U.S. Republican lawmakers release a 630-page new version of the CLARITY Act, bringing non-decentralized DeFi protocols under CFTC registration, but controversies over stablecoin yields and official ethics may still block the procedural vote on September 15.

Written by: ChandlerZ, Foresight News

On September 10, U.S. Senate Republicans unveiled a 630-page revised text of the Digital Asset Market Clarification Act (CLARITY Act), preparing to rewrite the House-passed H.R.3633 as a substitute amendment. Cynthia Lummis, chair of the Senate Banking Committee's digital assets subcommittee, stated that the new version incorporates over 100 amendments proposed by Democratic lawmakers.

The Senate is scheduled to hold a cloture vote on September 15 at 2:15 PM Eastern Time regarding the start of deliberations, where this vote will only decide whether the Senate can begin processing the bill, requiring 60 votes in support, which does not equate to the bill being passed by the Senate. The Block cited a Politico report that, as of September 10, the new text has yet to gain support from Democratic lawmakers.

The CLARITY Act aims to delineate the regulatory scope between the SEC and CFTC for the U.S. crypto market. The House passed H.R.3633 in July 2025 with 294 votes in favor and 134 against, including 78 Democratic votes; the Senate Banking Committee advanced its version in May this year with 15 votes in favor and 9 against. The 616-page text released in July first combined the proposals from the Banking Committee and Agriculture Committee, while the September version adds 14 pages to that.

If the bill goes into effect, digital commodity exchanges, brokers, and dealers will register with the CFTC and assume responsibilities such as client asset segregation, conflict of interest management, transaction recordkeeping, and bankruptcy protection obligations. Securities and tokenized stocks will continue to be regulated by the SEC, and network tokens meeting the definition of "ancillary assets" will need to disclose project progress, token distribution, and related party holdings.

Increased CFTC Registration Path for Non-Decentralized DeFi Protocols

The July text already required the SEC and the U.S. Treasury to establish rules for "decentralized financial trading protocols," applicable to controllers engaged in activities like securities brokerage, trading, execution, clearing, or custody. The September version adds corresponding arrangements to the Commodity Exchange Act section, assigning the handling of digital commodity spot business to the CFTC and requiring the CFTC to jointly promulgate rules with the SEC and the Treasury.

The new version lists three categories of judgment criteria; if a protocol has controllers capable of changing functions, operating methods, or consensus rules, if transactions are not executed entirely under pre-written transparent rules, or if someone can limit, censor, or prohibit user usage, meeting any one of these conditions may place it in the "decentralized" category. Regulatory requirements will be determined based on actual functions of brokerage, trading, execution, clearing, and custody; using names such as DAO, foundation, or open-source protocol will not alter the judgment outcome.

Protocol operators retaining upgrade keys, pause switches, transaction review authority, or asset control may need to comply with CFTC registration, information disclosure, recordkeeping, business supervision, and obligations under the Bank Secrecy Act. Simply operating nodes, providing oracle services, publishing code, developing non-custodial wallets, or providing read-only interfaces will not impose CFTC registration obligations solely based on those activities; merely participating in security committees or incident response will not separately be considered controlling the protocol. The CFTC may still take enforcement actions against fraud, manipulation, and false reporting.

Further Clarifying Regulation for Prediction Markets and Credit Unions

The September text limits CFTC-end DeFi protections to digital commodity spot and cash transactions. Prediction markets typically utilize event contracts and cannot automatically gain DeFi exemptions under this provision. Lummis stated that this modification responds to concerns from U.S. Native American tribes about prediction markets bypassing tribal gaming rights and state gambling rules. The bill does not directly rule on whether event contracts are gambling products, and disputes between CFTC authority, state law, and tribal gaming agreements will continue.

The credit union provisions have also undergone technical adjustments. Federal credit unions may utilize digital assets or distributed ledgers to conduct payment, lending, custody or trading activities legally permitted, with deposit credit unions allowed to operate under the same conditions. The text also notes that this provision does not expand the existing statutory authority of credit unions, nor does it exempt them from capital, risk management, and consumer protection requirements.

Stablecoin Yields and Official Ethics Provisions Largely Untouched

The new version continues to prohibit crypto service providers and their affiliates from paying U.S. users passive interest or yield solely for holding payment stablecoins while retaining rewards generated from real activities such as payments, transfers, exchanges, settlements, and liquidity provision. The SEC, CFTC, and Treasury must devise detailed rules together within one year after the bill is signed into law. The banking industry hopes to further limit stablecoin incentives, while crypto platforms wish to retain transaction and usage incentives; the September text does not resolve the ongoing disputes between both sides.

The official ethics provisions also retain the July proposal, stating that public officials, federal employees, and their spouses during their tenure may not issue or sponsor digital assets conditioned on obtaining compensation, but may hold digital assets as investments. Violations may only be civilly sued by the U.S. Attorney General, with state attorneys general and private parties unable to sue; the ban will expire on January 20, 2029, at noon. Democratic lawmakers, including Elizabeth Warren, had previously demanded an expansion of the applicability and enforcement subjects, but the new version did not make significant adjustments.

Democratic Senators Mark Warner, Cory Booker, Ruben Gallego, and five others jointly stated in July that the provisions on official ethics, consumer protection, illegal finance, conflicts of interest, and market integrity still need strengthening. If the procedural vote on September 15 does not achieve 60 votes, H.R.3633 will remain in the Senate, with the SEC and CFTC only able to rely on existing authorities to draft rules separately; if the procedural vote passes, the Senate will still need to address amendments and hold a final vote. The text approved by the Senate has differences from the House version, and the House still needs to accept the Senate text or negotiate a unified version between the two chambers before it can be sent to the president for signing. Most provisions in the bill are intended to go into effect 360 days after being signed into law, while provisions related to the formulation of implementation rules also need to wait for the final rules to be published for 60 days.