WHAT YOU NEED TO KNOW:
- The CLARITY Act represents a major step toward a comprehensive U.S. regulatory framework for digital assets, clearly delineating SEC and CFTC oversight.
- It introduces tailored registration, compliance, and disclosure regimes aimed at fostering responsible innovation while enhancing market integrity and investor protection.
- As Congress advances CLARITY alongside the GENIUS Act, stakeholders should prepare for new registration, compliance, and disclosure obligations, assess current and anticipated blockchain system maturity, and monitor upcoming rulemakings and studies.
I. Overview
This week's consideration of H.R. 3633, the Digital Asset Market Clarity Act of 2025 (CLARITY or the Act) in the U.S. House of Representatives is a pivotal moment for the development of US digital asset regulation. CLARITY is a response to years of regulatory ambiguity that stifled innovation and left market participants navigating a fragmented and unclear regulatory landscape. By clearly dividing primary regulatory oversight between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) and defining key concepts that are central to the regulation of digital assets, the Act aims to unlock responsible innovation, protect consumers and cement the US's position as the global leader in the digital asset economy.
The legislation arrives amid growing bipartisan consensus that digital assets are no longer fringe financial instruments—they are central to the future of payments, capital markets and decentralized finance. CLARITY's structure reflects the critical importance of establishing clear rules in this space, offering a comprehensive framework for everything from stablecoins and security tokens to decentralized protocols and qualified custodians.
The Act builds on the Financial Innovation and Technology for the 21st Century Act (FIT21), which passed the House in 2024 with bipartisan support. FIT21 laid the groundwork for progress in the digital asset space by defining digital asset categories and assigning regulatory roles to the SEC and CFTC. CLARITY expands and codifies those principles, introducing statutory definitions and operational rules for issuers, intermediaries and exchanges involved in the issuance, custody and trading of certain digital assets. Many of the regulatory concepts in the Act are familiar—they borrow from statutory and regulatory schemes in place for securities, commodities and derivatives markets today.
While the House works to advance CLARITY, the Senate has focused its attention on developing stablecoin regulations through the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), which addresses the issuance and custody of payment stablecoins and passed the Senate with bipartisan support on June 17, 2025. The GENIUS Act will also be considered as part of the House's planned "Crypto Week" along with legislation creating restrictions on central bank digital currencies (CBDCs). CLARITY includes several provisions that work in concert with the GENIUS Act and contains the House of Representative's latest amendments to the Senate-passed GENIUS Act.
The Senate Banking Committee is also moving forward on developing its own legislation for creating a digital asset market structure framework and recently released a set of principles for the development of comprehensive market structure legislation.1 Senate Banking Committee Republicans have emphasized the need for a unified framework, but differences remain—particularly around the scope of federal oversight and the role of state regulators. The Senate Banking Committee has held hearings to explore these issues, and several market structure bills—from the House and Senate—are expected to converge in the coming months.
If CLARITY becomes law, regulators like the SEC and CFTC will be expected to move quickly to adopt implementing regulations. The Act requires most rules to be adopted within one year and directs the SEC and CFTC to take preparatory actions, such as coordinating regulatory efforts through memoranda of understanding and conducting studies to ensure smooth implementation. CLARITY also contemplates an expedited registration process for certain entities and a provisional registration framework pending promulgation of the necessary regulations, which would permit market participants to continue to offer, solicit, trade or otherwise deal in certain digital assets.
II. CLARITY: General Structure, Key Definitions
CLARITY begins by defining and incorporating key terms related to blockchain technology, digital assets and digital commodities across the Securities Act of 1933 (Securities Act), the Securities Exchange Act of 1934 (Exchange Act) and the Commodity Exchange Act (CEA). This consistent definitional framework helps resolve regulatory ambiguity regarding the meanings of "security" and "commodity" and sets the foundation for the Act to establish clear jurisdictional boundaries between the SEC and the CFTC. Ultimately, the Act creates a new regulatory regime for "digital commodities," which are intrinsically linked to and derive value from use in a blockchain system, while maintaining that other digital assets structured as traditional products, such as securities, payment stablecoins, banking deposits, commodities and pooled investment vehicles, among others, are excluded from the definition of "digital commodity."
CLARITY adds new definitions to the Securities Act related to cryptocurrency and blockchain technology. These definitions include "digital asset" (any digital representation of value recorded on a cryptographically secured ledger), "blockchain protocol" and "mature blockchain system," as well as terms related to persons who issue, manage or hold substantial stakes in a digital commodity. The Act also defines "end user distribution" as a distribution of digital commodities without significant exchange of value, often as rewards for activities related to the operation of the blockchain system.
The definition of a "permitted payment stablecoin" comes from the GENIUS Act and refers to a digital asset used for payment and issued by an approved entity in the US that must ensure that the stablecoin can be redeemed for a fixed monetary value that is intended to maintain its stability with respect to an underlying currency.
CLARITY also adds new definitions to the CEA related to digital commodities. In doing so, the Act delineates the scope of the CFTC's jurisdiction over digital commodities and registered digital commodity market participants.
As mentioned, the Act defines "digital commodity" as a digital asset intrinsically linked to a blockchain system, with its value derived from the system's use. The definition explicitly excludes certain assets, such as securities, permitted payment stablecoins, banking deposits, derivatives, pooled investment vehicles, digital collectibles (such as digital art in the form of non-fungible tokens [NFTs]) and digital assets tied to agricultural commodities. There is no presumption that a digital asset is a security or excluded from being classified as a digital commodity solely because it offers voting or economic rights in the blockchain system, or because its value is influenced by the blockchain system's performance or because its value fluctuates with the blockchain system's usage.
CLARITY also defines related additional terms under the CEA, such as digital commodity broker (DCB), digital commodity dealer (DCD), digital commodity exchange (DCE), and associated persons, as well as decentralized finance trading protocol. The Act excludes certain blockchain-related activities (e.g., digital commodity custody, inventory management and transaction validation) from being classified as "trading in commodity interests." See Exhibit A for the key definitions.
Notably, the Act requires several joint rulemakings by the SEC and CFTC to further define certain terms. This mirrors the approach taken in Title VII of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, which established jurisdiction of the over-the-counter swaps market for the SEC and CFTC. The joint rulemakings topics include the key definitions listed above; regulation of mixed digital asset transactions (a transaction in which a digital commodity is traded for a security); delisting an asset for trading; and portfolio margining of securities, futures and options. Bank regulators must also develop risk-based capital requirements that address netting agreements in the event of a counterparty default.
III. Key Provisions of CLARITY
A. Offers and Sales of Digital Commodities
CLARITY protects digital assets (such as digital tokens) sold pursuant to investment contracts from being deemed "investment contracts" in and of themselves and therefore regulated under the federal securities laws. While investment contracts are considered securities, the Act clarifies that the definition of an "investment contract" does not include "investment contract assets," which include "digital commodit[ies]" that can both "[b]e exclusively possessed and transferred, person to person, without necessary reliance on an intermediary, and is recorded on a blockchain" and "sold or transferred pursuant to an investment contract." CLARITY amends the federal securities laws to incorporate this concept.
Exempted Primary Transactions in Digital Commodities
The Act amends Section 4(a) of the Securities Act to exempt digital commodity issuers from traditional securities registration for certain "primary transactions" relating to the sale of an investment contract involving digital commodities. Primary transactions, although securities, must meet certain threshold requirements to rely on this exemption, including those related to the maturity of the blockchain, offering value of the investment contract, concentration of ownership and certain characteristics of the issuer.
If a digital commodity issuer offering meets these criteria, the issuer must file an offering statement and related documents with the SEC. The offering statement will include, among other variables, financial information, a description of the issuer, the financial condition of the issuer, a description of the plan for distribution of the digital commodity and a plan for the development of the blockchain system for maturity (if it is not already mature). CLARITY also mandates that the digital commodity issuer provide purchasers with certain additional information, such as a future plan for maturity, access to source code, access to transaction history, details around the commodity economics, and material risks of holding. If the digital commodity issuer blockchain is not yet mature at the time of the offering, it must file semiannual reports detailing its plan for development until such time as it is mature. The digital commodity issuer must also disclose its ownership, but the SEC may determine that this information can be subject to confidential treatment. The SEC will allow for confidentiality, depending on what it deems is "necessary or appropriate in the public interest or for the protection of investors." Unlike traditional securities disclosure requirements that focus on an issuer's financials and operations, these digital asset disclosure requirements emphasize technological aspects such as blockchain development, functionality and decentralization. This reflects the concept that a digital commodity's value is primarily derived from the utility of its blockchain system rather than the issuer's performance.
Secondary Distributions, End-User Distributions and Staking
CLARITY provides that if a digital commodity is sold by a party other than an issuer or its agents, it will not be treated as an investment contract under the federal securities laws. Thus, secondary distributions by unrelated parties will not be treated as sales or purchases of securities. The Act also clarifies that an "end user distribution"—which covers certain forms of staking—is not to be treated as the offer or sale of a security. CLARITY further states that an "end user distribution" covers various types of staking, defining the term to include "self-staking," "self-custodial staking with a third party" and "custodial and ancillary staking services."
Mature Blockchain System Requirements
CLARITY provides requirements for digital commodity issuers and other digital commodity related parties that seek to have related blockchains certified as "mature." The benefits of maturity include less onerous filing requirements and looser restrictions on distributions or the digital commodity by related persons. The digital commodity issuers and interested parties must file a certification with the SEC and "include such information that is reasonably necessary to establish that the blockchain system is not controlled by any person or group of persons under common control." This may include information regarding the operation of the blockchain system, functionality and market value of the digital commodity, centralization of governance, and the roles of the digital commodity issuer or other digital commodity affiliated or related persons when those roles are "material" to the operation of the blockchain. The certification will generally become effective once the SEC provides notice that it does not object. The Act further lays out criteria the SEC and courts can use to evaluate whether a blockchain system should be certified as mature.
B. Digital Asset Regulation: SEC Oversight
CLARITY amends the federal securities laws to grant the SEC jurisdiction over certain digital commodities and stablecoins. It also provides an anti-fraud framework and requirements for CFTC-SEC cooperation over new, dual-registered DCBs, DCDs and DCEs.
The key provisions relate to:
- Permitted Payment Stablecoins: The SEC would have jurisdiction over the trading of permitted payment stablecoins, which are issued by an approved US entity under the terms set forth in the GENIUS Act. Permitted payment stablecoins may be traded or custodied by a broker, dealer, through a national securities exchange, or through an alternative trading system (ATS). The GENIUS Act creates a framework for the issuance and treatment of these permitted payment stablecoins.
- Eligibility of ATS: The SEC is not permitted to block an unregistered exchange from receiving a covered exemption because it trades both digital commodities/stablecoins and securities.
- Dual Registration: CLARITY revises the Exchange Act to add "additional registrations" with the CFTC; brokers and dealers can register as "digital commodity" brokers or dealers, and national security exchanges and ATSs can register as digital commodity exchanges. The SEC must prescribe rules for these dual-registered entities to protect them from "duplicative, conflicting, or unduly burdensome" provisions. The SEC must also enter a memorandum of understanding with the CFTC to ensure non-duplicative supervision and enforcement and appropriate information sharing for these dual-registered entities. This expands the current SEC regulatory framework by (1) providing a path for SEC-registered entities to transact in a new asset class, digital commodities; and (2) creating a new, more-fulsome dual-registration framework with the CFTC.
Anti-fraud
- The Act grants the SEC anti-fraud authority over certain digital commodities and stablecoins. Notably, judicial precedent and promulgated rules related to securities fraud will also be applied to transactions involving digital commodities and stablecoins.
C. Digital Commodity Regulation: CFTC Oversight
CLARITY amends the Commodity Exchange Act to provide the CFTC with primary regulatory oversight authority over spot digital commodities. This is primarily achieved through the registration and regulation of DCBs, DCDs and DCEs. The Act also includes guidance on the listing and review process for new digital commodities and introduces the concept of a qualified digital asset custodian to hold digital assets on behalf of a person or customer of a person registered under CLARITY. This significant development ends years of regulatory uncertainty by providing the first federal regulatory framework to govern spot digital commodity transactions and addresses perceived regulatory deficiencies for US digital asset markets versus other key jurisdictions.
Digital Commodity Broker, Digital Commodity Dealer
DCBs are those who, as a regular business, solicit or accept orders for the purchase or sale of digital commodities and maintain control over customer funds or transaction execution. DCDs are those who, as a regular business, act as a counterparty for the purchase or sale of digital commodities and maintain control over counterparty funds.
Importantly, for both entity types, a person does not meet the definition of a DCB or DCD solely because the person enters into a digital commodity transaction with an eligible contract participant. Similarly, there is a carve-out from both definitions for banks, as well as for activity incidental to making, sending, receiving or facilitating payments. Digital commodity dealers do not include activity conducted on or through a digital commodity exchange, with a digital commodity broker, or through a decentralized finance protocol.
CLARITY requires the CFTC to establish a registration regime for DCBs and DCDs. The requirements, set forth in new Section 4u of the CEA, resemble those adopted for swap dealers and include, among other things, core principles requirements related to capital, reporting and recordkeeping, trading records, business conduct standards, risk management, and conflicts of interest, among other things. DCBs must segregate customer money, assets and property from proprietary assets. DCBs and DCDs must also become members of a registered futures association.
Digital Commodity Exchange
A digital commodity exchange (DCE) is a trading facility that offers or seeks to offer a cash or spot market in at least one digital commodity. CLARITY requires the CFTC to establish a registration regime for DCEs. The requirements, set forth in new Section 5i of the CEA, resemble those adopted for designated contract markets or swap execution facilities, and include, among other things, core principle requirements related to the publication of certain DCE information, trade monitoring, recordkeeping and reporting, financial resources, and conflicts of interest, among other things. DCEs must segregate customer money, assets and property from proprietary assets. With limited exceptions, the Act prohibits a DCE or its affiliate from trading on the DCE for its own account. DCEs must also become members of a registered futures association.
Digital Commodity Product Certification and Approval
CLARITY introduces a new trading certification and approval framework for digital commodities that resembles the CEA's existing self-certification process for futures, swaps and options, with several important distinctions. Before offering a new digital commodity for trading, an eligible entity (e.g., digital commodity exchange) must submit a written certification to the CFTC that (1) shows compliance with applicable rules, and (2) includes analysis showing how the asset satisfies the CFTC's standards. If the CFTC does not disapprove of the certification, it automatically becomes effective, typically 20 business days after the CFTC receives the certification. The Act provides that a person applying with the CFTC to list or offer a digital commodity in the cash or spot market may seek prior approval to facilitate the transition to the new regulated environment.
Qualified Digital Asset Custodians
CLARITY defines a qualified digital asset custodian (QDAC) as an eligible entity that holds digital assets on behalf of a person or customer of a person registered under the Act. CLARITY requires all futures commission merchants holding digital assets to use a QDAC. QDACs must comply with supervision and regulation requirements imposed by the federal, state or appropriate foreign governmental authorities in the custodian's home country. QDACs must also meet specific standards, including those related to licensing, examination, capital requirements, recordkeeping and disclosure requirements, customer asset protection, and other supervisory processes. The CFTC may establish rules for these custodians and can temporarily suspend standards if necessary. Existing custodians are given a transition period of at least two years to comply with new regulations.
Exemption from CFTC Registration for Certain ATSs and Broker-Dealers
CLARITY provides pathways for certain SEC-registered broker-dealers and ATSs transacting in digital commodities to be exempt from CFTC registration. An ATS may be exempt from CFTC registration if it (1) does not engage in retail commodity transactions; (2) is not otherwise registered under the CEA; (3) only lists or trades digital commodities, currencies and securities; and (4) has not been suspended by the SEC. The ATS must also file an annual notice with the CFTC showing compliance and maintain digital commodity trading volumes that do not exceed 25%—or $50 billion—of its trading value per calendar quarter in either of its two most recent fiscal years.
A broker-dealer may be exempt from CFTC registration if it (1) does not engage in retail commodity transactions or other non-digital commodity contracts; (2) is not otherwise registered under the Act; (3) is not subject to disqualification by the SEC; and (4) is a member of a registered national securities association. The broker-dealer must also file an annual compliance notice with the CFTC and ensure that its revenue from digital commodity activities does not exceed 10%—or $100 million—of its total gross annual revenues in either of its two most recent fiscal years.
IV. Other Areas Addressed In CLARITY
A. Self-Custody of Digital Assets
CLARITY ensures that U.S. individuals retain the right to maintain hardware and software wallets for their own lawful custody of digital assets and engage in direct, peer-to-peer transactions using these wallets, provided that the other party is not a financial institution and the transactions do not involve property blocked by US sanctions. This right applies solely to personal use and does not extend to individuals acting in a custodial or fiduciary capacity for others. This does not limit the authority of various federal agencies to enforce laws related to illicit finance, money laundering, terrorism financing, or US sanctions.
B. Decentralized Finance Activities
CLARITY excludes decentralized finance activities from SEC regulation. This is consistent with the Act's broader exclusion of decentralized protocols from regulatory frameworks. However, CLARITY notes that the identified activities are not exempt from the SEC's anti-fraud and anti-manipulation enforcement authority. Certain activities performed in relation to the operation of a blockchain system or a decentralized trading protocol are carved out of the Exchange Act, including providing incidental services (e.g., computational work), providing user interfaces for blockchain systems, and developing or distributing a blockchain or decentralized finance messaging system, among others.
C. Permitted Payment Stablecoins
CLARITY incorporates the definition of a permitted payment stablecoin from the GENIUS Act as a digital asset used for payment and issued by an approved entity in the US. The entity must ensure that the stablecoin can be redeemed for a fixed monetary value that is intended to maintain its stability with respect to an underlying currency.
The Act clarifies that permitted payment stablecoins are not securities, nor do they qualify as "cash." It also provides the SEC authority to prevent fraud, manipulation and insider trading in the context of transactions involving permitted payment stablecoins. The SEC may not prevent a trading platform from operating under an exemption solely on the basis that the assets being traded are permitted payment stablecoins. Notably, ATSs that predominantly facilitate the trading of permitted payment stablecoins are not to be considered facilities of a securities exchange.
CLARITY also grants the CFTC authority over transactions dealing with a permitted payment stablecoin that occur on or with an entity registered with the CFTC. However, the CFTC is prohibited from issuing any rules, requirements or regulations regarding the operations of any permitted payment stablecoin issuer or any permitted payment stablecoin.
D. Studies and International Coordination
CLARITY calls for the CFTC, SEC, Secretary of the Treasury and Comptroller General to conduct various research studies related to cryptocurrency and report on their findings and recommendations to Congress, the public, or House and Senate committees.
The studies cover a wide range of topics, including:
- Decentralized finance and blockchain applications;
- NFTs (their purpose and use, differences between NFTs and other digital commodities, how they are minted and stored, and their benefits and risks);
- Financial literacy among retail digital commodity holders and consumers regarding the digital commodities provided by the CFTC and SEC, as well as methods to improve financial literacy;
- Whether additional guidance or rules are necessary to facilitate the development of tokenized securities and derivatives;
- The use of blockchain technology by the private sector, with a particular focus on fraud, automated payments and transactions;
- How Foreign Terrorist Organizations and Transnational Criminal Syndicates make use of digital assets in connection with illicit activities;
- Risks posed by central intermediaries located in foreign jurisdictions; and
- Digital commodity registrants owned by foreign adversarial governments and whether foreign adversarial governments are collecting data or intellectual property from the digital commodity market in the US.
V. Conclusion
The CLARITY Act marks a significant development toward establishing a regulatory framework for digital assets in the United States. By establishing jurisdictional boundaries for the SEC and CFTC, introducing tailored registration and compliance regimes, and implementing new regulatory obligations for listing and trading practices, the Act seeks to foster responsible innovation while improving market integrity and investor protection.
While this is not the final step for market structure legislation, as Congress advances CLARITY alongside the GENIUS Act, stakeholders should prepare for new registration, compliance and disclosure obligations, assess the current and anticipated maturity of their blockchain systems, and monitor forthcoming rulemakings and studies that will affect implementation.2
Exhibit A: Key Definitions in CLARITY
| Term | Description |
|---|---|
| Blockchain | Any technology or similar technology where data is shared across a network to create a distributed ledger of independently verifiable transactions, linked using cryptography, propagated among network participants to reach consensus on the state of the ledger and composed of publicly available source code. |
| Blockchain Application | Any executable software deployed to a blockchain, including smart contracts, composed of publicly available source code, or similar technology. |
| Blockchain Protocol | The publicly available source code of a blockchain used by its network participants that facilitates the blockchain's functioning, or similar technology. |
| Blockchain System | Any blockchain along with its protocol and applications. |
| Decentralized Governance System | Any transparent, rules-based system that allows for consensus-based blockchain development and management, where no single entity has control over the blockchain, including legal entities that do not operate under centralized management. The delegation of ministerial or administrative authority at the direction of participants in a decentralized governance system is not considered centralized governance. |
| Mature Blockchain System | A blockchain system, together with its related digital commodity, that is not controlled by any person or group of persons under common control. |
| Permitted Payment Stablecoin | A digital asset used for payment and issued by an approved entity in the US, which must ensure that the stablecoin can be redeemed for a fixed monetary value that is intended to maintain its stability with respect to an underlying currency. Such stablecoins exclude national currencies, bank deposits and securities. Approved issuers can be subsidiaries of insured depository institutions, federally qualified issuers or state-qualified issuers. CLARITY incorporates this definition from the GENIUS Act. |
| Digital Asset | Any digital representation of value recorded on a cryptographically secured distribution ledger, or similar technology. |
| End User Distribution | A distribution of a unit of a digital commodity that does not involve an exchange of more than a nominal value of cash, property or other assets. This distribution must be done broadly and fairly, based on conditions that any participant in the blockchain system can meet. It can include incentive-based rewards given to users of the digital commodity or any related blockchain system, for activities directly related to the operation of the blockchain system (such as mining, validating or staking), or to existing holders of another digital commodity in proportion to the amount they hold. |
| Term | Description |
|---|---|
| Digital Commodity | A digital asset intrinsically linked to a blockchain system, and its value is derived from or reasonably expected to be derived from the use of the blockchain system. |
| Digital Commodity Broker | Any person who, as a regular business, solicits or accepts orders for the purchase or sale of a digital commodity or related margin financing and maintains control over customer funds or transaction execution. |
| Digital Commodity Dealer | Any person who, as a regular business, acts as a counterparty for the purchase or sale of digital commodities and maintains control over counterparty funds. |
| Digital Commodity Exchange | A trading facility that offers or seeks to offer a cash or spot market in at least one digital commodity. |
| Qualified Digital Asset Custodian | A person who (1) holds digital assets on behalf of a person registered under this Act or a customer of a person registered under CEA; and (2) is in compliance with subsections 5j(b) and 5j(c) of the CEA. |
Footnotes
1 Press Release, U.S. Senate Comm. on Banking, Housing & Urban Affairs, Scott, Lummis, Tillis, Hagerty Release Principles for Market Structure Legislation (June 24, 2025).
2 In addition to the contributors listed below, Ravi Singh, Casey D. Grant, Hayley Hopkins and Dani Flamini also provided valuable support in the review and drafting process.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
