New CLARITY Act Bill Emerges Ahead of Senate Vote
Senate Republicans have revised their crypto market-structure bill before a September 15 procedural vote, addressing disputes over controlled DeFi platforms, prediction markets and state authority.
Key Takeaways
- CFTC gains an explicit DeFi control test.
- Registration depends on activities performed.
- DeFi protection covers only spot markets.
- Emergency councils receive a narrow exception.
- The prediction-market dispute remains unresolved.
- Advancing the bill requires 60 votes.
The revised CLARITY Act text retains the market structure established in the July draft but substantially rewrites Section 20209, which covers software developers and decentralized finance.
The main change is an attempt to separate autonomous software from platforms that call themselves decentralized while leaving identifiable people with operational control. The legislation would protect code development and genuinely decentralized activity while allowing regulators to apply existing requirements to people who control financial functions.
Lummis presents the revision as a compromise
Senator Cynthia Lummis said the new text reflects negotiations conducted during August and contains “over 100 changes requested by Democrats.”
This updated Clarity Act text reflects bipartisan hard work over August—specifying when decentralized-in-name-only DeFi protocols must register with the CFTC and limiting the DeFi provisions to spot and cash transactions, in response to Native American concerns about prediction…
— Senator Cynthia Lummis (@SenLummis) September 10, 2026
She highlighted the new treatment of controlled DeFi protocols and the decision to limit DeFi protections to cash and spot transactions.
Those changes were made partly in response to concerns about prediction markets, according to Lummis’ announcement. However, requested changes do not necessarily amount to Democratic support. The September 15 vote will show whether the revisions have secured enough votes to begin debate.
When a DeFi protocol would be treated as controlled
The July draft already contained a control test in the part of the bill dealing with securities and Bank Secrecy Act requirements. The revised version adds a corresponding framework to the Commodity Exchange Act section administered by the CFTC.
Under the new language, a protocol can be classified as “non-decentralized” if it meets at least one of three conditions. A person or coordinated group may have authority to materially alter the protocol’s operation or consensus rules; the system may not operate solely through predetermined, transparent onchain code; or someone may be able to restrict, censor or prohibit its use.
This test focuses on authority rather than branding. Calling a platform decentralized would not determine its legal treatment if a company, foundation or coordinated group could still change how it operates or prevent users from accessing it.
Control would not trigger automatic registration
Meeting the control test would not automatically require registration. The CFTC, in consultation with the Securities and Exchange Commission and Treasury Department, would first have to conduct a public rulemaking.
That process would determine which obligations apply according to the functions performed by the controlling party. The bill identifies brokerage, dealing, trade execution, clearing and custody as examples. A controller performing one of those functions could be regulated in the same way as a similarly situated market intermediary.
Treasury would separately specify how existing Bank Secrecy Act and anti-money-laundering requirements apply when a controlling party becomes subject to registration. The bill does not create a presumption that every developer, governance participant or protocol operator falls within those rules.
It also states that software code and distributed ledger systems cannot be required to register in their own capacity. Regulators would assess the conduct of the people controlling regulated activities, not the existence of the underlying code.
The DeFi shield is now limited to spot markets
The clearest narrowing concerns the protection given to DeFi-related activity. The July version used broader Commodity Exchange Act language, although anti-fraud, anti-manipulation and false-reporting enforcement remained available.
The revised draft separates general software development from activities involving a DeFi trading protocol. Protection for maintaining a protocol, operating a liquidity pool or providing an interface would apply only against digital-commodity cash and spot-market rules. It would not extend across the entire Commodity Exchange Act.
That distinction matters for prediction markets because event contracts fall under the derivatives framework rather than the spot-market framework. A DeFi prediction platform could not rely on the Section 20209 spot-market shield to avoid rules governing event contracts.
The prediction-market dispute is only partly addressed
In July, 12 Democratic senators raised concerns about prediction markets that resemble sports betting or casino gaming. They argued that broad federal protections could allow such platforms to bypass state regulation, Tribal gaming rights and the Indian Gaming Regulatory Act.
Limiting the DeFi provision to spot markets addresses the specific possibility that a prediction platform could use a DeFi exemption to avoid derivatives oversight. It does not settle the broader jurisdictional dispute.
The revised bill does not include the explicit Indian Gaming Regulatory Act savings clause requested by the senators, nor does it impose their proposed ban on CFTC-registered platforms listing contracts that resemble sports bets. The change closes one potential DeFi route without resolving every concern raised in the July letter.
Security councils receive a limited exception
The revised text also explains when participation in a security council would not, by itself, establish control over a protocol. The exception applies to predetermined and temporary emergency powers used in response to a documented cybersecurity incident or imminent threat.
Those powers must operate through publicly disclosed, onchain authorization rules, remain limited in scope and duration, and prevent any single person from exercising unilateral control. They cannot be used for unrelated protocol upgrades, governance decisions or economic changes.
A council with broader or permanent authority could therefore still contribute to a finding that the protocol is controlled.
Federal preemption does not remove every state power
The draft gives the CFTC exclusive jurisdiction over registered digital-commodity intermediaries for activities covered by federal law. It nevertheless preserves defined areas of state and local enforcement.
States could pursue registered parties for fraud, deceit, manipulation and violations of the Commodity Exchange Act. They could also enforce generally applicable consumer-protection, banking, payments, property, contract and criminal laws against unregistered parties.
Certain protected software and DeFi activities would be shielded from state securities, commodities and digital-asset laws. State anti-money-laundering, anti-fraud and anti-manipulation powers would remain available.
The wider market structure remains intact
The revision does not replace the broader framework negotiated in the July draft. The bill would still divide oversight between the SEC and CFTC, establish federal registration categories for digital-commodity exchanges and brokers, and set rules for custody, disclosures and customer protection.
The new language concentrates on how that framework reaches DeFi projects with identifiable controllers. It does not create a separate registration system for blockchains or software developers.
September 15 is a procedural test
The Senate is expected to hold a procedural vote on September 15. Sixty votes are required to advance the bill, meaning Republicans need Democratic support even before senators consider amendments or final passage.
An earlier assessment of the CLARITY Act vote explained why reaching that threshold remained difficult. Lummis’ claim that the new draft incorporates more than 100 Democratic requests indicates where negotiators sought compromise, but it does not establish how many senators will support the motion.
Even a successful procedural vote would not make the bill law. The Senate would still need to debate and pass the legislation, while the House would have to approve the Senate’s changes or reconcile the two versions.
The revision gives senators more precise language on controlled DeFi, prediction markets and regulatory responsibility. The September 15 vote will determine whether those concessions are enough to secure the 60 votes required to begin debate.
This article is for informational purposes only and does not constitute legal or financial advice.
Alexander Zdravkov is a market analyst and crypto journalist with interests in economics, broader financial markets and digital assets. His journey into crypto began more than four years ago, driven by a fascination with the rapid evolution of blockchain technology and the transformative potential of decentralized finance. He began analyzing market cycles and identifying emerging trends before they reach the mainstream. He holds a degree in International Relations - a background that helped shape his broader perspective on global economics, geopolitics, and the interconnected nature of modern financial markets. Whether covering the latest developments in the crypto sector or exploring broader macroeconomic themes, Alexander focuses on giving readers context rather than simply repeating headlines. During his career, he has authored more than 5,000 articles covering cryptocurrencies, traditional finance, and global market developments. His work spans everything from Bitcoin and altcoins to macroeconomic trends influencing risk assets worldwide.
