What Is the CLARITY Act? Crypto Market Structure Explained
Last updated: October 6, 2026
TL;DR
The CLARITY Act (the Digital Asset Market Clarity Act, H.R. 3633) is a proposed US law that would divide crypto oversight between the SEC and the CFTC, create a legal test for when a token stops being a security, and require crypto exchanges and brokers to register. It passed the House 294 to 134 in July 2025. A Senate procedural vote failed 49 to 50 on September 15, 2026, so it is not law.
The CLARITY Act: definition and positioning
The CLARITY Act is a market structure bill. It answers the question the GENIUS Act deliberately left open: once a regulated stablecoin exists, who supervises the markets where every other token trades?
The two bills are often confused because they moved through the House the same week. They do different jobs.
| GENIUS Act | CLARITY Act | |
|---|---|---|
| What it covers | Payment stablecoin issuers: licensing, reserves, redemption | Crypto spot markets, exchanges, brokers, token classification |
| Status | Signed into law, July 2025 | Passed the House July 2025; stalled in the Senate September 2026 |
| Main regulators | Federal and state banking regulators | CFTC for digital commodities, SEC for investment contract assets |
| Stablecoin yield | Issuers may not pay interest to holders | Senate drafts restrict yield on idle balances paid by platforms, allow activity-based rewards |
The distinction matters in practice because the hardest fight over CLARITY was not about exchanges or token taxonomy. It was about stablecoins: whether a platform like Coinbase can pay rewards on USDC balances that the GENIUS Act forbids the issuer itself from paying.
How the CLARITY Act works
The bill builds a classification system first, then hangs registration rules off it. According to the DeFi Rate CLARITY Act fact sheet, which summarizes the House-passed text, the framework has six moving parts:
- Three asset categories. Every token falls into one of three buckets: a digital commodity, an investment contract asset, or a permitted payment stablecoin.
- A jurisdictional split. The CFTC gets exclusive authority over spot markets in digital commodities such as BTC and ETH. The SEC keeps authority over investment contract assets, meaning tokens sold as part of a capital raise. The two agencies write joint rules for mixed transactions.
- The mature blockchain test. A token can move out of the securities category once no single entity controls 20% or more of its supply or governance. This is the bill's most important idea: a measurable exit ramp from securities law instead of case-by-case enforcement.
- Registration for intermediaries. Digital commodity exchanges, brokers, and dealers register with the CFTC and must segregate customer assets.
- A DeFi carve-out. The House text excludes non-controlling software developers from registration. The September 10, 2026 Senate draft narrowed this, directing tailored registration and Bank Secrecy Act rules for people who control non-decentralized DeFi trading protocols.
- State preemption. Section 308 exempts digital commodities from state securities laws, replacing a 50-state patchwork with one federal regime.
The House version also carries a separate title, the Anti-CBDC Surveillance State Act, which would bar the Federal Reserve from issuing a retail central bank digital currency.
The SEC would have 270 days after enactment to write its implementing rules. That deadline is why industry treated 2026 passage as urgent: a bill signed late in the year still means rules landing well into the following one.
The CLARITY Act in practice: why the bill stalled
The legislative path shows where the coalition held and where it broke.
| Date | Milestone |
|---|---|
| May 29, 2025 | Introduced by House Financial Services Chair French Hill |
| July 17, 2025 | Passed the House, 294 to 134 |
| January 29, 2026 | Senate Agriculture Committee advanced its CFTC title, 12 to 11 |
| May 14, 2026 | Senate Banking Committee advanced the bill, 15 to 9 |
| June 1, 2026 | Placed on the Senate legislative calendar |
| September 15, 2026 | Cloture on the motion to proceed failed, 49 to 50 |
Sources: Congress.gov bill status, Senate Roll Call 234, Latham & Watkins policy tracker.
The framing I keep coming back to: CLARITY failed on a stablecoin question wearing a market structure costume. Three disputes did the damage.
Stablecoin rewards. Section 404 became the battleground. The Tillis-Alsobrooks compromise released May 1, 2026 bars platforms from paying yield on stablecoin balances that is "economically or functionally equivalent" to bank deposits, while preserving rewards tied to payments, transfers, and trading. Banking groups argued yield-bearing stablecoins could cut consumer and small-business lending by one-fifth or more. The White House Council of Economic Advisers countered in April 2026 that a full yield ban would raise bank lending by roughly $2.1 billion, about 0.02% of the US lending base. The stakes for exchanges were concrete: DeFi Rate reports Coinbase's USDC rewards line runs at about $1.35 billion a year.
Ethics. Democrats including Sen. Kirsten Gillibrand made an enforceable ban on senior officials issuing or profiting from crypto a condition of support. Revised ethics language arrived in the sponsors' September 14 draft, one day before the vote, and was never adopted.
Arithmetic. Republicans hold 53 Senate seats. Cloture needs 60. Two Democrats backed the bill in committee, but committee votes did not convert into floor votes. Sen. Thom Tillis entered a motion to reconsider after the failure, which keeps the procedural door technically open.
What happens if the CLARITY Act does not pass?
Regulators are already filling the gap with the authority they have. The SEC and CFTC issued, in March 2026, a joint interpretation naming 16 crypto assets as digital commodities. Two days after the failed vote, the CFTC sent a crypto market rulemaking (RIN 3038-AF80) to the White House Office of Information and Regulatory Affairs for review.
Agency action has hard limits, though. As Troutman Pepper Locke notes, CLARITY's bankruptcy priority for customer digital commodities and its Bank Secrecy Act provisions require an act of Congress. Orrick adds that rulemaking cannot deliver the broad state-law preemption the bill was designed to provide. Rules written by one SEC or CFTC can also be rewritten by the next.
The calendar is the binding constraint. The Senate's state work period runs October 5 to November 6, 2026, the midterms fall on November 3, and a new Congress is seated in January 2027. As of October 5, 2026, Kalshi traders priced the odds of the bill becoming law before January 1, 2028 at about 17%. Most observers now expect any revival to start from the September Senate draft in the next Congress.
What the CLARITY Act means for stablecoin businesses
For issuers, very little changes either way: the GENIUS Act already governs licensing and reserves, and its implementing rules are moving regardless. The OCC's February 2026 proposed rule presumes that third-party yield arrangements violate the GENIUS ban on issuer interest, which reaches some of the same reward programs CLARITY was trying to define.
For platforms that distribute stablecoins, the open question is the rewards boundary. Without CLARITY, that line will be drawn by GENIUS rulemaking and enforcement rather than by statute. Our guide to how stablecoin yield works covers where those returns come from today.
Trade-offs and limitations
Supporters argue the bill replaces regulation by enforcement with written rules, gives tokens a measurable path out of securities law, and keeps developers and exchanges onshore. Treasury Secretary Scott Bessent framed it as a competitiveness issue, citing developers moving to Singapore and Abu Dhabi.
Critics raise different concerns. Preempting state securities laws removes a layer of investor protection. The DeFi provisions leave anti-money-laundering duties for front ends unsettled. Democrats on the Agriculture Committee pushed for a fully staffed, bipartisan CFTC before handing it a large new mandate, and the agency still had vacancies. Banking groups view the rewards compromise as a deposit-flight loophole.
Both sides agree on one thing: the House and Senate texts differ, so even Senate passage would have required reconciliation before anything reached the president.
FAQs
Has the CLARITY Act passed?
No. The CLARITY Act passed the House 294 to 134 on July 17, 2025 and cleared the Senate Banking Committee 15 to 9 on May 14, 2026. On September 15, 2026, a Senate cloture vote on the motion to proceed failed 49 to 50, short of the 60 votes needed. It has not passed the Senate or been signed.
What is in the CLARITY Act?
The CLARITY Act sorts tokens into digital commodities, investment contract assets, and payment stablecoins. It gives the CFTC authority over digital commodity spot markets and the SEC authority over investment contract assets, sets a 20% control test for decentralization, requires exchange and broker registration, and preempts state securities laws for digital commodities.
How is the CLARITY Act different from the GENIUS Act?
The GENIUS Act regulates payment stablecoin issuers: who can issue, what reserves they hold, and how redemption works. It became law in July 2025. The CLARITY Act regulates the broader crypto market: which agency oversees which tokens and how exchanges and brokers register. It remains stalled in the Senate.
What would the CLARITY Act do for XRP?
The House bill does not name individual tokens. Senate Banking drafts included a provision treating tokens that underlie an exchange-traded fund as digital commodities, which would cover XRP, and Sen. Elizabeth Warren filed an amendment to remove it. Because the bill is not law, XRP's status rests on agency guidance and court rulings instead.
Is the CLARITY Act dead?
Not formally, but it is unlikely to pass this Congress. Sen. Tillis entered a motion to reconsider after the failed vote, and seven Democratic senators said they remain committed to bipartisan talks. With the midterms on November 3, 2026 and few legislative days left, most observers expect a revised bill in 2027.
Will the CLARITY Act pass?
Prediction markets put the odds low. As of October 5, 2026, Kalshi priced the chance of the CLARITY Act becoming law before January 1, 2028 at about 17%, and before January 1, 2027 at about 5%. Passage depends on finding at least seven Democratic votes, most likely through a stronger ethics provision.
The takeaway
The CLARITY Act is the missing half of US crypto law: GENIUS regulates the dollar token, CLARITY would have regulated the market around it. It stalled on stablecoin rewards and ethics, not on its core design, which is why the September Senate draft is likely to be the starting point for the next attempt.
The open question is whether agency rulemaking settles enough in the meantime that a future bill looks less urgent, or whether the lack of preemption and bankruptcy protection keeps the pressure on. For the stablecoin side of the story, read our GENIUS Act explainer. If you are building a stablecoin product affected by the rewards debate, reach out.
