The failure of the U.S. Senate to advance the CLARITY Act has left retail cryptocurrency markets without the comprehensive federal framework lawmakers had sought to establish putting greater pressure on the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) to fill the gap through existing authorities.
REGULATION | The CLARITY Act Fails to Advance
The CFTC proposed a framework for exchanges offering margined, leveraged, or financed crypto transactions to retail customers. The proposal would create a new category of federally regulated venues called ‘crypto asset markets,’ subjecting them to requirements including anti-manipulation controls and proof-of-reserves obligations. Registered futures commission merchants would also be required to intermediate customer trades.
REGULATION | CFTC Sends Crypto Market Rules to White House After CLARITY Act Stalls
But the proposal does not give the CFTC broad statutory authority over the spot crypto market. That authority was a central element of the failed CLARITY Act, leaving much of the retail spot market outside a dedicated federal regulatory regime.
The CFTC said its proposed rules rely on existing authority over certain retail commodity transactions while seeking public comment on how those rules should apply to crypto assets. The agency said the framework would provide a uniform national regulatory pathway rather than relying primarily on state-level licensing.
The SEC has also moved to establish rules within its existing authority. Last week, it proposed rules governing crypto-asset custody by investment advisers and funds saying they would provide a regulatory framework and a compliant pathway for investment professionals holding digital assets.
REGULATION | The Securities and Exchange Commission Updates Crypto Guidance After CLARITY Act Stalls
Those measures, however, do not amount to the comprehensive market-structure legislation that failed in the Senate. The SEC’s rules primarily address crypto assets falling within its securities jurisdiction while the CFTC’s latest initiative focuses on specific leveraged and margined retail transactions.
That division leaves a fundamental question unresolved for retail investors – which federal regulator has clear authority over the broader spot market and what protections apply when consumers buy and trade crypto assets directly?
Better Markets, a financial reform advocacy group, said the CFTC was the wrong agency to take the lead in regulating retail crypto arguing that the regulator lacks the SEC’s investor-protection mandate. It also questioned whether the CFTC’s existing statutory authority was intended by Congress to cover crypto transactions.
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The CFTC has said its rules are intended to provide clarity and consumer protection while SEC and CFTC officials have indicated they will continue developing crypto rules despite the legislative impasse. But without congressional action, the resulting framework remains dependent on the agencies’ existing powers and could face legal challenges or change with future administrations.
The post-CLARITY reality is therefore less a new U.S. crypto rulebook than a patchwork of agency actions with retail spot crypto still lacking the clear federal regulatory foundation Congress failed to deliver.
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