The U.S. Senate rejected the Digital Asset Market Clarity Act (CLARITY Act) on September 15, 2026, by a vote of 49–50, eleven short of the 60-vote cloture threshold required to advance the bill. The legislation would have established the first comprehensive federal market-structure framework for ...
"Statute is the way to future-proof something. The market needs the certainty of a statute so the framework does not shift with each administration." — Paul Atkins, SEC Chairman
The U.S. Senate rejected the Digital Asset Market Clarity Act (CLARITY Act) on September 15, 2026, by a vote of 49–50, eleven short of the 60-vote cloture threshold required to advance the bill. The legislation would have established the first comprehensive federal market-structure framework for digital assets, dividing oversight between the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) and providing statutory classification for Bitcoin and Ethereum as commodities.
Five weeks later, neither agency waited for Congress. The SEC published its 146-page "Regulation Crypto Assets" proposal in the Federal Register on August 21, with a comment period closing October 20, 2026. The CFTC followed on October 5 with an Advanced Notice of Proposed Rulemaking covering retail crypto exchange registration. On October 1, the SEC added a crypto custody proposal for registered investment advisers and funds. Three concurrent rulemaking tracks are now open across two agencies — a patchwork approach replacing the unified statutory framework that Congress could not deliver.
The CLARITY Act passed the U.S. House of Representatives in July 2025 and entered the Senate Banking Committee shortly after. For over a year, bipartisan negotiations attempted to reconcile competing interests. The bill's core function was structural: it would have drawn a statutory line between digital commodities (CFTC jurisdiction) and investment contracts (SEC jurisdiction), eliminating the case-by-case enforcement approach that had characterized U.S. crypto regulation since 2017.
On September 15, 2026, the Senate voted 49–50 on cloture. Two issues drove the collapse.
Stablecoin yield. Senators Susan Collins (R-ME), Josh Hawley (R-MO), and Jerry Moran (R-KS) voted against the bill over provisions that would have permitted stablecoin issuers to offer yield or rewards to holders. Community banks lobbied that yield-bearing stablecoins would siphon retail deposits. The three Republican defections, combined with unified Democratic opposition, killed the motion.
Ethics provisions. Democratic negotiators — including Senators Kirsten Gillibrand, Mark Warner, Cory Booker, Raphael Warnock, and Ruben Gallego — had participated in drafting the bill but ultimately voted no. Senator Elissa Slotkin characterized the ethics provisions as "simply too thin," citing gaps in money-laundering safeguards and insufficient CFTC staffing mandates. The ethics language applied narrowly to the issuance or sponsorship of new digital assets by federal officials, which opponents argued failed to address existing holdings.
Senator Thom Tillis (R-NC) switched his vote to "no" for procedural reasons, preserving a technical path for reconsideration. The bill is therefore stalled, not formally dead. According to DeFiRate, Polymarket odds for passage in the current Congress stood at 7–9% as of mid-October 2026.
With November midterm elections compressing the Senate calendar, legislative analysts widely consider passage in the 119th Congress to be improbable.
On August 18, 2026, the SEC proposed "Regulation Crypto Assets," a purpose-built offering framework for crypto investment contracts. The proposal, spanning 146 Federal Register pages and containing 149 numbered requests for comment, represents Chairman Paul Atkins' first major crypto rulemaking under what the agency internally calls "Project Crypto."
The rule creates a two-tier exemption structure:
Startup Exemption. A one-time exemption permitting token offerings of up to $5 million over a four-year period, with minimal disclosure requirements. This tier targets early-stage projects that cannot yet support full SEC reporting.
Fundraising Exemption. Two sub-tiers: Tier 1 permits up to $20 million per 12-month period; Tier 2 permits up to $75 million per 12-month period. Both require ongoing SEC reporting and GAAP-compliant financial statements.
Investment Contract Safe Harbor. A formal mechanism allowing a crypto asset to "separate" from its investment contract — addressing the persistent question of when a token ceases to be a security. The safe harbor is conditional: projects must demonstrate sufficient decentralization and functional utility to qualify.
The rule also defines "qualified purchaser" under the Securities Act in a manner that would preempt state securities law registration requirements for covered investment contracts sold under Regulation Crypto Assets.
The comment period closes October 20, 2026. Given the breadth of the proposal — 149 discrete comment requests — legal observers do not expect final rules before Q1 2027. The rule, once finalized, can be challenged under the Administrative Procedure Act and reversed by a future administration, a limitation Chairman Atkins himself has acknowledged.
On October 5, 2026, the CFTC issued its own Advanced Notice of Proposed Rulemaking (ANPRM), the agency's first crypto-specific proposal since the CLARITY Act's failure. The ANPRM proposes two regulatory frameworks:
Regulation Crypto Asset Transactions (Regulation CTX). This would define the scope of retail crypto asset transactions subject to CFTC authority under existing Commodity Exchange Act provisions, particularly the "actual delivery" exception for spot commodity transactions.
Regulation Crypto Asset Markets (Regulation CAM). This contemplates a new subcategory of designated contract market (DCM) registration — a "crypto asset market" (CAM) — specifically for exchanges offering retail crypto asset transactions. The framework would impose tailored requirements for exchanges that offer margin, leverage, or financing on crypto trades.
The comment deadline is December 14, 2026. Unlike the SEC's approach, the CFTC's ANPRM is an initial step seeking public input before developing actual regulatory text. The sequencing suggests final CFTC rules are at minimum 12–18 months away.
According to Baker Botts, the ANPRM is "notable as the first crypto assets related proposal by the CFTC since the Senate failed to approve comprehensive crypto assets legislation, and is likely the first in a series of CFTC rulemakings on crypto assets."
On October 1, 2026, the SEC added a third concurrent rulemaking, proposing new custody rules for crypto assets held by registered investment advisers and regulated funds. Chairman Atkins stated the Commission proposed to "close a gap that has left investment advisers and funds guessing how to effect lawful custody of an asset class that their clients increasingly demand."
Key provisions:
The proposal was published in the Federal Register on October 6, 2026. The 60-day comment period runs through early December 2026.
The custody proposal responds to a practical bottleneck: the AIMA/PwC Global Crypto Hedge Fund Report found that 55% of hedge funds now hold crypto exposure, up from 47% a year earlier, with 71% planning to increase allocations. The average allocation stands at 7% of assets under management across the 122 surveyed funds managing approximately $982 billion. Without clear custody rules, advisers operating under fiduciary standards face compliance uncertainty that constrains allocation decisions.
Polymarket odds for the CLARITY Act's passage in 2026 have undergone a steep decline. In early May 2026, traders assigned a 73% probability to the bill becoming law. By July, odds had fallen to 32%. Following the Senate's September 15 rejection, odds collapsed to 7–9%.
The trajectory reflects a broader shift in expectations. With midterm elections in November 2026, the Senate calendar does not accommodate the multi-week floor debate that a revised bill would require. Industry groups have shifted lobbying resources toward agency rulemaking comment periods.
DeFiRate's CLARITY Act tracker assigns the bill a 7% chance of passage in the current Congress. The odds imply that market participants view the three concurrent agency rulemaking processes as the operative regulatory pathway for the foreseeable future.
The shift from legislation to rulemaking carries structural limitations that affect market participants.
Durability. Agency rules adopted under the Administrative Procedure Act can be revised or rescinded by a future administration through new rulemaking. Chairman Atkins has acknowledged this vulnerability, noting that statute is "the way to future-proof something." A Democratic administration in 2029 could reopen every rule finalized under the current framework.
Jurisdictional clarity. The CLARITY Act would have drawn a statutory line between SEC and CFTC authority. Without it, jurisdictional boundaries depend on agency coordination and informal agreements — mechanisms that have historically produced turf disputes. Both agencies are now writing rules simultaneously, with overlapping scope in areas like tokenized securities that may trade on commodity-style exchanges.
Stablecoin yield. The GENIUS Act, signed into law in 2026, established a federal framework for stablecoins but explicitly left yield provisions unresolved. The CLARITY Act would have addressed this gap. Without it, the question of whether stablecoin issuers can offer yield remains a source of regulatory uncertainty and was, notably, one of the issues that killed the bill.
State preemption. The SEC's Regulation Crypto Assets proposes limited state law preemption for qualified purchasers, but falls short of the comprehensive preemption that the CLARITY Act would have provided. Token issuers operating in multiple states still face a patchwork of state-level requirements.
The failure of the CLARITY Act has produced a regulatory improvisation. Two agencies, acting under existing statutory authority, are attempting to construct through rulemaking what Congress was unable to accomplish through legislation. The result is three open comment periods, two agencies with overlapping jurisdiction, and zero statutory certainty about the durability of whatever framework emerges.
For market participants, the immediate practical question is not whether rules will arrive — they will — but whether the rules will survive the next election cycle. The regulatory clock and the political clock are now running in opposite directions. Final rules from these proceedings are unlikely before mid-2027 at the earliest. The next presidential inauguration is in January 2029. That leaves, optimistically, an 18-month window in which the new framework operates before its permanence is tested.
The $302 billion stablecoin market, the $90 billion DeFi lending sector, and the growing institutional allocation — 55% of hedge funds now hold crypto — are all building on a regulatory foundation that is, by the SEC chairman's own admission, less durable than the statutory alternative that 50 senators could not deliver.