US CLARITY Act Stalls, Leaving SEC and CFTC to Lead Crypto Regulation as Legal Uncertainty Persists

The failure of the CLARITY Act, a US digital-asset market structure bill, has left federal regulators in the lead on crypto oversight, splitting the industry between hopes for faster progress and concerns that legal uncertainty will persist.

CoinDesk reported on October 11 that the US Securities and Exchange Commission and the Commodity Futures Trading Commission have stepped up work on crypto-related rules since the bill stalled. Even so, it remains unclear whether agency action alone can provide long-term regulatory stability without legislation from Congress.

The SEC on September 17 introduced a five-year innovation exemption allowing trading in blockchain-based tokenized stocks. On October 1, it followed with a proposed rule change that would allow state trust companies to custody digital assets and, under certain conditions, permit direct custody by investment advisers and funds. The CFTC on October 5 also began seeking public comment on rules for leveraged crypto trading for retail investors and on a new market registration framework. Its move, however, remains at an early notice-and-comment stage rather than formal rule implementation.

Some in the industry say an agency-led regulatory overhaul could help accelerate market activity. Matt Hougan, chief investment officer at Bitwise, said direct action by regulators may be more effective in the short term because additional rulemaking could take years even after Congress passes legislation. Paul McCaffrey, head of digital assets at investment bank KBW, added that greater regulatory clarity is spurring merger-and-acquisition activity across crypto, traditional finance and fintech.

Legal experts, however, say agency regulation alone has clear limits. Lev Brayd, a professor at William & Mary Law School, said the SEC and CFTC are refining rules under existing law, but a comprehensive federal oversight framework for spot crypto trading still does not exist. Kevin Kroiser, legal counsel at D3, also said regulators' actions are welcome but do not provide the same level of long-term certainty as legislation.

Some analysts also say the CLARITY Act's failure could work in favor of large incumbent exchanges. Hougan said delays in passing the bill could preserve regulatory barriers to entry for established operators such as Coinbase and Kraken, limiting competition from new firms. Brayd added that only Congress can ultimately create a comprehensive and durable regulatory framework.