Crypto Jurisdiction Bill: Clarity Act Passes Finance Committee, House Floor Next

Key Takeaways

• The CLARITY Act passes the Financial Committee and is set for a full floor vote next.
• The act clearly defines the jurisdictions of regulatory agencies such as the CFTC and SEC.
• If approved, CFTC will become the primary crypto regulator while the SEC will oversee the crypto securities market.

The Digital Asset Market Clarity Act of 2025, or CLARITY Act, introduced on May 28, has passed the Financial Committee with a 32-19 vote and will now head to the floor for a full House vote.

The proposed crypto legislation aims to clearly define the jurisdiction of law enforcement agencies such as the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) over the crypto market. 

CLARITY Act Set to Define US Agency’s Role

The proposed CLARITY Act could end the long-running power struggle between regulatory agencies such as the SEC and CFTC and set clear guidelines on which agency will oversee which aspects of the crypto market.

House Financial Services Committee Chairman French Hill introduced the bill with co-sponsors, including Reps. Tom Emmer, G.T. Thompson, Dusty Johnson, Ritchie Torres, and Angie Craig.

Crypto market jurisdiction has long been controversial, especially under the Joe Biden administration, where the SEC became the sole market regulator, often taking enforcement actions beyond their purview.

The Act mandates disclosures, fund segregation, and conflict-of-interest rules to protect investors, addressing fraud and scams prevalent in unregulated crypto markets.

The CLARITY Act aims to settle long-standing jurisdictional conflicts between the SEC and CFTC by giving the CFTC primary control over the trading of digital commodities and stablecoins, while the SEC is in charge of securities and antifraud policies. 

The bill emphasizes consumer safeguards, DeFi exclusions, and role clarifications, all intended to establish a fair system. However, its success depends on overcoming political differences and improving its provisions through the legislative process.

CFTC to Become Primary Crypto Regulator

Under the newly proposed legislation, the CFTC will become the primary crypto regulator. The commodities regulator will oversee digital commodities covering most cryptocurrencies and tokens traded on spot or cash markets, including decentralized finance (DeFi) activities.

This includes oversight of exchanges, brokers, and spot markets for non-security digital assets like Bitcoin and Ethereum.

CFTC will also monitor stablecoin trade and custody on commodities exchanges. This comes after prior confusion over stablecoins’ classification has been cleared up as they are specifically excluded from federal securities regulations under the definition of “permitted payment stablecoins.

Conversely, the SEC retains authority over digital assets classified as securities, specifically “investment contract assets” under the Securities Act. This includes tokens issued in securities contracts, such as initial offerings for new ventures.

The SEC’s role in stablecoin regulation is limited to enforcing antifraud rules when stablecoins are traded on securities platforms, avoiding overlap with CFTC jurisdiction. 

Meanwhile, centralized entities in DeFi, such as those taking custody of customer assets, acting as counterparties, or exercising discretionary control over protocols, must register with the SEC if their activities involve securities.