Crypto10 October, 20263 min read
Clarity Act Fails in Senate, Leaving SEC and CFTC Crypto Rules Uncertain
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Clarity Act failed in Senate, leaving regulatory regime to SEC and CFTC uncertain. Hill says SEC and CFTC rules fall short; calls for lasting congressional legislation.
6 outlets told this the same way.
Clarity fails, agencies move
The Act to Clarify the Digital Assets Market failed to move forward in the Senate, and the shift left U.S. crypto regulation centered on the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) while leaving “a central question unresolved: how much certainty can regulators provide without Congress?” Lev Breydo, an assistant professor of law at William & Mary Law School, said Clarity exposed divisions within the industry, and he argued, “A coalition that looked unified against Gensler found out definitions create winners and losers,”.
The SEC introduced a five-year “Innovation Exemption” on September 17 that lets qualifying venues trade tokenized U.S. stocks through blockchain liquidity pools while it works on permanent rules, and the CFTC followed on October 5 seeking feedback on rules for leveraged retail crypto trading and a new registration category for crypto markets. The SEC also proposed an October 1 custody rule that would let state trust companies safeguard client crypto and allow advisers and funds to hold it themselves under certain conditions, as legal experts warned that ordinary, unleveraged spot trading still lacks comprehensive federal oversight beyond the CFTC’s anti-fraud and anti-manipulation powers.
Executives weigh the gap
Paul McCaffery, head of digital assets at investment bank KBW, said the SEC and CFTC were “already moving proactively to provide the regulatory certainty markets need,” and he linked that to “a wave of M&A across digital assets, traditional financial services, and fintech alike,”. Matt Hougan, Bitwise Chief Investment Officer, said the agency approach looked more favorable in the short term than legislation that would have required years of follow-up rulemaking, and he expected more protocols to adopt token buybacks, particularly buy-and-burn models, after SEC clarification he said gave investors greater confidence.
Derek Lowrey, head of legal at Newton Labs (formerly known as Magic Labs), said the “biggest gap is implementation,” and he argued that without legislation, overseeing venues, intermediaries, decentralized finance (DeFi) and spot markets remained harder. Kevin Kreuser, general counsel at domain-name tokenization firm D3, said “Agency action is welcome, but it does not provide the same long-term certainty as legislation,” while Jim Petrila, chief legal officer at Dromos Labs, said “For DeFi, the signal is bullish,” as he tied the outlook to growing liquidity and tokenized securities on public blockchains.
Congress still the hinge
CFTC Chairman Mike Selig told CNBC he was “absolutely disappointed in Congress” for failing to deliver crypto market legislation on October 6, 2026, and he said the CFTC would not wait for lawmakers and would proceed using its existing authority. Selig clarified in an op-ed published on October 5 that the CFTC could not require crypto to trade exclusively on federally registered platforms without congressional approval, and he said exchanges that only facilitate spot trading do not have to register with the federal agency and can continue operating under state licenses.
Representative French Hill, chair of the House Financial Services Committee, said SEC and CFTC actions “fall short” of the CLARITY bill, and he told Fox Business, “I still have hope [...] that we can get [CLARITY] passed in the lame duck session of Congress,”. Hill said the Senate would have only 22 days in session between the U.S. midterm elections in November and the next group of lawmakers entering Congress in 2027, and he argued that the lame-duck window could determine whether votes favor or oppose CLARITY.