The U.S. Senate's failure to advance the CLARITY Act has left retail cryptocurrency markets without the comprehensive federal framework lawmakers had sought to establish, placing greater pressure on the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) to fill the gap through their existing authorities.

Both regulators have since moved with measures under their existing mandates, but the combined response still falls short of the sweeping market-structure legislation that stalled in the Senate. For retail investors, that distinction is consequential: without new legislation, the protections that apply to a given crypto transaction depend on which agency's rulebook — if any — covers it.

CFTC Proposes 'Crypto Asset Markets' Framework

The CFTC has proposed a framework for exchanges offering margined, leveraged, or financed crypto transactions to retail customers. According to a related report, the agency has sent the crypto market rules to the White House following the CLARITY Act's stalling in Congress — a step in the U.S. regulatory process that typically precedes the formal publication of proposed rules.

The proposal would create a new category of federally regulated venues called 'crypto asset markets,' subjecting them to requirements including anti-manipulation controls and proof-of-reserves obligations. Registered futures commission merchants would also be required to intermediate customer trades.

However, the proposal does not grant the CFTC broad statutory authority over the spot crypto market — the direct purchase or sale of crypto assets, as distinct from derivatives. That authority was a central element of the failed CLARITY Act, and its absence leaves much of the retail spot market outside any dedicated federal regulatory regime.

The CFTC said its proposed rules rely on its existing authority over certain retail commodity transactions, and the agency is seeking public comment on how those rules should apply to crypto assets. Public comment is a standard stage of U.S. rulemaking, and agencies can revise proposals in response before finalizing them. It added that the framework would provide a uniform national regulatory pathway rather than relying primarily on state-level licensing, under which crypto businesses have historically been licensed state by state.

SEC Proposes Custody Rules

The SEC has also moved to establish rules within its existing authority. Last week, it proposed rules governing crypto-asset custody by investment advisers and funds, saying they would provide a regulatory framework and a compliant pathway for investment professionals holding digital assets. Custody rules govern how client assets are held and safeguarded, a long-standing focus of securities regulation.

Those measures, however, do not amount to the comprehensive market-structure legislation that failed in the Senate. The SEC's rules primarily address crypto assets falling within its securities jurisdiction, while the CFTC's latest initiative focuses on specific leveraged and margined retail transactions.

That division leaves a fundamental question unresolved for retail investors: which federal regulator has clear authority over the broader spot market, and what protections apply when consumers buy and trade crypto assets directly?

Advocacy Questions CFTC's Role

Better Markets, a financial reform advocacy group, said the CFTC was the wrong agency to take the lead in regulating retail crypto, arguing that the regulator lacks the SEC's investor-protection mandate. The group also questioned whether the CFTC's existing statutory authority was intended by Congress to cover crypto transactions. The objection draws on the agencies' differing statutory mandates: the SEC's mission centers on protecting investors in securities markets, while the CFTC's core remit has historically covered derivatives markets such as futures and swaps.

A Patchwork Rather Than a New Rulebook

The CFTC has said its rules are intended to provide clarity and consumer protection, and officials at both agencies have indicated they will continue developing crypto rules despite the legislative impasse. Without congressional action, however, the resulting framework remains dependent on the agencies' existing powers and could face legal challenges or change with future administrations.

The post-CLARITY reality is therefore less a new U.S. crypto rulebook than awork of agency actions, with retail spot crypto still lacking the clear federal regulatory foundation that Congress failed to deliver. For readers tracking the outcome, the near-term markers are procedural rather than legislative: the public comment process on the CFTC's proposal, any movement by the SEC toward final custody rules, and whether Congress returns to market-structure legislation.

Related Coverage

• The CLARITY Act Fails to Advance
• CFTC Sends Crypto Market Rules to White House After CLARITY Act Stalls
• The Securities and Exchange Commission Updates Crypto Guidance After CLARITY Act Stalls
• Prediction Markets Fall Under Our Federal Mandate, Says CFTC Chairman
• European Crypto Users Have More Trust in Regulated Platforms Under MiCA, Says Crypto Executive

Source: BitcoinKE