pathway is more durable than a rulemaking because a rulemaking can be revoked by the next administration while a statutory mandate is much harder to undo. A separate concern called the clean slate problem involves crypto projects that evolved from centralized teams into DAO structures and may need to comply with the new registration regime but lack the organizational structure to do so, though early discussions on both sides of the aisle have treated this issue as relatively non-controversial.

Senate Democrats have demanded an ethics provision for over a year as a condition of their support and are rejecting the current version. The ethics provision only comes into effect 360 days after the bill is signed into law and then sunsets the day after the president leaves office, meaning it provides roughly one year of effective restriction before expiring. There has been no indication that any Senate Democrat finds the current version acceptable, making White House and Democratic agreement a prerequisite for the bill to advance.

The legislative window is extremely narrow. Congress goes on August recess in two weeks, leaving Wednesday and Thursday as the realistic windows for a cloture vote. After recess, only three weeks in September remain before the window effectively closes, and one participant said that if the bill does not pass the Senate in the next two weeks, the next realistic chance will be sometime in the 2030s.

One participant argued that Republicans, Democrats, financial institutions, and Coinbase do not actually want the bill to pass, describing the process as political theater in which a silent Republican majority follows financial industry preferences against passage while a small minority plays along publicly to later blame Democrats for failure and retain industry donations in a midterm year. Another participant pushed back, noting that dozens of staffers and senators on both sides have poured tens of thousands of hours into the bill over 12 to 18 months and that it is too soon to conclude the effort is entirely performative.

Without the bill, one participant warned the US could face a crypto ice age rather than merely a crypto winter, driving innovation to Singapore and the Middle East, with stablecoin discussions dominating the next five years and little structural progress to show. Even without the bill the current SEC is not operating as it did under Gary Gensler, but without statutory regulation the next administration can reverse everything. Polymarket odds for the CLARITY Act being signed into law in 2026 had fallen to 37 percent at the time of the conversation, down from above 80 percent earlier in the year.