A "Pseudo-DeFi" Would Have to Register, with 60 Votes as the Threshold: What Key Rules Did the New CLARITY Act Change?

Author: ChandlerZ, Foresight News

U.S. Senate Republicans released a 630-page revised text of the Digital Asset Market Clarity Act (CLARITY Act) on September 10, preparing to rewrite the House-passed H.R.3633 in its entirety as a substitute amendment. Cynthia Lummis, chair of the Senate Banking Committee's digital assets subcommittee who is shepherding the bill, said the new version incorporates more than 100 amendments put forward by Democratic lawmakers.

The Senate will hold a cloture vote at 2:15 p.m. Eastern Time on September 15 to begin consideration. That vote only determines whether the Senate can begin working on the bill and requires 60 votes in support; it does not mean the bill has passed the Senate. The Block, citing Politico, reported that as of September 10, the new text had still not won support from Democratic lawmakers.

The CLARITY Act seeks to delineate the regulatory boundaries between the SEC and the CFTC for the U.S. crypto market. The House passed H.R.3633 in July 2025 by a vote of 294 to 134, with 78 Democrats voting in favor; the Senate Banking Committee advanced its own version in May of this year by a vote of 15 to 9. The 616-page text released in July merged the Banking Committee and Agriculture Committee proposals for the first time, and the September version adds 14 pages on top of that.

If the bill becomes law, digital commodity exchanges, brokers and dealers would register with the CFTC and assume obligations for segregating customer assets, managing conflicts of interest, maintaining trading records and providing bankruptcy protections. Securities and tokenized stocks would remain under SEC oversight, while network tokens meeting the definition of an "ancillary asset" would need to disclose project progress, token distributions and related-party holdings.

Non-decentralized DeFi protocols gain a CFTC registration pathway

The July text already required the SEC and the U.S. Treasury Department to write rules for "non-decentralized finance trading protocols," applicable to controllers engaged in activities such as securities brokerage, trading, execution, clearing or custody. The September version adds corresponding arrangements in the Commodity Exchange Act section, assigning digital commodity spot business to the CFTC and requiring the CFTC to jointly develop rules with the SEC and Treasury.

The new version lays out three categories of criteria for judgment. A protocol may fall within the "non-decentralized" scope if it has a controller able to change its functions, operating methods or consensus rules; if transactions are not executed entirely according to transparent rules pre-written into the code; or if someone can restrict, censor or prohibit users from using it—meeting any one of these is sufficient. Regulatory requirements would be determined according to actual functions such as brokerage, trading, execution, clearing and custody, and a team's use of names like DAO, foundation or open-source protocol would not change the outcome of that judgment.

Protocol operators that retain upgrade keys, kill switches, transaction censorship powers or asset control may need to assume CFTC registration, disclosure, record-keeping, business supervision and Bank Secrecy Act compliance obligations. Persons who merely run nodes, provide oracles, publish code, develop non-custodial wallets or provide read-only interfaces would not bear CFTC registration obligations solely because of these activities; merely participating in a security committee or incident response would also not, on its own, cause someone to be deemed to control a protocol. The CFTC can still take enforcement action against fraud, manipulation and false reporting.

Further clarifying regulation of prediction markets and credit unions

The September text limits the CFTC-side DeFi protection to digital commodity spot and cash transactions. Prediction markets typically use event contracts and cannot automatically obtain a DeFi exemption through this provision. Lummis said the change responds to concerns from Native American tribes that prediction markets could circumvent tribal gaming rights and state gaming rules. The bill does not directly rule on whether event contracts are gambling products, and disputes among CFTC authority, state law and tribal gaming compacts will continue.

The credit union provisions also underwent technical adjustments. Federal credit unions could use digital assets or distributed ledgers to carry out payment, lending, custody or trading activities already permitted by law, and federally insured deposit-taking credit unions could conduct business under the same conditions. The text also notes that this provision does not expand credit unions' existing statutory authority and does not exempt them from capital, risk management and consumer protection requirements.

Stablecoin yield and official ethics provisions largely unchanged

The new version continues to prohibit crypto service providers and their affiliates from paying U.S. users passive interest or yield arising solely from holding payment stablecoins, while preserving rewards generated by genuine activities such as payments, transfers, exchanges, settlement and providing liquidity. The SEC, CFTC and Treasury Department would need to jointly develop detailed rules within one year after the bill is signed into law. Banks want to further restrict stablecoin rewards, while crypto platforms want to preserve incentives for transactions and usage, and the September text does not end the dispute between the two sides.

The official ethics provisions likewise follow the July proposal: public officials, federal employees and their spouses may not issue or sponsor digital assets in exchange for consideration during their tenure, but they may hold digital assets as investments. Violations may only be pursued through civil lawsuits brought by the U.S. Attorney General; state attorneys general and private parties cannot sue. The prohibition would expire at noon on January 20, 2029. Democrats including Elizabeth Warren had previously sought to expand the scope of application and the entities responsible for enforcement, and the new version does not make major adjustments.

Seven Democratic senators, including Mark Warner, Cory Booker and Ruben Gallego, jointly stated in July that provisions on official ethics, consumer protection, illicit finance, conflicts of interest and market integrity still needed strengthening. If 60 votes are not obtained on September 15, H.R.3633 will remain stalled in the Senate, and the SEC and CFTC will be able to rely only on their existing authority to write rules separately. If the procedural vote passes, the Senate will still need to handle amendments and hold a final vote. The text passed by the Senate will differ from the House version, and the House will still need to accept the Senate text or have both chambers reconcile a unified version before it can be sent to the president for signature. Most provisions of the bill are intended to take effect 360 days after being signed into law, while provisions involving the development of implementing rules would also need to wait 60 days after final rules are published.