CLARITY Act Setback Shifts Crypto Policy Toward Regulators and House Bills

SEC and CFTC prepare to move without Congress

The Senate setback immediately increased the role of the Securities and Exchange Commission and Commodity Futures Trading Commission, whose leaders said they would proceed with digital-asset rulemaking under their existing legal authority rather than wait for a comprehensive market-structure law.

SEC Chairman Paul Atkin said: “Our collective conviction that America must continue to lead is indispensable.” He added: “I have been unequivocal: with or without legislation, we will act decisively within the SEC’s statutory authority to deliver certainty for American investors and for the entrepreneurs shaping our technological future. Stay tuned.”

CFTC Chair Mike Selig said his agency was “locked in and ready to ship its rules for the new frontier of finance.” Selig described the Senate outcome as “unfortunate” and said American investors deserved “regulatory clarity, legal certainty, and consumer protections in crypto asset markets.”

Selig also tied the agency’s approach to the administration’s broader digital-asset agenda. “President Trump promised to deliver a future-proof crypto asset regulatory market structure one way or another, and we will help him get the job done using our existing statutory authorities,” he said. Coinbase CEO Brian Armstrong responded to the agencies’ statements by saying: “The CFTC and SEC are stepping up. Go time.”

Bernstein analysts led by Gautam Chhugani expected the regulators to focus on “specific rule-making” and predicted an “aggressive and swift” process intended to make up for time spent negotiating legislation. Bernstein identified native-token classification, protections for DeFi and self-custody infrastructure and rules for equity tokenization among the issues the agencies could address.

Bernstein also saw room for faster approvals of real-world-asset perpetual futures and coordination between the SEC and CFTC over single-stock perpetuals. The firm expected regulators to revisit federal sports event contracts and their treatment as swaps.

JPMorgan similarly expected investors and crypto businesses to shift their attention toward federal regulators. The bank said agency action could establish “some guardrails to appease the crypto-ecosystem and instill some confidence into incremental capital flows,” but warned that administrative rules would be less durable than legislation because future administrations could change them and courts could challenge them.

One SEC measure being watched by the industry is a potential “innovation exemption” covering crypto projects, including tokenized equities. JPMorgan said reports had indicated that the regulator was waiting to see whether the CLARITY Act passed before advancing its own proposal.

Galaxy founder and CEO Mike Novogratz blamed both political parties for failing to reach a compromise over government-ethics provisions. Novogratz nevertheless expected the SEC and CFTC to keep developing a regulatory framework that Congress could eventually put into more durable statutory form.

Mizuho Securities also expected policymaking to migrate toward SEC and CFTC rules and guidance. Mizuho said declines in Circle and Coinbase shares were understandable because the legislative failure left uncertainty around stablecoin yield and rewards, while Robinhood, Figure and Strategy were being “unduly punished.”

Mizuho said approximately 80% to 90% of Robinhood’s revenue did not come from crypto and noted that Figure primarily operated a home equity line of credit marketplace. Strategy remained exposed to movements in the bitcoin price, according to Mizuho, although the firm said recent bitcoin flows pointed toward improving medium-term market sentiment.

TD Cowen’s Lance Vitanza also viewed near-term passage of the CLARITY Act as increasingly unlikely. Vitanza said legislation remained the preferred long-term approach but that SEC rulemaking could address some immediate industry issues, with the digital-asset sector continuing to develop “likely at an uneven pace.”

Stablecoin rewards remain unchanged after Senate failure

The failed CLARITY Act also preserved the existing framework for stablecoin rewards. Bernstein said the compromise legislation would have prohibited rewards on idle stablecoin balances and required rewards to be connected to customer activity.

Without that provision becoming law, platforms such as Coinbase can continue offering rewards on idle balances, according to Bernstein. “Stablecoins should be just fine since they are governed by GENIUS,” the firm’s analysts wrote.

StoneX identified a separate regulatory issue that could still affect those programs. The firm said proposed OCC and FDIC rules could presume that a stablecoin issuer violates the GENIUS Act’s issuer-yield prohibition when the issuer pays an affiliate that subsequently provides rewards to stablecoin holders. StoneX said the dispute could ultimately reach the courts after GENIUS takes effect in January 2027.

House advances first federal digital-asset tax framework

Congressional crypto work continued on another track when the House Ways and Means Committee advanced the Digital Asset Tax Certainty Act, H.R. 10357, on September 16. Committee Chair Jason Smith, R-Mo., said the measure resulted from more than a year of bipartisan work.

“This is a historic moment for this Committee: after more than a year of working together, Republican and Democrat Members have come together to establish the first-ever tax framework for digital assets,” Smith said.

The tax legislation would exempt qualifying crypto network or transaction fees of $10 or less from tax, although the provision would not apply to service providers conducting transactions for other people. If enacted, that provision would take effect in December 2027.

Treasury would also be required to establish a Digital Asset Voluntary Disclosure Program within 12 months of enactment. Eligible taxpayers could use the program to amend previous returns and settle taxes, interest and penalties they owe.

Mining and staking rewards would be treated as ordinary income under the legislation, while certain investment trusts could stake their holdings without that activity alone altering their tax status. An earlier version contained an option to defer income, but lawmakers removed that provision, leaving the timing of income recognition unresolved.

Rep. Steven Horsford, D-Nev., who worked on the legislation, said: “This bill is not as comprehensive as I would have liked, but I continue to believe that Congress needs to address when mining and staking rewards are recognized as income.” Horsford added: “This package establishes ordinary income treatment, but leaves that timing question unresolved.”

The House was preparing to leave Washington until after the November elections, placing the next potential action during the post-election session. Alison Mangiero, chief strategy officer and head of U.S. policy at the Crypto Council for Innovation, said: “Given the House is expected to go on recess, this will likely be taken up during the lame duck period.”

Mangiero said the Senate Finance Committee had also expressed interest in advancing digital-asset tax legislation. She said lawmakers still had an opportunity to refine “the timing of income recognition for staking and mining rewards, broader de minimis relief for everyday digital asset transactions, and other technical issues that will further ensure that the final framework is clear, administrable, and durable.”

Rep. Lloyd Doggett, D-Texas, opposed the tax package and said: “This bill still bestows billions in tax breaks for the crypto industry, benefiting billionaire crypto whales and some of the richest Americans like the Trump family.” His statement represented his characterization of the legislation rather than an independently established estimate of its tax effects.