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1. What happens to US crypto rules now that the Clarity Act stalled?
After the Digital Asset Market Clarity Act failed to advance in the Senate, responsibility for shaping United States crypto rules has shifted to the Securities and Exchange Commission and the Commodity Futures Trading Commission. As of October 11, 2026, executives and lawyers are debating how much certainty those two agencies can deliver without new legislation from Congress.
The Clarity Act was designed to divide authority over digital assets between the two regulators and to set clear rules for trading venues and intermediaries. Its failure leaves that task to agency rulemaking, interpretations and exemptions, tools that can move faster than Congress but are also easier for later administrations or courts to change.
Industry participants broadly agree that regulation will keep advancing. Where they differ is on whether agency action can become a lasting foundation for the market, or whether it leaves companies exposed to political and legal shifts.
2. Why the coalition behind the bill fell apart
Lev Breydo, an assistant professor of law at William & Mary Law School, argues that the bill's difficulties exposed divisions inside an industry that had appeared united. In his view, disputes over ethics provisions and over a fight with community banks about yield on stablecoins showed that legislative definitions inevitably create winners and losers.
He summarized the point this way: a coalition that looked united against former SEC Chair Gary Gensler learned that definitions create winners and losers. The comment captures a recurring problem in market-structure legislation. Firms can agree that existing enforcement was unclear, yet disagree sharply on which activities should be regulated, and by whom, once the rules are written down.
Banks and crypto companies were on opposite sides of the yield question, which concerns whether stablecoin issuers and platforms may pass returns on to holders. Community banks worry about deposits leaving for digital dollars, while crypto firms see yield as a core product feature. That disagreement helped keep the bill from gaining enough support.
3. The agencies move to fill the gap
The regulators have not waited. On September 17, the SEC introduced a five-year Innovation Exemption that allows qualifying venues to trade tokenized versions of United States stocks through blockchain liquidity pools. The relief is temporary by design, giving the agency time to work on permanent rules.
The CFTC followed on October 5 by asking for public feedback on rules for leveraged retail crypto trading and on a new registration category for crypto markets. A request for comment opens a process rather than concluding one, and it is likely to lead to a long period of comment and rulemaking before any final requirements take effect.
On October 1, the SEC also put forward a custody proposal. It would let state-chartered trust companies hold crypto on behalf of clients, and under certain conditions would allow investment advisers and funds to hold digital assets themselves. Together, the three steps cover tokenized trading, derivatives and safekeeping, three areas that the Clarity Act would have addressed in a single statute.
4. What Breydo expects from regulators in 2027
Breydo expects the SEC to complete its offering and custody rules in 2027 and to build on the tokenized-stock exemption announced in September. He regards a joint interpretive release issued by the two agencies in March as an important foundation, because it supersedes earlier guidance and coordinates the agencies' positions within the limits of current law.
That coordination matters for companies that previously faced overlapping or contradictory signals from the two regulators. A shared interpretation lets firms plan product launches with a clearer view of which agency's rules apply.
Yet the approach has limits. Interpretations and exemptions work within existing statutes, so they cannot create new authority that Congress has not granted. That constraint becomes most visible in one area, discussed below.
5. The oversight gap in spot crypto markets
The most significant gap involves unleveraged spot trading, which is the ordinary buying and selling of coins for immediate delivery. Outside the CFTC's powers against fraud and manipulation, no federal regulator has comprehensive authority over these markets. Closing that gap was one of the central aims of the Clarity Act.
Without a statute, the agencies must rely on a patchwork of existing powers. They can police fraud and enforce anti-money-laundering and recordkeeping obligations, but they cannot impose a full framework of venue registration and conduct standards on spot platforms in the way they do for securities exchanges or futures markets.
Derek Lowrey, head of legal at Newton Labs, formerly Magic Labs, identifies implementation as the largest gap. Overseeing venues, intermediaries, decentralized finance and spot markets is harder without legislation, he says, though existing duties on anti-money-laundering, sanctions and recordkeeping give compliant teams a base to build on.
6. Why some executives expect more activity, sooner
Several industry leaders argue that the legislative setback could speed up commercial activity. Paul McCaffery, head of digital assets at investment bank KBW, says the SEC and CFTC are providing regulatory certainty that is unlocking a wave of mergers and acquisitions across crypto, traditional finance and financial technology.
Matt Hougan, chief investment officer at Bitwise, regards the agency route as more favorable in the short term than a law that would have required years of follow-up rulemaking. He expects more crypto protocols to adopt token buybacks, particularly buy-and-burn models, following what he describes as SEC clarification that has increased investor confidence.
Developers are watching a different question: whether regulators will distinguish between writing software and operating a financial intermediary. Cathy Yoon, chief legal officer at Temporal, a research and development firm focused on Solana (SOL), hopes the SEC will treat developers as creators of software and not as securities enterprises. She cautions that staff FAQs are not SEC rules and do not carry the same weight.
Michael Lie, global head of digital assets at market maker Flow Traders, sees comprehensive regulation as inevitable as finance moves toward round-the-clock trading. He is following innovation exemptions and changes to transfer-agent rules, and notes that European and Asian regimes are already advancing.
7. Can agency action last?
Legal experts describe progress arriving in stages, with implementation the hardest part. A rule adopted by an agency can be revised by its successors, while a statute carries a durability that only Congress can provide.
Kevin Kreuser, general counsel at D3, a domain-name tokenization company, says tokenized real-world assets in particular need clearer jurisdictional boundaries. He put the contrast plainly: agency action is welcome, but it does not provide the same long-term certainty as legislation.
Jim Petrila, chief legal officer at Dromos Labs, the developer behind the Aerodrome and Velodrome exchanges, is more optimistic. He argues that growing liquidity and tokenized securities on public blockchains could make a reversal impractical within two years, and he calls the signal for decentralized finance bullish. Breydo, for his part, maintains that only Congress can deliver a comprehensive framework with statutory durability.
8. Who benefits if the bill stays stalled?
The gains may not be shared evenly. Hougan argues that the failure of the Clarity Act preserves a regulatory moat for established companies such as Coinbase (COIN) and Kraken, delaying competition that could reduce costs for users.
The reasoning is that incumbents already hold licenses, compliance staff and relationships with regulators, so they can adapt to new agency programs quickly. Newer competitors, which a statute might have given a clear path to registration, must instead navigate exemptions and proposals that are still being written.
Experimentation is accelerating, then, but important questions remain open: who will be able to compete, how long the new arrangements will last, and whether Congress will eventually return to the task. The next milestones are the comment periods on the CFTC's October 5 request and the SEC's custody proposal, and the permanent rules Breydo expects the SEC to finish in 2027.
9. What is the SEC's Innovation Exemption?
The Innovation Exemption is a five-year program announced by the SEC that lets qualifying trading venues list tokenized United States stocks and match trades through blockchain liquidity pools. A tokenized stock is a digital token that represents a share of a listed company and can move on a blockchain network, potentially around the clock and with faster settlement than traditional systems.
An exemption differs from a rule. It permits activity that might otherwise break existing securities law, subject to conditions, and it can be amended or allowed to expire. The five-year window is meant to give the agency room to observe how these venues behave while it drafts permanent requirements.
For market participants, the practical effect is that tokenization projects no longer have to wait for Congress before offering regulated products. For critics, the open question is whether a temporary permission offers enough stability to justify the large investments needed to build trading infrastructure.
10. Why the split between the SEC and CFTC matters
The SEC oversees securities, and the CFTC oversees derivatives and certain commodity markets. Many digital assets sit awkwardly between those categories, which is why firms have long sought a statute that says which agency regulates which activity. Without it, a single product, such as a token traded with leverage, can attract the attention of both regulators.
The agencies' recent actions show that each is staking out its own territory. The SEC is working on tokenized equities and custody, areas tied to securities law, while the CFTC is focused on leveraged retail trading and a registration category for crypto markets. Their March joint release is intended to keep these efforts consistent.
The arrangement can work if the agencies continue to coordinate, but it depends on goodwill and staffing in a way a statute would not. That is the reason several of the lawyers quoted above keep returning to the contrast between agency action and legislation.