CLARITY Act backers say sheriffs misread DeFi rules

Blockchain Association sent Senate Majority Leader John Thune and Minority Leader Chuck Schumer an eight-page response on Aug. 3, disputing the National Sheriffs’ Association’s objections to the latest CLARITY Act draft.

The trade group said the Senate text released on July 22 does not give decentralized finance platforms, software developers, mixers or bridges a “blanket exemption” from anti-money laundering and sanctions laws. It argued that the bill draws a line between financial intermediaries that control assets or transactions and developers who only create neutral software, a distinction that matters because the debate has become less about DeFi in the abstract than about who actually touches customer assets and who does not.

The exchange came as the legislative window narrowed. The Senate ended Monday without taking up H.R. 3633. It invoked cloture on a continuing resolution vehicle and scheduled further work on that measure for Tuesday, leaving the market structure bill without a publicly announced vote.

CLARITY Act dispute centers on transaction control

In a letter sent to Senate leaders on July 31, the sheriffs’ group said the bill’s developer protections were too broad and could make financial crime investigations more difficult. Its attachment argued that Congress should regulate “everyone who receives revenue” from the digital asset marketplace and urged lawmakers to remove or narrow Section 10604.

Blockchain Association rejected that view. It said revenue alone does not determine whether a person is a financial institution under the Bank Secrecy Act. The group pointed to FinCEN’s 2019 guidance, which says money transmitter status depends on the facts and circumstances of a business model, and to FATF guidance, which focuses on whether a person performs covered financial functions for another party.

1/ Today, we sent a letter to @LeaderJohnThune and @SenSchumer responding to the @NationalSheriff’s recent letter on the Clarity Act. Our response explains why their letter misunderstands the legislation and sets the record straight, point by point. Below is a walkthrough of… pic.twitter.com/pUiqOVqniS — Blockchain Association (@BlockchainAssn) August 3, 2026

According to the association, brokers, dealers and exchanges that are registered or required to register under the bill would still be subject to anti-money laundering programs, customer identification, suspicious activity reporting, recordkeeping and sanctions compliance. The sheriffs’ group disputes whether the framework reaches enough participants, underscoring how the fight is now centered on which market actors should face the same obligations that already apply in traditional finance.

Developer protections would keep criminal laws in place

Section 10604 would protect a noncontrolling developer from being treated as a money transmitting business simply for creating software, offering self-custody tools or providing infrastructure. To qualify, the person must lack the legal right and unilateral ability to control transactions involving users’ assets.

Blockchain Association said the provision leaves existing laws on money laundering, wire fraud, sanctions violations, terrorism financing, conspiracy, theft and aiding and abetting intact. Under the group’s interpretation, a developer who knowingly handles criminal proceeds, controls customer funds or assists an offense could still be prosecuted.

The draft also directs the SEC, working with Treasury, to write rules for people controlling protocols that are decentralized in name but perform intermediary functions. The association said that provision responds to claims that controlled platforms could avoid oversight by labeling themselves DeFi.

Law enforcement groups remain split

The dispute does not reflect a single law enforcement position. Blockchain Association cited support from the Fraternal Order of Police, the National Organization of Black Law Enforcement Executives, the Major Cities Chiefs Association and the Federal Law Enforcement Officers Association. Major County Sheriffs of America is neutral, while 160 former law enforcement, intelligence and national security officials previously urged Senate action.

In related coverage, crypto.news examined how the law enforcement divide centers on developer protections and investigative authority. Supporters say a control-based standard is needed so software writers are not treated like banks. Critics argue that broad language could make responsible parties harder to identify when illicit funds move through decentralized systems.

The July 22 draft proposes $600 million annually from fiscal 2027 through 2031 for state and local digital asset investigations and prosecutions. It would fund training, blockchain analytics and a Digital Asset Cyber Innovation Center. FinCEN would receive another $30 million annually for five years.

No CLARITY vote is scheduled on the Senate calendar

The latest verified Senate floor update shows the chamber adjourned Monday after invoking cloture on H.R. 6500 by an 89-4 vote. Senators were due to resume work on that continuing resolution vehicle Tuesday. The official update did not list H.R. 3633 or announce a CLARITY Act cloture filing.

As crypto.news previously reported, an ordinary cloture filing by Wednesday, Aug. 5 could preserve a possible Friday procedural vote. That timing follows Senate Rule XXII rather than a leadership commitment. A petition requires at least 16 signatures, while ending debate on legislation normally requires three-fifths of senators duly chosen and sworn.

Even a successful motion to proceed would not enact the bill. Senators would still need to debate the text, consider amendments and approve final passage. Any Senate changes would also need House approval before the measure could reach the president.

The Senate calendar places its state work period from Aug. 10 through Sept. 11. Leaders could still negotiate faster action or extend floor time, but no arrangement had been announced by Monday’s adjournment. The next confirmed signal would be a cloture filing, leadership notice or formal scheduling agreement.