Senator Thom Tillis (R-NC) is pressing the Senate Banking Committee to advance the CLARITY Act, a bipartisan crypto market structure bill that would draw a statutory line between SEC and CFTC jurisdiction over digital assets. Tillis’s recent statement that the legislation has “made a lot of progress” signals renewed momentum for a bill that has been stalled at the committee level — and raises the question of whether Congress will finally deliver the regulatory clarity the crypto industry has demanded for years.

The stakes are significant. The United States remains the only major financial market without a statutory framework for classifying digital assets. Every enforcement action, every exchange delisting decision, and every token launch currently operates against a backdrop of regulatory ambiguity that the CLARITY Act is designed to resolve.

Key Takeaways

• Committee action is the bottleneck: The CLARITY Act cannot reach the Senate floor without a markup vote in the Senate Banking Committee — the step Senator Tillis is now pushing for.
• SEC/CFTC jurisdictional divide: The bill would create statutory criteria for determining whether a digital asset falls under SEC or CFTC oversight, replacing the current case-by-case enforcement approach.
• Registration pathways: New compliance pathways would be established for digital asset intermediaries, potentially replacing the current regime where platforms face enforcement for failing to register under frameworks not designed for crypto.
• Passage is not assured: Despite bipartisan interest, the bill faces significant procedural hurdles — committee markup, 60-vote Senate threshold, and reconciliation with any House companion legislation.
• Current law still governs: Until legislation is enacted and effective, the Howey test and existing SEC/CFTC authority remain the operative legal framework for digital asset classification.

Why Does the US Need a Crypto Market Structure Law?

The core problem is straightforward: no federal statute defines what a “digital asset” is or which agency regulates it. The SEC claims jurisdiction over tokens it considers securities under the Howey test — the four-part investment contract analysis established in SEC v. W.J. Howey Co., 328 U.S. 293 (1946) and codified in the Securities Act of 1933, Section 2(a)(1) (15 U.S.C. § 77b(a)(1)). The CFTC, meanwhile, has asserted that certain digital assets — including Bitcoin and Ether — are commodities under the Commodity Exchange Act (7 U.S.C. § 1 et seq.), giving it jurisdiction over derivatives markets and fraud enforcement.

The result is a regulatory no-man’s-land. Token issuers cannot determine with certainty which agency they must register with. Exchanges must make their own classification judgments when listing assets — judgments that the SEC may later disagree with through enforcement action. And both agencies have at times claimed overlapping authority over the same assets, as seen in the ongoing debate over whether certain tokens are simultaneously securities and commodities depending on the transaction context.

This is not an academic problem. The SEC brought over 100 crypto-related enforcement actions between 2017 and 2024, many premised on the theory that tokens were unregistered securities — a classification the defendants often contested. The CLARITY Act aims to replace this enforcement-first, classify-later approach with ex ante statutory definitions.

What Would the CLARITY Act Do?

While the final bill text may evolve through the markup process, crypto market structure proposals in Congress — including the House-passed Financial Innovation and Technology for the 21st Century Act (FIT21), which passed 279-136 in May 2024 during the 118th Congress — have generally converged around several core concepts that the CLARITY Act is expected to address:

Statutory Classification Framework

The bill would create defined categories for digital assets — broadly distinguishing between assets that function as investment contracts (subject to SEC jurisdiction) and those that function as commodities on sufficiently decentralized networks (subject to CFTC jurisdiction). The specific terminology and criteria may differ from the House version, but the structural approach — replacing Howey-based enforcement classification with statutory definitions — is the legislative consensus.

Decentralization as a Regulatory Threshold

Both the House and Senate approaches have incorporated the concept that a digital asset’s regulatory classification may change as its underlying network matures. A token initially sold to fund network development might be classified differently once the network achieves sufficient decentralization — meaning no single entity controls the protocol, governance is distributed, and the network operates autonomously. This “graduation” concept has no basis in current law and would be a novel statutory innovation.

Registration Pathways for Intermediaries

The bill would establish new registration categories for digital asset trading platforms, brokers, and custodians — creating compliance pathways that account for the unique characteristics of crypto markets rather than forcing digital asset platforms into registration frameworks designed for traditional securities or commodities markets.

Where Does the Bill Stand in the Legislative Process?

The CLARITY Act is currently stalled at the Senate Banking Committee, awaiting the scheduling of a markup hearing — the procedural step where committee members debate, amend, and vote on whether to send the bill to the full Senate. Senator Tillis’s public advocacy for advancing the bill suggests that behind-the-scenes negotiations on key provisions may be nearing resolution, though no markup date has been publicly announced.

Context matters here. Congress has considered some form of comprehensive crypto legislation in every session since 2018, and none has been enacted. The closest any bill has come was FIT21’s House passage in 2024, but that legislation expired with the 118th Congress. The CLARITY Act represents the current Congress’s attempt to succeed where prior efforts have not.

The path from committee to law remains steep:

• Committee markup: The next critical milestone. The committee chair controls scheduling, and competing legislative priorities (including the GENIUS Act on stablecoin regulation) may affect timing.
• Senate floor vote: Requires 60 votes to overcome a filibuster, making bipartisan support essential — not merely helpful.
• House action: The House would need to pass its own version or adopt the Senate bill, followed by reconciliation of any differences.
• Presidential signature: The current administration has signaled support for crypto regulatory clarity, but specific provisions could draw a veto threat depending on final bill language.

Who Would Be Most Affected?

Token issuers and crypto projects would gain what they currently lack: a defined process for determining which regulator to register with and what disclosures are required. Projects that have avoided US markets due to regulatory uncertainty could potentially re-enter with a clear compliance roadmap.

Exchanges and trading platforms would benefit from statutory listing standards rather than making independent — and legally risky — classification judgments. The bill could resolve the fundamental tension that led to SEC enforcement actions against platforms like Coinbase and Kraken for allegedly listing unregistered securities.

DeFi protocol developers face a more complex picture. The decentralization criteria that determine whether a protocol falls under SEC or CFTC oversight would create strong incentives for protocols to demonstrate sufficient decentralization — but would also create a statutory basis for regulating protocols that fail to meet those thresholds.

The SEC and CFTC would see their jurisdictional boundaries set by Congress rather than established through enforcement actions and inter-agency memoranda. For the SEC in particular — which under Chairman Paul Atkins has already begun pulling back from aggressive crypto enforcement through its Crypto Task Force — the CLARITY Act would codify jurisdictional limits that survive changes in agency leadership.

How Does This Interact with the GENIUS Act and SEC Policy Shifts?

The CLARITY Act is one piece of a broader legislative push. The GENIUS Act (Guiding and Establishing National Innovation for US Stablecoins Act) addresses payment stablecoin regulation specifically, establishing reserve and disclosure requirements for stablecoin issuers. Together, these bills represent a two-track approach: the GENIUS Act for stablecoins, the CLARITY Act for the broader digital asset market.

Meanwhile, the SEC’s posture under Chairman Atkins — including the dismissal or settlement of several enforcement actions and the issuance of staff guidance through the Crypto Task Force — has created a more permissive regulatory environment. But agency guidance can be reversed by future leadership. Statutory law cannot. This distinction makes the CLARITY Act significant regardless of the current enforcement climate: it would make regulatory clarity durable rather than administration-dependent.

Practical Implications and What to Do Now

For token issuers: Begin mapping your token’s characteristics against the classification frameworks proposed in both the CLARITY Act and FIT21. Assess whether your network would meet decentralization thresholds under the proposed criteria. This analysis will be valuable regardless of the bill’s fate — it stress-tests your regulatory position under any framework. But do not structure transactions in reliance on legislation that has not been enacted.

For exchanges and trading platforms: Develop internal classification frameworks that mirror the bill’s proposed approach. Even if the legislation stalls, demonstrating a principled classification methodology strengthens your position in any enforcement context. Monitor the Senate Banking Committee calendar for markup scheduling.

For legal counsel advising crypto clients: The operative legal framework remains the Howey test (securities), the Commodity Exchange Act (commodities), and state money transmitter laws. Advise clients based on current law, not anticipated legislation. Use the CLARITY Act’s framework as a planning tool for scenario analysis, not as a compliance baseline.

For investors: Understand that the bill’s classification framework would determine which regulatory protections apply to specific assets and which agency oversees the platforms where you transact. A token classified as a digital commodity under CFTC oversight carries different disclosure and custody requirements than one classified as a security under SEC oversight.

Conclusion

Senator Tillis’s push to move the CLARITY Act through the Senate Banking Committee is a meaningful development — but it is a procedural step, not a legislative outcome. The bill addresses a genuine and widely acknowledged gap in US financial regulation, and its core approach (statutory classification replacing enforcement-driven classification) has attracted bipartisan support in concept. Whether that support translates into the 60 Senate votes needed for passage — and whether the Senate and House can reconcile their respective approaches — remains the central uncertainty.

Stakeholders should track three things: (1) whether the Senate Banking Committee schedules a markup hearing, (2) what amendments emerge from that process, and (3) whether the House advances companion legislation in this Congress. Until the bill is enacted, current law governs — and prudent compliance strategies should reflect that reality.

CryptoLaw.blog will continue tracking the CLARITY Act’s legislative progress and will publish updated analysis as committee action unfolds.

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This article is for informational and educational purposes only and does not constitute legal advice. Reading this content does not create an attorney-client relationship. Laws and regulations in the cryptocurrency space change rapidly — consult a qualified attorney for advice specific to your situation and jurisdiction. Seth Goettelman is licensed to practice law in Wisconsin and Florida.