The CLARITY Act Has Advanced Through The House Financial Services Committee

The Digital Asset Market Clarity (CLARITY) Act of 2025, H.R. 3633, has advanced through the House Financial Services Committee with a 32-19 vote and the House Agriculture Committee with a 47-6 vote, securing bipartisan support. It is now set for discussion and a full vote on the House floor. The bill aims to establish a regulatory framework for digital assets, dividing oversight between the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC).

The CFTC would regulate “digital commodities” linked to mature, decentralized blockchain systems, while the SEC would oversee investment contracts involving digital assets. Key features include consumer protections, provisional registration for digital commodity entities, and exemptions for noncustodial blockchain developers from money transmitter regulations. Critics, including some Democrats, argue it may weaken investor protections and create regulatory loopholes, while supporters see it as fostering innovation and U.S. leadership in blockchain technology.

Implications of the CLARITY Act (H.R. 3633)

The Digital Asset Market Clarity (CLARITY) Act of 2025, if passed, would significantly reshape the U.S. regulatory landscape for digital assets, with far-reaching implications for the crypto industry, investors, regulators, and the broader economy. The bill provides a clear division of oversight, with the CFTC regulating “digital commodities” (e.g., mature cryptocurrencies like Bitcoin on decentralized blockchains) and the SEC overseeing digital assets tied to investment contracts. This clarity could reduce regulatory uncertainty, encouraging innovation and attracting investment to the U.S. crypto sector.

Supporters argue it could position the U.S. as a global leader in blockchain technology, fostering job creation and economic growth. By exempting noncustodial blockchain developers from money transmitter rules, the bill lowers barriers for startups and decentralized projects. Critics warn that the lighter regulatory touch for digital commodities under the CFTC could create loopholes, potentially enabling fraud or market manipulation in less mature crypto markets.

The bill includes consumer safeguards, such as requiring digital commodity trading facilities to register with the CFTC and comply with fraud prevention and market integrity rules. It also mandates disclosures for digital asset offerings. Some Democrats and consumer advocates argue that the bill weakens investor protections compared to existing securities laws under the SEC. The CFTC’s historically lighter regulatory framework might not adequately address risks in volatile crypto markets, potentially exposing retail investors to losses.

By assigning clear roles to the CFTC and SEC, the bill aims to end overlapping jurisdiction and regulatory disputes, which have frustrated the industry. Provisional registration allows entities to operate while meeting compliance requirements. Implementation could face hurdles, as the CFTC may need significant resources to scale up its oversight of digital commodities. The SEC, which has been assertive in crypto enforcement, might resist ceding authority, leading to inter-agency tensions.

The bill could make the U.S. more competitive compared to jurisdictions like the EU, which has implemented the MiCA framework, or Singapore, with its crypto-friendly regulations. A clear U.S. framework might deter companies from relocating offshore. If the bill is perceived as too lenient, it could strain relationships with international regulators, complicating cross-border compliance for U.S. firms.

Crypto markets may see short-term boosts as regulatory clarity signals stability, though uncertainty around Senate passage and potential amendments could temper gains. Bipartisan support in committee votes (32-19 in Financial Services, 47-6 in Agriculture) suggests momentum, but opposition from progressive Democrats and regulatory hawks could complicate floor passage. The bill’s fate in the Senate, where crypto policy remains contentious, is uncertain.

The CLARITY Act has sparked a divide among stakeholders, reflecting broader debates about innovation, regulation, and investor safety. Firms like Coinbase and the Blockchain Association back the bill, arguing it provides a workable framework that fosters innovation while addressing fraud. They see CFTC oversight as more predictable than the SEC’s enforcement-heavy approach.

Many Republicans, including lead sponsor Rep. Glenn “GT” Thompson (R-PA), view the bill as a pro-market solution that supports U.S. competitiveness without stifling growth. They emphasize job creation and technological leadership. Moderate Democrats, such as Rep. Ro Khanna (D-CA), support the bill for its bipartisan compromise and potential to keep the U.S. ahead in fintech. They see it as balancing innovation with consumer protections.

The exemption for noncustodial developers is a win for DeFi, reducing legal risks for open-source projects and peer-to-peer platforms. Supporters argue that the current regulatory patchwork—marked by SEC lawsuits and unclear rules—drives companies overseas. They believe the bill strikes a pragmatic balance, enabling growth while addressing bad actors.

Lawmakers like Rep. Maxine Waters (D-CA), Ranking Member of the Financial Services Committee, criticize the bill for undermining SEC authority and weakening investor protections. They argue that digital assets, even on decentralized blockchains, often function like securities and should face stricter oversight. Groups like Americans for Financial Reform warn that CFTC oversight is underfunded and ill-equipped to handle crypto’s complexity, potentially exposing retail investors to scams and vovolatility.

Former SEC Chair Gary Gensler has historically opposed efforts to shift crypto oversight to the CFTC, arguing that most digital assets are securities. Opponents fear the bill could limit the SEC’s ability to pursue enforcement actions. Critics who view crypto as speculative or prone to illicit use (e.g., money laundering) argue the bill legitimizes an industry with systemic risks, citing past failures like FTX.

Opponents contend that the bill prioritizes industry interests over investor safety, creating a “race to the bottom” in regulation. They advocate for stronger securities laws and more robust enforcement to protect the public. The core divide centers on whether the CFTC’s commodity-focused approach is suitable for crypto or if the SEC’s securities framework offers better protections. Supporters prioritize fostering a nascent industry, while opponents emphasize preventing harm to investors and the financial system.

The bill’s criteria for “digital commodities” (mature, decentralized blockchains) are contentious, as opponents argue few assets meet this threshold, potentially creating regulatory gaps. Republicans and pro-crypto Democrats frame the bill as pro-market, while progressives see it as deregulation that favors corporate interests.

Passage in the House seems likely given committee votes, but the Senate remains a hurdle. Sens. Debbie Stabenow (D-MI) and John Boozman (R-AR) are working on a companion bill, but progressive opposition and election-year politics could delay or derail it. If passed, implementation would require CFTC and SEC rulemaking, likely taking years. Legal challenges from either pro-crypto or pro-regulatory groups are possible.