On May 5, 2025, several House committees jointly introduced a discussion draft for a bill that would establish a regulatory framework for digital assets. On May 29, House Financial Services Committee Chairman French Hill, R-Arkansas, introduced an updated version of this bill, named the Digital Asset Market Clarity (CLARITY) Act.
The key elements from the discussion draft remain: The Commodity Futures Trading Commission (CFTC) would largely take the lead on the regulation of digital commodities and oversee several new types of entities, while the Securities and Exchange Commission (SEC) would retain jurisdiction over investment contracts involving digital commodities in primary market transactions, pursuant to some exceptions. However, the CLARITY Act arrives with some noteworthy changes as compared with the discussion draft. These include:
- The “blockchain” definition no longer requires that the system’s distributed ledgers be automated, instead requiring that the data is propagated among network participants to reach consensus on the state of the distributed ledger (§ 103).
- The Act’s revisions to the Commodity Exchange Act’s (CEA’s) retail commodity transaction subsection has been simplified: Whereas the discussion draft amended the CEA’s retail commodity subsection to include carve-outs for digital commodity transactions with actual delivery within two days and for transactions executed with digital commodity dealers — along with a public interest assessment for permitting these transactions — the CLARITY Act simply states that digital commodity brokers are allowed to offer or enter into margin financing with retail customers for the purchase or sale of a digital commodity (§ 401). In contrast to other types of retail participant leveraged transactions, such contracts would not be treated as futures contracts under CEA Section 2(c)(2)(D).
- The Act now contains two separate sections for the SEC’s jurisdiction over primary and secondary market transactions, respectively, involving digital commodities. The SEC has jurisdiction over primary transactions, but there are registration exemptions for mature blockchain systems meeting certain requirements (§ 202). Digital commodities sold pursuant to an investment contract are not themselves investment contracts, but rather “investment contract assets,” and, when sold in the secondary market, are not investment contracts under securities laws (§§ 201, 203).
- The CLARITY Act limits the ability of SEC-registered alternative trading systems (ATS) or broker-dealers to notice-register with the CFTC as digital commodity exchanges or digital commodity broker-dealers and be primarily regulated by the SEC. Now, they can only do so if the ATS, during any given calendar quarter, has no more than 25% of its total trading volume in digital commodities and its total trading volume for digital commodities does not exceed $50 billion; or if the broker-dealer, in either of its past two fiscal years, has not had more than 10% of its gross revenue come from digital commodity sales or commissions, and did not have had sales or commissions of greater than $100 million from digital commodities in either of those years (§ 411).
- All digital commodities are now treated as a “covered security” for the purposes of state securities laws, exempting them from those states’ blue sky law registration requirements (§ 308). In the discussion draft, a digital commodity had to be custodied, traded or brokered by a registered broker-dealer to be treated as a covered security.
- The Act has reworked and expanded its criteria for when a digital commodity is “intrinsically linked to a blockchain system” (§ 103). The expanded definition includes, among other criteria, cases where the digital commodity is used as payment or incentive for various blockchain activities.
- The CLARITY Act adds “innovation” to the public interest factors that the SEC must consider when rulemaking under various securities laws (§ 502).
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