Crypto Rule Push Gathers Pace as CLARITY Gets Vote Date

Commodity Futures Trading Commission (CFTC) Chair Michael Selig said on 11 Aug that the agency is developing clearer "rules of the road" for crypto assets, as it announced charges against a company and its CEO over an alleged $397mn Ponzi scheme involving Bitcoin and Ether. Selig's comments came days before the Securities and Exchange Commission (SEC) is due to consider proposing new rules for some crypto offerings.

The moves underscore how regulators are not waiting for Congress to finish work on the CLARITY Act, which would set the nation's first comprehensive rules for digital assets and better divide oversight between the SEC and CFTC. The Senate left for its August recess without voting on the bill and lawmakers are now expected to hold the first procedural vote on 15 Sep. The legislation was stalled in the Senate over disagreements on ethics provisions and stablecoin rewards.

However, legal experts argue that there are limits to what the agencies can do on their own – and any rules they put in place may be easier to change or challenge without legislation.

"Regulatory guidance buys the industry breathing room and some predictability, but it's inherently more fragile and incomplete than legislation," David B. Hoppe, founder and managing partner at media/tech law firm Gamma Law, told Sandmark.

SEC to prepare crypto rules

According to the SEC's meeting agenda, the agency on 14 Aug will consider a proposal titled "Regulation Crypto Assets," which would create a new framework for certain crypto assets sold as part of investment contracts – transactions in which buyers invest money with an expectation of profit from the efforts of others.

"In the meantime, the Commission will work to advance a regulatory framework... that will help ensure the United States remains the crypto capital of the world," a SEC spokesperson told Politico in a statement.

The agency has not yet said which offerings would be covered or how the rules would work, but the move follows other efforts by the SEC and the CFTC to clarify how existing laws apply to crypto, including a joint interpretation issued earlier this year.

Sandmark reached out to the SEC and to the CFTC for comment but has not yet heard back.

Congress still holds the key

Lawmakers are preparing for another attempt to advance the CLARITY Act with the first procedural vote expected on 15 Sep. 

Senate Majority Leader John Thune filed a cloture motion on 7 Aug just before lawmakers left Washington for their August recess, setting up a vote on whether to limit debate and move towards bringing the bill to the Senate floor. The motion needs 60 votes to pass.

If senators clear that hurdle, they can move towards amending the legislation before a final vote. But they would still need to resolve disagreements that prevented the Senate from advancing the bill before the recess, including proposed ethics restrictions on senior government officials' crypto activities and rules governing rewards paid on stablecoin holdings.

Democrats have pushed for stronger ethics provisions amid concerns about President Donald Trump's crypto interests, while some Republicans have raised objections to provisions allowing rewards on stablecoins because of their potential impact on community bank deposits.

Hoppe told Sandmark that passage this year remains possible, but called September critical. 

"The bill isn't dead, but it's now on a much tighter clock than we all wanted," he said. If senators can clear the first procedural hurdle soon after returning, Hoppe said there is still a path to passing the legislation this year. 

Agencies face limits

In the meantime, he explained that the SEC and CFTC can make rules and issue guidance under their existing powers, but they cannot answer all of the questions that CLARITY is designed to answer – and one of the biggest questions is where the SEC's authority ends and the CFTC's begins.

"They can't resolve fundamental jurisdictional questions, like which agency has primary authority over a given digital commodity trading venue, which only Congress can settle by statute," Hoppe said.

The agencies' rules can also be challenged in court or changed by future administrations, making them less concrete than legislation, Hoppe said. Selig also recently acknowledged that risk, saying CLARITY would be "the most future-proof way to lock this industry into the United States."