The CLARITY Act is reshaping the U.S. digital asset market, forcing decentralized finance (DeFi) tokens into clear regulatory categories and removing long-standing legal ambiguity. Most tokens will now be classified either as digital commodities under the Commodity Futures Trading Commission (CFTC) or as investment contract assets under the Securities and Exchange Commission (SEC), placing projects such as UNI, AAVE, OP, and ARB under heightened scrutiny.
Regulatory split redraws the market
Under the proposed framework, tokens traded on secondary markets are expected to fall primarily under CFTC oversight. This classification comes with a key restriction: digital commodities cannot distribute revenue directly to holders. However, guidance issued in March 2026 warns that tokens may still be deemed investment contracts if traders expect profits derived from the efforts of others, potentially triggering SEC oversight even retroactively.
Prediction markets currently assign a 42% probability that the CLARITY Act will pass this year, down from earlier estimates near 73%, underscoring ongoing uncertainty for market participants.
Buybacks replace revenue sharing
With direct income distribution constrained, many protocols have pivoted to buyback and burn strategies. These mechanisms use protocol revenue to repurchase tokens on the open market and remove them from circulation.
Uniswap adopted this model in late 2025, allocating 17% of swap fees to buybacks, and recorded a single-day burn of 134,000 UNI in June 2026. Aave followed by committing all protocol revenue to repurchases while cutting its annual budget from about $50 million to $30 million after a 25% decline in borrow fee income.
Despite these efforts, price performance has remained weak. UNI continues to trade more than 92% below its 2021 peak, highlighting the limited impact of buybacks on valuation. Earlier cases show similar outcomes, as GMX and Metaplex reduced token supply significantly but still saw declines exceeding 70% during the same periods.
Two-layer models gain traction
An alternative structure is emerging through dual-layer compliance models. In this setup, a permissionless base layer supports decentralized activity and buybacks, while a permissioned layer allows verified participants to access income distributions through Know Your Customer (KYC) requirements.
This approach is already being tested. Financial firms including BlackRock have launched tokenized funds on platforms like Uniswap, but access is restricted to whitelisted institutional participants. The result is a bifurcated market where the same token can carry different rights and valuations depending on the layer in which it is used.
Valuations disconnect from fundamentals
The regulatory shift is forcing a reassessment of how tokens are valued. Historically, prices were driven by speculation, governance influence, and utility demand. Restrictions on revenue sharing are eroding speculative premiums, while governance rights carry less weight without financial upside.
Valuation models are now shifting toward measurable on-chain performance. A June 2026 report from Grayscale found that leading protocols are trading at revenue multiples between 1x and 4x, well below traditional software benchmarks, suggesting the market has yet to fully price in earnings potential under the new rules.
Market pressure intensifies
The transition is unfolding during a broader downturn in DeFi. Total value locked has fallen from $115 billion in January to $70 billion by late June 2026. At the same time, security concerns are rising, with approximately $775 million lost to exploits in the second quarter alone.
Revenue generation is also highly concentrated, with the top ten protocols accounting for more than 80% of total distributions in recent data. This concentration is pushing traders toward projects that demonstrate consistent income rather than speculative growth.
Turning point for token economics
The CLARITY Act marks a structural shift for digital assets, separating tokens from direct claims on protocol earnings and redefining how value is created and sustained.
Three paths are emerging for the sector: regulatory acceptance of buyback models, widespread adoption of dual-layer compliance structures, or a lasting disconnect between token prices and protocol performance.
Whichever direction prevails, DeFi protocols are now operating under tighter legal constraints, facing the challenge of maintaining relevance and value without relying on traditional profit-sharing mechanisms.
For deeper context on U.S. crypto rules and DeFi’s future, explore our analysis in this regulatory breakdown.
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