The Digital Asset Market Clarity Act of 2025, or CLARITY Act, is a bipartisan effort to establish a regulatory regime for cryptocurrency in the US. It builds off of the Financial Innovation and Technology for the 21st Century Act, a market structure bill that passed the House of Representatives but stalled in the Senate last session.

Like FIT21, the major thrust of the CLARITY Act is drawing boundaries between the jurisdictions of the Securities and Exchange Commission and Commodity Futures Trade Commission over cryptocurrency.

The two agencies have differing regulatory requirements and priorities, causing confusion for the digital assets industry which has been clamoring for clear guidance for years.

The SEC has jurisdiction over securities, and the CFTC has the authority to regulate commodities, futures, and derivatives trading. Both have claimed jurisdiction—at times overlapping—over various digital assets services and products.

The act attempts to resolve a significant amount of jurisdictional uncertainty by creating new categories that would fall within the CFTC’s purview.

Under the act, “investment contract assets” are a new category of “digital commodities” that can be:

Such “digital commodities” are per se mutually exclusive with traditional “investment contracts” under the seminal test in SEC v. W.J. Howey Co.

Subject to certain exceptions, the CFTC is the primary regulator and has exclusive jurisdiction over most digital commodity transactions. Digital commodities are subject to certification and approval by the CFTC.

Representing a significant departure from the CFTC’s historic role, the CLARITY Act folds spot transactions of “digital commodities” into the CFTC’s jurisdiction. In other words, the act gives the CFTC regulatory authority over digital assets, regardless of whether a futures market exists for those same assets.

Section 203 of the CLARITY Act focuses on the treatment of secondary transactions in “digital commodities.”

The offer or sale of a digital commodity that originally involved an investment contract by a person other than the issuer, agent, or underwriter thereof, isn’t an offer or sale of the investment contract originally involving the digital commodity. Secondary sales of “digital commodities” by persons other than an issuer, agent, or underwriter aren’t traditional securities transactions.

On this score, the CLARITY Act echoes and perhaps endorses Judge Analisa Torres’ reasoning in SEC v. Ripple Labs Inc. In that case, Torres distinguished between institutional buyers that knowingly purchased XRP directly from Ripple, versus secondary market purchasers.

In SEC v. Binance Holdings Ltd. (which the SEC later discontinued), Judge Amy Berman Jackson similarly dismissed the SEC’s arguments concerning secondary sales of BNB by sellers other than Binance.

Section 204 of the act applies to blockchain systems that are certified as mature or are actively taking steps to mature. “Maturity” of blockchain systems essentially means decentralization; the act describes it as certification to “establish that the blockchain system is not controlled by any person or group of persons under common control.”

The act includes specific time bounds—blockchains have four years after the law passes, or the first sale (whichever is later) to become mature. The SEC would ensure maturity through semi-annual reports and disclosures to the SEC regarding how much money the issuer has raised, a timeline for the development of the blockchain system, and how it aims to achieve maturity.

Section 205 specifies that the digital commodity issuer or a related or affiliated person can file certain information with the SEC to certify the blockchain’s maturity, including information regarding the operation of the blockchain system, the functionality of the related digital commodity, and other factors.

How the SEC will use the information about maturity remains to be seen. As drafted, a digital commodity issuer or a related or affiliated person can file certain information with the SEC when they believe the blockchain has reached maturity.

The SEC can rebut the filing within 60 days, or file for an extension due to a lack of information or novel/complex issues. If the SEC doesn’t issue a rebuttal within 60 days, the blockchain is automatically deemed mature.

The benefit to founders and developers is that the process, though lengthy, has time restraints so issuers aren’t waiting for potential certification from the SEC indefinitely. A similar back-and-forth process is envisioned for digital commodities filing for certification with the CFTC.

The CLARITY Act doesn’t ignore certain DeFi activities that don’t (and perhaps can’t) fit within the proposed certification and registration regime.

The act tackles this issue head on by enumerating certain activities that are excluded from the Securities Exchange Act of 1934, including validating transactions, operating a node, providing a user interface, and developing or distributing self-custodial wallet software.

The current draft of the CLARITY Act may not end up being its final form. But the act is a strong basis for a long-needed update to the federal securities and commodities laws and moves away from the lack of clarity that has plagued the digital assets industry for the last decade.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Jason Gottlieb is partner at Morrison Cohen and focuses on regulatory enforcement, litigation, and arbitration relating to cryptocurrency.

William Roth is counsel at Morrison Cohen and focuses his practice on complex civil litigation and white collar defense relating to digital assets, cryptocurrency, and securities.

Vani Upadhyaya is an associate at Morrison Cohen and focuses her practice on litigation, arbitration, and regulatory enforcement relating to cryptocurrency and blockchain technology.