CLARITY Act Explained: What It Does and Where It Stands

The CLARITY Act (H.R. 3633, the Digital Asset Market Clarity Act) is the US bill that would split oversight of crypto markets between the SEC and the CFTC and set federal rules for token classification, exchanges, brokers, DeFi and developers. As of 2 October 2026 it is not law: the House passed it in July 2025, but on 15 September 2026 the Senate voted 49–50 against cloture on the motion to proceed, short of the 60 votes needed, so the full Senate never debated it.

The bill is stalled rather than formally dead, because a motion to reconsider keeps a procedural path open. This guide covers what the bill would do, exactly where it stands, why it failed, and what that means for people who use DeFi. The fight over stablecoin rewards in Section 404 has its own guide: the CLARITY Act and stablecoin yield.

What is the CLARITY Act?

The CLARITY Act is a "market structure" bill. The US already has a stablecoin law, the GENIUS Act, signed in July 2025. What it does not have is a statute that says which crypto assets are securities, which are commodities, and which regulator oversees the platforms that trade them. For years that question has been answered case by case, mostly through SEC enforcement.

The CLARITY Act tries to answer it in law. In broad terms, it would:

• give the CFTC jurisdiction over spot markets in "digital commodities", while the SEC keeps authority over assets sold as investment contracts (DeFi Rate fact sheet);
• create registration regimes for crypto exchanges, brokers and dealers;
• set out when a token stops depending on its creators and can be treated as a commodity;
• protect non-custodial software developers and people's right to self-custody;
• apply anti-money-laundering rules to crypto intermediaries;
• limit how crypto platforms can pay rewards on stablecoin balances.

The SEC/CFTC split and token classification

The core of the bill is the line between the two regulators. The House version used a "mature blockchain" test: a token could qualify as a digital commodity when no single person or group controls 20% or more of its supply or governance, according to DeFi Rate's summary.

The Senate Banking Committee's substitute text, advanced in May 2026, used different terms. Law firm Davis Wright Tremaine's summary of the substitute describes:

• a network token: a digital commodity "intrinsically linked to a distributed ledger system and expected to derive its value from the use of that system", which would not be treated as a security;
• an ancillary asset: a network token whose value still depends on the efforts of an identifiable originator, which would carry SEC disclosure duties, with a certification process for showing the token no longer depends on that originator.

For an ordinary holder, the practical effect is simple. Most large, decentralised tokens would be regulated as commodities, and the exchanges listing them would register with the CFTC. Tokens still run by a team would come with SEC-style disclosures.

What the bill says about DeFi and developers

DeFi was one of the most negotiated parts of the bill. The Senate Banking substitute included, per Davis Wright Tremaine:

• Developer protections. A version of the Blockchain Regulatory Certainty Act, which shields developers who never control users' funds from being treated as money transmitters.
• Self-custody. "Keep Your Coins" language protecting people's right to hold their own assets.
• A DeFi title. Rulemaking to clarify how a person or "control group" behind a trading protocol might register, with disclosure, recordkeeping and Bank Secrecy Act duties. It separates administrative activity, such as mining and staking, from intermediary conduct that would be regulated.

The September draft narrowed the DeFi rules to "digital-commodity cash and spot transactions", according to DeFi Rate. The DeFi Education Fund called the developer and Exchange Act protections the most important parts of the bill for builders (DEF May 2026 recap).

KYC and AML obligations for platforms

The bill would treat digital commodity intermediaries, such as exchanges and brokers, as financial institutions under the Bank Secrecy Act. That means anti-money-laundering programmes, customer identification, suspicious activity reports and sanctions compliance, plus new rules for crypto ATM ("kiosk") operators, per Davis Wright Tremaine's summary.

Centralised platforms serving US customers already do most of this. If the bill passes, the obligations would come from one federal statute rather than a patchwork of state licences and guidance. In practice, platforms meet them with identity-verification and screening vendors such as iDenfy, which handle KYC, KYB and AML checks during onboarding. For how these checks work, and where they reach into DeFi, see our guides to KYC in DeFi and sanctions screening for crypto exchanges.

Non-custodial protocols are a harder question. The developer protections above are meant to keep pure software outside these duties. The DeFi title, though, would give regulators room to decide when a "control group" behind a protocol becomes responsible for compliance.

The stablecoin section: rewards, not issuance

The CLARITY Act does not regulate stablecoin issuers. The GENIUS Act already does. What the CLARITY Act adds is Section 404, which governs crypto platforms that pay rewards to people holding stablecoins.

The compromise, negotiated by Senators Thom Tillis and Angela Alsobrooks and released on 1 May 2026, bans interest or yield paid "solely in connection with the holding" of payment stablecoins, and anything "economically or functionally equivalent" to interest on a bank deposit. It allows rewards tied to "bona fide activities or bona fide transactions" (CoinDesk). The 14 September draft added a Treasury "circuit breaker" for community bank deposits (CoinDesk).

That section became one of the two issues the bill failed on. We cover the text, the bank lobby's objections and what it would mean for DeFi yield in a separate guide: CLARITY Act stablecoin yield explained.

Where the CLARITY Act stands: timeline and Senate status

Sources: DeFi Rate, CNBC, Senate Banking Committee, FinTech Weekly.

Two details about the 15 September vote matter. First, it was a procedural vote on whether to start debating the bill, not a vote on the bill itself. Second, Senator Tillis switched his vote to "no" at the end. Under Senate rules, only a senator on the winning side can move to reconsider, so his switch let him file a motion to reconsider and keep the bill available for another vote (The Block).

In the committee vote in May, Democratic Senators Ruben Gallego and Angela Alsobrooks joined all Republicans on the panel (CoinDesk). On the floor in September, no Democrat voted yes (AMINA Bank).

Why it failed, and what could happen next

The vote did not fail over the SEC/CFTC split. It failed over two things:

• Ethics. Democrats argued the revised text did not effectively stop a sitting president or his family profiting from crypto. Republicans said they had made more than 100 changes at Democrats' request (FinTech Weekly).
• Bank deposits. Banking groups kept lobbying to tighten the stablecoin rewards language until the day of the vote (CoinDesk).

The day after the vote, JPMorgan analysts called the bill "not fully dead" but said the window for passage this year was "extremely narrow and only getting narrower" (The Block). The most realistic route is a lame-duck session after the November midterms. Without an ethics deal, most observers expect market structure legislation to slip to 2027, when the next Congress would likely start over.

Meanwhile, the regulators are acting without the bill. On 17 March 2026 the SEC, joined by the CFTC, issued an interpretation that protocol staking, including liquid staking, does not involve the offer and sale of securities when the provider's role is administrative (Sidley). In August the SEC proposed "Regulation Crypto Assets", with comments due by 20 October 2026 (Federal Register). Agency rules are quicker to make, but a future administration can also change them more easily than a statute.

What it means for DeFi users

For now, nothing changes in how on-chain protocols work. The practical points:

• Self-custody is unaffected. No US law currently stops you holding your own keys or using non-custodial protocols. See our self-custody guide.
• Centralised platforms carry the uncertainty. Without the bill, US exchanges keep operating under agency guidance, and some products, such as stablecoin rewards, stay in a grey area.
• Stablecoin rules are coming anyway. The GENIUS Act takes effect no later than 18 January 2027, whatever happens to the CLARITY Act.
• The DeFi carve-outs are not settled. Whatever bill returns may handle developers and "control groups" differently.

JewelSwap is a non-custodial DeFi protocol on MultiversX, Sui and Radix, so these rules affect it indirectly, mainly through the exchanges and on-ramps users rely on.

Frequently asked questions

Has the CLARITY Act passed?

No. The House passed it 294–134 on 17 July 2025. On 15 September 2026 the Senate voted 49–50 against cloture on the motion to proceed, short of the 60 votes needed. As of 2 October 2026 it has not passed the Senate and is not law.

Is the CLARITY Act dead?

Not formally. Senator Tillis filed a motion to reconsider, which lets Senate leaders bring it back for another vote. Analysts see the window for 2026 as very narrow, with a post-election lame-duck session the most realistic chance.

What does the CLARITY Act do?

It would split crypto oversight between the SEC and the CFTC, define when a token is a digital commodity rather than a security, register exchanges and brokers, protect non-custodial developers and self-custody, apply AML rules to intermediaries, and limit stablecoin rewards paid by crypto platforms.

Why did the CLARITY Act fail in the Senate?

Mainly over ethics rules on a sitting president's crypto interests, and over bank lobbying on stablecoin rewards. The SEC/CFTC framework itself was not the main dispute.

What is the difference between the CLARITY Act and the GENIUS Act?

The GENIUS Act is law and regulates stablecoin issuers. The CLARITY Act is a pending bill covering the wider crypto market: token classification, exchanges, brokers, DeFi and developers, plus limits on stablecoin rewards paid by platforms.

Does the CLARITY Act ban DeFi?

No. The Senate text included protections for non-custodial developers and self-custody. It would let regulators define when a person or control group behind a trading protocol must register, so the details would depend on later rulemaking.

Keep reading

• CLARITY Act stablecoin yield: what Section 404 bans and allows
• The GENIUS Act explained
• Stablecoins explained
• CeFi vs DeFi
• The future of DeFi in 2026
• JewelSwap crypto glossary

This article is educational and isn't legal or financial advice. Bill status is as of 2 October 2026 and can change quickly. Sources are linked inline, including DeFi Rate, CoinDesk, The Block, FinTech Weekly, Davis Wright Tremaine, the Senate Banking Committee and the Federal Register.