SEC and CFTC Move Ahead After CLARITY Vote Fails
The SEC and CFTC move ahead with crypto rules after CLARITY fails, while comprehensive spot-market oversight still requires Congress.
Key Takeaways
- Both regulators will use existing legal authority.
- SEC plans address offerings, custody and recordkeeping.
- CFTC action focuses on leveraged crypto markets.
- Comprehensive spot oversight still requires congressional action.
- Agency rules face reversal and court challenges.
The vote changed the route, not the law
The Senate’s failure to advance the CLARITY Act did not expand either regulator’s powers. It blocked the immediate legislative route, leaving the SEC and CFTC to continue work they had already announced under existing statutes.
SEC Chair Paul Atkins said after the vote that the agency would act “with or without legislation” and remain within its statutory authority. CFTC Chair Michael Selig said his agency was ready to proceed with its planned crypto rules, according to a report covering both regulators’ responses.
Both officials had presented their plans before the CLARITY Act fell short of the required 60 Senate votes. The result makes those agency initiatives the principal near-term federal route for addressing several unresolved parts of crypto regulation.
The statements do not immediately change a token’s legal status, an exchange’s obligations or the protections attached to a customer account. Those effects would depend on the rules the agencies publish and eventually adopt.
The SEC can change how crypto projects raise money
The SEC’s clearest route concerns activities covered by federal securities law. Its proposed Regulation Crypto Assets would create tailored exemptions for certain projects raising capital through crypto assets and establish a process for determining when an associated investment contract has ended.
Under the SEC proposal, a startup exemption would cover qualifying offerings of up to $5 million over four years. A separate fundraising exemption would allow qualifying projects to raise as much as $75 million annually, subject to disclosure and other conditions.
The proposed safe harbor addresses projects that sell an asset while promising to build a network, product or service. If the issuer later completes those promised managerial efforts and meets the SEC’s conditions, the asset could cease to be treated as part of the original investment contract.
Atkins has also asked SEC staff to develop rules for crypto custody by investment advisers and regulated funds. The proposal could allow advisers to hold certain assets directly or use qualifying state trust companies under specified safeguards.
A separate transfer-agent proposal would update how ownership records for tokenized securities are maintained. These measures could change how crypto projects raise money and how investment firms hold blockchain-based assets, but only where federal securities law applies.
The CFTC’s clearest route runs through leverage
The CFTC oversees commodity derivatives such as futures and swaps, along with certain retail commodity transactions involving margin, leverage or financing. That gives it a route to regulate parts of crypto trading without receiving new authority from Congress.
Selig has directed staff to examine whether existing firms and crypto exchanges could operate as a type of designated contract market under tailored CFTC rules. These platforms could offer leveraged or margined crypto trading while becoming subject to federal registration, surveillance and customer-protection requirements.
In his August 20 remarks outlining the plan, Selig also said the agency would work with developers seeking compliant routes for onchain financial protocols.
Ordinary spot trading presents the larger problem. Buying a crypto asset with cash and taking delivery is not the same as trading a futures contract or opening a leveraged position. The CFTC can pursue fraud and manipulation involving spot commodity markets, but that is different from continuously supervising exchanges through a registration regime. The agency lacks the comprehensive authority to register and supervise conventional spot digital-commodity platforms that CLARITY would have provided.
Existing authority stops short of a complete framework
The agencies can coordinate their interpretations, but they cannot make that division of authority permanent. Future agency leadership could revise their rules, while businesses or industry groups could challenge them in court if they believe a regulator has exceeded its statutory powers.
The SEC and CFTC plans are at different stages
Regulation Crypto Assets has already been proposed and is going through the SEC’s public-comment process. Its final wording could change before commissioners vote on whether to adopt it.
The custody framework is less advanced. Atkins has instructed staff to prepare it, but the complete proposal, covered institutions and operating conditions have not been published. His September 14 remarks described the intended direction rather than a finished rule.
The CFTC has also described the structure it wants staff to explore, but it has not published the full market-structure proposal. Important details remain unknown, including which platforms could qualify, how customer assets would be handled and precisely which leveraged transactions would fall under the framework.
Selig’s statement that the agency is ready to move therefore refers to its ability to begin or accelerate rulemaking. It does not mean that new requirements are already effective.
Four developments will show whether the plans have substance
- The SEC custody proposal: Its text should identify which firms can hold crypto, whether self-custody is permitted and what safeguards apply.
- The final fundraising rules: Changes made after public comments will show which projects can realistically use the exemptions.
- The CFTC market proposal: Its scope will reveal whether the agency stays focused on derivatives and leveraged trades or tests a broader interpretation of its authority.
- Shared regulatory definitions: Compatible terminology from the SEC and CFTC would reduce the risk that the same asset or transaction receives conflicting treatment.
Rules confined to clearly established authority could reduce uncertainty in specific parts of the market. An attempt to construct comprehensive spot-market regulation without Congress could begin sooner, but it would face a greater risk of being overturned by a court or reversed under future leadership.
This article is provided for informational purposes only and does not constitute legal, financial or investment advice. Agency proposals can change during rulemaking and may be subject to judicial review.
Kosta has reported on cryptocurrency markets and blockchain infrastructure since 2020, bringing over six years of hands-on experience in the crypto industry built through daily tracking of markets, trends, and emerging blockchain developments. Specializing in Bitcoin on-chain analysis, institutional ETF flows, and digital asset price action, his work at Coindoo has been cited by other news agencies and consistently covers market developments with a focus on data-driven reporting across Bitcoin, Ethereum, Solana, and XRP. Over the years, Kosta has contributed to multiple crypto media outlets in different regions, authoring over 6,000 articles across the sector. His reporting spans cryptocurrency markets and the broader fintech industry, tracking not only price action but also the technological and regulatory forces shaping the ecosystem. To support his analysis, Kosta actively leverages on-chain data and metrics from leading platforms such as Santiment, Glassnode, and CryptoQuant, enabling deeper, evidence-based market insights. He believes in the power of transparency and the data that underpins the blockchain ecosystem. His academic background in Marketing Management from Denmark further complements his analytical approach, adding a strong understanding of communication strategy and content positioning to his work.
