The U.S. Senate's failure to advance the CLARITY Act has not halted federal crypto regulation — it has redirected it. With the bill falling short in the Senate, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) are pressing ahead with rulemaking under the legal authority they already possess.

The Vote Changed the Route, Not the Law

The Senate's inability to advance the CLARITY Act did not expand either regulator's powers. It blocked the immediate legislative route, leaving the agencies to continue work they had already announced under existing statutes.

SEC Chair Paul Atkins said after the vote that the agency would act "with or without legislation" and remain within its statutory authority. CFTC Chair Michael Selig said his agency was ready to proceed with its planned crypto rules, according to a report covering both regulators' responses.

Both officials had presented their plans before the CLARITY Act fell short of the required 60 Senate votes. The outcome makes those agency initiatives the principal near-term federal route for addressing several unresolved parts of crypto regulation.

The statements do not immediately change a token's legal status, an exchange's obligations, or the protections attached to a customer account. Those effects would depend on the rules the agencies publish and ultimately adopt.

The SEC Can Change How Crypto Projects Raise Money

The SEC's clearest route concerns activities covered by federal securities law. Its proposed Regulation Crypto Assets would create tailored exemptions for certain projects raising capital through crypto assets and establish a process for determining when an associated investment contract has ended.

Under the SEC proposal, a startup exemption would cover qualifying offerings of up to $5 million over four years. A separate fundraising exemption would allow qualifying projects to raise as much as $75 million annually, subject to disclosure and other conditions.

The proposed safe harbor addresses projects that sell an asset while promising to build a network, product, or service. If the issuer later completes those promised managerial efforts and meets the SEC's conditions, the asset could cease to be treated as part of the original investment contract.

For issuers, that would shift a token's securities-status question from after-the-fact adjudication — historically through enforcement actions and court rulings — to conditions published in advance, letting a project structure its U.S. offering to fit a rule before going to market.

Atkins has also asked SEC staff to develop rules for crypto custody by investment advisers and regulated funds. The proposal could allow advisers to hold certain assets directly or use qualifying state trust companies under specified safeguards. A transfer-agent proposal would update how ownership records for tokenized securities are maintained.

Together, these measures could reshape how crypto projects raise money and how investment firms hold blockchain-based assets — but only where federal securities law applies.

The CFTC's Clearest Route Runs Through Leverage

The CFTC oversees commodity derivatives such as futures and swaps, along with certain retail commodity transactions involving margin, leverage, or financing. That mandate gives it a path to regulate parts of crypto trading without new authority from Congress.

Selig has directed staff to examine whether existing firms and crypto exchanges could operate as a type of designated contract market under tailored CFTC rules. Designated contract markets are the same registration category that hosts established futures exchanges, meaning an approved crypto platform would sit in the same regulatory tier as traditional derivatives venues. Such platforms could offer leveraged or margined crypto trading while becoming subject to federal registration, surveillance, and customer-protection requirements.

In his August 20 remarks outlining the plan, Selig also said the agency would work with developers seeking compliant routes for onchain financial protocols.

Ordinary spot trading presents the larger problem. Buying a crypto asset with cash and taking delivery is not the same as trading a futures contract or opening a leveraged position. The CFTC can pursue fraud and manipulation involving spot commodity markets, but that differs from continuously supervising exchanges through a registration regime. The agency lacks the comprehensive authority to register and supervise conventional spot digital-commodity platforms — authority that CLARITY would have provided.

Existing Authority Stops Short of a Complete Framework

What the agencies can address now:

• Securities offerings and disclosure requirements
• Custody by advisers and regulated funds
• Tokenized securities and transfer-agent records
• Derivatives and certain leveraged crypto transactions

What still requires Congress:

• Comprehensive registration for spot digital-commodity exchanges
• A statutory boundary between SEC and CFTC authority
• Statutory standards not dependent on agency leadership
• Crypto-specific rules for spot-platform capital and customer assets

The agencies can coordinate their interpretations, but they cannot make that division of authority permanent. Future agency leadership could revise their rules, while businesses or industry groups could challenge them in court if they believe a regulator has exceeded its statutory powers.

The SEC and CFTC Plans Are at Different Stages

Regulation Crypto Assets has already been proposed and is going through the SEC's public-comment process. Its final wording could change before commissioners vote on whether to adopt it. That sequence — proposal, comment, adoption vote — is the standard course for federal agency rulemaking, and each step unfolds on the agency's timetable rather than a legislative calendar.

The custody framework is less advanced. Atkins has instructed staff to prepare it, but the complete proposal, covered institutions, and operating conditions have not been published. His September 14 remarks described the intended direction rather than a finished rule.

The CFTC has likewise described the structure it wants staff to explore but has not published the full market-structure proposal. Important details remain unknown, including which platforms could qualify, how customer assets would be handled, and precisely which leveraged transactions would fall under the framework.

Selig's statement that the agency is ready to move therefore refers to its ability to begin or accelerate rulemaking — it does not mean that new requirements are already effective.

Four Developments Will Show Whether the Plans Have Substance

• The SEC custody proposal: Its text should identify which firms can hold crypto, whether self-custody is permitted, and what safeguards apply.
• The final fundraising rules: Changes made after public comments will show which projects can realistically use the exemptions.
• The CFTC market proposal: Its scope will reveal whether the agency stays focused on derivatives and leveraged trades or tests a broader interpretation of its authority.
• Shared regulatory definitions: Compatible terminology from the SEC and CFTC would reduce the risk that the same asset or transaction receives conflicting treatment.

Rules confined to clearly established authority could reduce uncertainty in specific parts of the market. An attempt to construct comprehensive spot-market regulation without Congress could begin sooner, but it would face a greater risk of being overturned by a court or reversed under future leadership.

This article is provided for informational purposes only and does not constitute legal, financial, or investment advice. Agency proposals can change during rulemaking and may be subject to judicial review.

Source: Coindoo