The Digital Asset Market Clarity Act of 2025 (H.R. 3633), known as the CLARITY Act, passed the U.S. House of Representatives 294-134 on July 17, 2025. Ten months later, it remains stalled in the Senate Banking Committee. A compromise on stablecoin yield finalized on May 5, 2026 by Senators Thom T...
"Failure to pass the CLARITY Act by May could stall crypto legislation indefinitely." — Senator Bernie Moreno (R-Ohio), DC Blockchain Summit, April 2026
The Digital Asset Market Clarity Act of 2025 (H.R. 3633), known as the CLARITY Act, passed the U.S. House of Representatives 294-134 on July 17, 2025. Ten months later, it remains stalled in the Senate Banking Committee. A compromise on stablecoin yield finalized on May 5, 2026 by Senators Thom Tillis (R-NC) and Angela Alsobrooks (D-MD) removed the last major policy obstacle, but unresolved disputes over ethics provisions targeting senior government officials' crypto holdings, DeFi protocol classification, and vacant CFTC commissioner seats continue to block a committee markup.
The window is narrow. The Senate Banking Committee cannot schedule a markup until the week of May 11 at the earliest, with Congress breaking for Memorial Day recess on May 21 and midterm election dynamics consuming the remainder of 2026. Senator Moreno stated on May 6 that all outstanding issues have been resolved and set a target of presidential signature before July 4. Polymarket odds for the CLARITY Act becoming law in 2026 stand at approximately 47%, down from 82% in February.
The bill's passage or failure will determine how the $2.1 trillion U.S. crypto market is regulated: which agency oversees which assets, whether DeFi protocols face registration requirements, and whether stablecoin issuers can offer yield-like products to compete with bank deposits.
The CLARITY Act establishes the first comprehensive federal regulatory framework for digital asset markets. It divides crypto assets into three categories:
The bill creates three new CFTC-registered entity types: digital commodity exchanges, digital commodity brokers, and digital commodity dealers. Each must register with the CFTC and comply with anti-fraud, anti-manipulation, and customer protection requirements.
For issuers, the Act creates a new Securities Act exemption allowing up to $75 million in digital commodity offerings within a 12-month period, provided issuers file disclosures covering maturity status, source code, token economics, and risk factors. This effectively creates a regulated on-ramp for token launches without full SEC registration — a structure the crypto industry has lobbied for since 2018.
The central architectural decision in the CLARITY Act is granting the CFTC "exclusive jurisdiction" over digital commodity spot markets. This is a substantial expansion of the CFTC's mandate; the agency primarily regulates derivatives markets and has historically possessed only limited anti-fraud authority over commodity spot transactions.
Under the Act:
| Jurisdiction | SEC | CFTC | Banking Regulators | |---|---|---|---| | Asset type | Investment contract assets | Digital commodities | Permitted payment stablecoins | | Registration | Broker-dealers, national securities exchanges | Digital commodity exchanges, brokers, dealers | Stablecoin issuers | | Enforcement | Anti-fraud over securities; anti-fraud over digital commodities traded on SEC-registered entities | Exclusive anti-fraud/anti-manipulation over digital commodity spot markets | Supervisory authority over stablecoin reserves |
The March 17, 2026 joint SEC-CFTC interpretive guidance — classifying 16 major cryptocurrencies as digital commodities — was widely viewed as an attempt by both agencies to pre-position ahead of the legislation. According to the Congressional Research Service, the guidance "effectively pre-implements portions of the CLARITY Act's classification framework," though it lacks statutory force without the bill's passage.
The CFTC faces a practical problem: it currently lacks the budget and personnel to oversee spot commodity markets at scale. The Act authorizes new funding, but appropriations have not been secured. The agency also has two vacant commissioner seats, a point of contention among Senate Democrats who argue the CFTC is not operationally ready to assume its expanded role.
The most contentious provision in the Senate version of the CLARITY Act centers on Section 404, which governs whether crypto firms can offer yield on stablecoin balances.
The Tillis-Alsobrooks compromise, finalized May 5, 2026, prohibits crypto firms from offering yield on stablecoin balances where such yield is "the functional or economic equivalent" of a bank deposit. However, it permits "bona fide activities" — loyalty rewards, fee rebates, and usage-based incentives. The framework gives the SEC, CFTC, and Treasury twelve months to define exactly which reward programs qualify.
In practice, this forces stablecoin issuers and platforms to restructure from a "buy and hold" model (where users earn yield simply by holding stablecoins) to a "buy and use" model (where rewards are tied to transactional activity).
Five major banking trade groups — the American Bankers Association, the Bank Policy Institute, the Consumer Bankers Association, the Financial Services Forum, and the Independent Community Bankers of America — issued a joint statement rejecting the compromise. Their position: yield-earning stablecoins, even under the "bona fide activities" carve-out, could reduce consumer, small-business, and farm lending by one-fifth or more by drawing deposits away from the banking system.
Senators Tillis and Alsobrooks responded directly: "Some in the banking industry may not want either of these things to happen, and we respectfully agree to disagree."
The Crypto Council for Innovation backed the deal but flagged concerns over the "broad prohibition" language, warning it could inadvertently capture legitimate DeFi yield products.
The second unresolved issue is an ethics provision targeting senior government officials' crypto holdings. Senate Democrats, led by Senator Ruben Gallego, are demanding language that would restrict executive branch officials from profiting off crypto interests while in office — a provision widely understood to target the Trump family's crypto business activities.
Senator Gallego stated there is "no final bill without bipartisan agreement on the ethics provision." Notably, Republican Senator Thom Tillis — the bill's co-architect — has also said ethics language must be included before the bill leaves the Senate, or he will vote against it.
The ethics dispute is not a policy disagreement about crypto regulation; it is a political negotiation about the scope of conflict-of-interest rules in a Congress where crypto industry donations have accelerated. According to OpenSecrets data, the crypto industry spent over $130 million on the 2024 election cycle. The question of whether to firewall elected officials from the asset class they are regulating is procedurally separate from market structure but has become legislatively entangled.
The CLARITY Act's treatment of decentralized finance is less publicly contested but carries significant long-term implications for a sector processing billions in daily volume.
The bill exempts protocol-level activity from registration requirements. Transaction validation, node operation, staking, and blockchain infrastructure participation are explicitly excluded from both SEC and CFTC regulatory scope. DeFi lending, borrowing, and liquidity pool operations remain outside the statutory framework.
However, the bill distinguishes between "protocol-level activity" and "centralized intermediaries that interact with DeFi protocols." The latter remain subject to risk management and cybersecurity standards. The definition of "control" in decentralized systems — where governance tokens, admin keys, and protocol sequencers complicate any clean categorization — remains an active point of negotiation.
Critics argue the current language could harm protocol developers by creating ambiguity about when a developer or DAO governance participant crosses the line from protocol maintenance into intermediary activity. This is not an academic concern: the Kelp DAO hack of April 19, 2026 ($292 million stolen) and the Drift Protocol exploit of April 1 ($285 million) demonstrated that DeFi protocols with admin key structures and governance councils face the same insider-risk vectors as centralized entities.
The legislative calendar is the CLARITY Act's most formidable obstacle.
Key dates:
If the committee markup slips past May, the bill enters a legislative dead zone. The summer recess, appropriations battles, and midterm campaign dynamics will consume floor time. Senator Moreno warned at the DC Blockchain Summit that missing May "could stall crypto legislation indefinitely." Multiple analysts, including Galaxy Digital, have suggested the next realistic window for comprehensive crypto legislation could be 2029 or 2030 if the CLARITY Act fails this cycle.
The House passed the CLARITY Act with a comfortable 294-134 bipartisan majority. The Senate does not have equivalent momentum. A successful committee markup requires resolving the ethics provision, confirming CFTC commissioners, and navigating banking industry opposition — all within approximately 15 operational legislative days before Memorial Day.
The CLARITY Act's passage or failure would produce materially different regulatory environments:
If passed:
If stalled:
The CLARITY Act represents the most advanced attempt at comprehensive digital asset market structure legislation in U.S. history. The policy framework is largely complete: a jurisdictional split between the SEC and CFTC has been negotiated, a stablecoin yield compromise has been finalized, and DeFi protocol exemptions have been drafted.
What remains is political, not technical. The ethics provision, CFTC vacancies, and banking industry opposition are the blocking factors — none of which relate to the bill's core market structure provisions. The legislation's fate will be determined not by its policy merits but by whether the Senate Banking Committee can resolve these peripheral disputes within a 15-day window.
The crypto industry has spent over a decade operating without a comprehensive federal regulatory framework. The next three weeks will determine whether that changes in 2026 or extends into the next decade.