CLARITY Act review countdown: Can the SEC vs CFTC over regulatory authority be resolved?

On July 13, 2026, the U.S. Senate officially reconvened after adjourning for its July 4 recess. From this day until August 7, when the Senate’s summer recess begins, there are only about 20 working days left on the calendar. Standing right at the threshold of a full Senate vote is the “Digital Asset Market Clarity Act” (CLARITY Act), which industry insiders call the most weighty market-structure legislation in U.S. crypto history.

The next three weeks will determine whether this bill becomes law in 2026 or gets delayed to 2027 or even longer. For the entire U.S. crypto industry, this is not just a fate-of-a-bill question—it concerns whether the foundational logic of the digital-asset regulatory framework can shift from “enforcement-driven” to “institutionalized regulation.”

A decade-long U.S. crypto regulatory impasse: Why “not knowing who regulates” is more fatal than regulation itself

Does a digital asset belong to securities or commodities? The answer to this question determines whether it is regulated by the SEC or the CFTC. Yet over the past decade, this boundary has remained perpetually blurry.

The SEC uses the “Howey Test” to determine whether an asset is an “investment contract,” thereby bringing it under securities law; the CFTC argues that mainstream crypto assets such as Bitcoin and Ethereum are commodities. The overlap and conflict between these two legal frameworks mean the same asset can face sharply different regulatory requirements depending on the scenario.

The biggest dilemma confronting the U.S. crypto industry is not that regulation is too strict or too lax, but that “no one knows who regulates it.” At the level of statutory law, there is a lack of a unified definition of “digital commodities,” making it difficult for exchanges, brokers, and issuers to design a predictable compliance structure. Senator Cynthia Lummis has been blunt: “Software developers should not need a platoon of lawyers to know whether their code is legal.” This uncertainty not only raises compliance costs, but also pushes many crypto businesses and developers offshore.

The core design of the CLARITY Act: How to draw a clear line between the SEC and the CFTC

The CLARITY Act’s core logic is not complicated: it replaces some paths that rely on case-by-case enforcement with statutory form, building a complete federal regulatory framework for digital assets.

The bill’s key mechanism is to build a regulatory bridge between the SEC and the CFTC. Specifically, digital assets with a high degree of decentralization will be classified as “digital commodities,” under the CFTC’s exclusive jurisdiction—including comprehensive regulatory authority over spot markets. Bitcoin and Ethereum would fall into this category. Assets that function like traditional securities will be defined as “investment contract assets,” and will continue to be regulated by the SEC.

Digital commodities are defined as digital assets intrinsically linked to the blockchain system, whose value primarily derives from the use of that blockchain system, and are clearly excluded from traditional securities, permissioned payment stablecoins, derivatives, and other categories through exclusionary provisions. The bill makes clear that the CFTC has jurisdiction over digital commodity transactions and requires transactions in digital commodities to be registered with the CFTC, while complying with rules such as customer-asset segregation, risk management, and anti-manipulation.

The significance of this division goes far beyond the technical definition itself. Granting the CFTC exclusive jurisdiction over digital commodity spot markets means that, for the first time, the U.S. is establishing a complete federal regulatory framework for crypto assets in statutory form.

The 60-vote threshold in the Senate: Why bipartisan consensus isn’t enough to pass the bill

Although the CLARITY Act passed the House on a bipartisan majority basis of 294-134 in July 2025, and was advanced in the Senate Banking Committee on a 15-9 vote on May 14, 2026, it still needs to overcome a key procedural hurdle before it can reach a full Senate floor vote.

In the U.S. Senate, passing most bills requires overcoming the “filibuster” procedure. To end debate and move to a vote, at least 60 votes are needed—this is known as the “cloture” threshold. Currently, Republicans hold 53 seats in the Senate. Even if all Republican senators vote in favor, the bill would still need at least 7 Democratic senators to cross party lines in support to reach the 60-vote threshold.

In the May 14 vote in the Senate Banking Committee, Democratic senators Ruben Gallego and Angela Alsobrooks voted in favor alongside all 13 Republican committee members. But these two Democrats’ final support on the full floor remains conditional to date.

During the Senate Banking Committee debate, more than 100 amendments were proposed, covering ethics, AI sandboxing, and stablecoin yields, among other topics, but many of them broke down during negotiations. The committee vote was essentially along party lines: all 13 Republican members voted in favor, and aside from the two Democrats, the remaining Democrats voted against.

Three major flashpoints: how ethics provisions, stablecoin yield, and enforcement exemptions determine the bill’s fate

Even with initial bipartisan agreement, the CLARITY Act must still clear three hurdles before a full Senate vote.

Ethics is the most difficult issue right now. Democrats want to add a restriction clause prohibiting senior government officials—including the President—from maintaining business dealings with the crypto industry. The backdrop is that President Trump’s latest financial disclosures show that in 2025 he earned more than $1.4 billion from crypto-related business. Two Democratic senators who voted in favor of the Banking Committee version have already clearly warned that they will not support the final bill unless the ethics provision is handled properly. A combined draft expected to be issued by the Senate this week reportedly does not include the ethics provision proposed by Democrats.

The stablecoin yield provision is another core point of contention. The new text clearly prohibits stablecoin issuers from paying interest or providing economic-equivalent benefits solely because users hold the tokens. However, crypto platforms can still provide activity-based rewards when users purchase, lend, or provide liquidity. This compromise has been interpreted by some observers as a win for banking-industry lobbying.

The enforcement exemption dispute centers on Section 604 (the “Blockchain Regulatory Clarity Act”). This provision sets a safe harbor for non-custodial software developers who only publish code, provide self-custody tools, or maintain blockchain infrastructure, clarifying that this does not constitute being a funds-transmission business. However, federal law-enforcement agencies have expressed concern, arguing that the provision could hinder investigations related to crimes involving cryptocurrencies. The Federal Law Enforcement Officers Association (FLEOA) has stated support for the bill, but also requested that the wording be modified to preserve investigative tools and accountability mechanisms.

From 75% to 24%: Why market expectations have crashed over the past two months

The legislative outlook for the bill has deteriorated markedly in recent weeks. Data from the prediction market Polymarket shows the probability the bill becomes law in 2026 fell from about 65% to 43%, a drop of 22 percentage points. In early June, Galaxy Digital cut the probability from 75% to 60%, citing a shrinking Senate agenda and lack of progress on controversies including ethics and illicit finance. As of July 13, Polymarket’s probability of passage has dropped further to 24%.

Galaxy Research has pegged the probability of the CLARITY Act passing in 2026 at about 50%. Multiple prediction platforms have lowered their forecasts; Kalshi priced the bill’s passage probability at 50% to 50%. Industry analysts say the probability of passage is now close to “coin-flip” uncertainty.

Analysts noted that for the bill to pass in 2026, it must be moved through the Senate as much as possible by the end of June. If it cannot be handled before the August recess, the outlook will be unfavorable. On July 17, the House Financial Services Committee will hold an in-person hearing in New York on the CLARITY Act—this will be the last public review of the bill’s substance and could also become a key piece of political leverage for driving a Senate vote.

If the bill passes: How the regulatory map of the U.S. crypto market will be reshaped

If the CLARITY Act is formally signed into law and takes effect in 2026, the regulatory landscape for the U.S. crypto market would shift from “enforcement-driven” to “institutionalized regulation.”

First, exchanges would get a clear federal registration path. The bill provides U.S. market exchanges with a clear route to register federal licenses, removing the need to navigate between the SEC, the CFTC, and state regulatory regimes. Under the current framework, U.S. states have significant differences in rules covering customer assets, margin, custody, and information disclosure; applicants would need to obtain money-transmitter licenses in each state one by one. The bill establishes a temporary registration mechanism that allows eligible entities to begin operating before final rules are issued, reducing the business interruption risk of a “rules vacuum” period.

Second, primary-market fundraising activities would move into a registration framework, with compliance issuance caps of $75 million per year. The broad categorization of digital assets would move toward predictable classification standards. Payment stablecoins would be excluded from the definitions of “securities” and “digital commodities,” and would be subject to an independent stablecoin regulatory framework.

Third, the bill would end the regulatory model in which the SEC replaces rulemaking with enforcement actions. The crypto industry would no longer need to rely on case-by-case lawsuits to clarify the boundaries; instead, it would have predictable statutory bases.

If the bill stalls: The cost of continuing uncertainty

If the CLARITY Act fails to pass in 2026, uncertainty in U.S. crypto regulation would persist—and potentially worsen.

The current jurisdictional dispute between the SEC and the CFTC would continue, and the industry would face the risk of “enforcement regulation,” where assets could be reclassified at different stages, keeping compliance costs high. The absence of a statutory framework means the classification of digital assets would still rely on case-by-case litigation and agency interpretation, making it difficult for companies to plan long-term strategy.

From the perspective of international competition, a stalled bill could further push crypto companies and capital toward jurisdictions with clearer regulatory frameworks—such as the European Union, which has already implemented the MiCA framework. Trump himself has positioned passage of the bill on July 13 as a key to maintaining U.S. competitive advantages in digital finance against China, warning that “China, and many other countries, want to fully and completely control this important financial area.”

Summary

The CLARITY Act is in the most critical window of its 2026 legislative process. Intended to draw the SEC–CFTC jurisdictional boundary in statutory form, the bill carries the hope of ending the U.S. crypto regulatory “jurisdiction war.” However, the ethics-provision dispute, disagreements over stablecoin yields, the enforcement-exemption bargaining, and the Senate 60-vote threshold together create multiple obstacles to passage. Market expectations have already fallen sharply from their peak, and these three weeks from mid-July to early August will ultimately decide whether the U.S. crypto regulatory framework moves toward institutionalized clarity or continues to live with uncertainty.

Frequently Asked Questions (FAQ)

Q1: What stage is the CLARITY Act in right now?

The CLARITY Act passed the House in July 2025 by a 294-134 vote and advanced in the Senate Banking Committee on May 14, 2026 by a 15-9 vote. The bill is currently under consideration by the full Senate, which is expected to release a combined draft during the week of July 13.

Q2: How does the CLARITY Act divide SEC and CFTC jurisdiction?

The bill classifies digital assets with a high degree of decentralization as “digital commodities,” under exclusive CFTC jurisdiction (including spot markets). Assets that function like traditional securities are defined as “investment contract assets,” which continue to be regulated by the SEC. Payment stablecoins are subject to an independent stablecoin regulatory framework.

Q3: How many votes are needed for the CLARITY Act to pass in the Senate?

At least 60 votes. Because Republicans hold 53 seats in the Senate, the bill needs at least 7 Democratic senators to cross party lines in order to reach the cloture threshold.

Q4: What is the probability the CLARITY Act passes right now?

As of mid-July 2026, the prediction market Polymarket shows a passage probability of about 24%, while Galaxy Research estimates it at about 50%. Expectations have fallen significantly from May (about 75%).

Q5: What would the CLARITY Act mean for crypto exchanges?

The bill will provide U.S. market exchanges with a clear federal license registration path, so they won’t have to keep navigating among the SEC, the CFTC, and state regulatory systems. The bill also establishes a temporary registration mechanism that allows eligible entities to operate before final rules are issued.

Q6: What is Section 604 in the bill?

Section 604 is the “Blockchain Regulatory Clarity Act.” It establishes a safe harbor for non-custodial software developers who only publish code, provide self-custody tools, or maintain blockchain infrastructure, clarifying that this does not constitute being a funds-transmission business. The provision is intended to protect open-source innovation, but it also raises concerns among law-enforcement bodies about the ability to investigate crimes.