The Digital Asset Market Clarity Act of 2025, or CLARITY Act, is one of the key crypto bills moving in the US. The bill is designed to establish a clear federal framework for digital assets by specifying the crypto tokens that would be under the Securities and Exchange Commission (SEC) and those under the Commodity Futures Trading Commission (CFTC).

The SEC has contended that many tokens are securities, while the CFTC has categorized such assets as commodities. The overlap has created legal uncertainty for exchanges, developers and investors.

What Is the CLARITY Act?

In May 2025, House Financial Services Committee Chairman French Hill and House Agriculture Committee Chairman G.T Thompson introduced the CLARITY Act (Digital Asset Market Clarity Act of 2025).

The bill was passed by the US House of Representatives on July 17, 2025, by a vote of 294 to 134, and was largely bipartisan. It has advanced through the Senate Banking Committee on May 14, 2026, in a bipartisan vote of 15-9 in favor.

The bill sets out a set of regulations for the centralized exchanges, brokers and dealers, and some decentralized finance platforms, as proposed. It also covers consumer protection, anti-money laundering compliance, tax reporting, and activities related to stablecoins.

SEC vs CFTC: How Oversight Will Be Divided

The most prominent aspect of the CLARITY Act is its ability to classify digital assets into more precise classifications.

SEC regulation would continue to apply to tokens that are considered ‘investment contract assets.’ These are assets where buyers expect profit mainly from the work of a central team or organization. There are many tokens and centralized projects that could fall under this category that are created like ICOs.

‘Digital commodities,’ on the other hand, would come under the jurisdiction of the CFTC. These contain tokens trading on sufficiently decentralized networks with practical use, like Bitcoin and maybe Ethereum. The bill will also expand the CFTC's authority to include digital commodity spot markets.

The bill also adds a ‘mature blockchain test.’ This test would be useful to know whether a token will be placed under SEC regulation or CFTC regulation when its network is sufficiently decentralized. 

The test considers things like open source software, token allocation, voting control, and no one having over 20% of the supply or voting.

What Does the Bill Mean for Exchanges and DeFi?

Centralized exchanges, brokers and dealers who trade digital commodities would have to register with the CFTC. This would put them under formal federal rules with regard to custody, trading standards, reporting, and consumer protection.

The bill also increases tax-reporting requirements. Additional platforms may need to report to the IRS and users on Form 1099-DA, much like platforms in the stock market.

For DeFi, the CLARITY Act includes a carve-out through the Blockchain Regulatory Certainty Act. This is to safeguard non-custodial software developers who are not responsible for user funds and only develop software that is open-source.

Simply put, wallets, smart contracts, or decentralized protocols developed by those who cannot move or freeze the assets of their customers may not be considered to be money transmitters. But, Defi platforms that have custodial control or centralized management may still face compliance requirements.

Also Read: CLARITY Act Hits Senate Roadblock as Crypto Bill Faces New Challenges

Stablecoins Remain a Key Debate

The CLARITY Act is an amendment to the GENIUS Act and addresses the loophole in the GENIUS Act regarding yield. The May 11, 2026, senate draft prohibits rewards for passively holding stablecoins that are ‘economically or functionally equivalent’ to deposit interest, but would permit rewards based on trading or transaction activity.

This is still one of the most contested issues, as banks are concerned that when users place their deposits into yield-bearing stablecoins, they will take them out of the traditional banking system.

What is the situation now?

As of May 2026, the CLARITY Act is not yet law. It passed the House and the Senate Banking Committee, and a companion bill in the Senate Agriculture Committee has passed.

Now the two versions of the bills in the Senate are to be combined into one for a full vote on the Senate floor. 60 votes are required to stop a filibuster on the bill.

Will the CLARITY Act End Crypto’s Regulatory Chaos?

While the CLARITY Act isn't the solution to all crypto regulation issues, it may be the largest move toward the end of years of uncertainty in the US. The bill also provides clarity for exchanges, developers and investors regarding when the SEC or CFTC has authority.

This may minimize regulatory action against cryptos by the enforcement agencies and spur more activity to come back to the US. 

FAQs:

1. What is the CLARITY Act?

The CLARITY Act, or Digital Asset Market Clarity Act of 2025, is a US crypto regulation bill. It aims to define how digital assets are classified and which regulator oversees them.

2. How does the CLARITY Act divide SEC and CFTC roles?

The SEC would regulate investment contract assets, mainly tokens linked to centralized teams or fundraising. The CFTC would oversee digital commodities such as tokens running on sufficiently decentralized networks.

3. What is the mature blockchain test?

The mature blockchain test checks whether a crypto network is decentralized enough to move from SEC oversight to CFTC oversight. It looks at token supply, voting control, open-source code and network utility.

4. How will the CLARITY Act affect crypto exchanges?

Centralized exchanges, brokers and dealers handling digital commodities would need to register with the CFTC. They would face rules on custody, reporting, trading standards and consumer protection.

5. Is the CLARITY Act already a law?

No, the CLARITY Act is not yet law as of May 2026. It has passed the House and Senate Banking Committee, but still needs a full Senate vote and final approval.