Commodity Futures Trading Commission Chair Michael Selig warned that federal regulators may be left to shape U.S. cryptocurrency policy on their own if Congress does not pass the Clarity Act before the Senate leaves for its August recess, raising the stakes for one of the most closely watched digital asset bills in Washington.
Selig said the absence of a comprehensive federal framework has left the cryptocurrency sector operating under a patchwork of state rules and agency enforcement actions. He urged lawmakers to move the legislation forward, arguing that Congress, not regulators acting case by case, should decide how digital assets are divided between commodities and securities law.
The Clarity Act, which passed the House in July 2025, is intended to draw clearer lines between the CFTC and the Securities and Exchange Commission. Under the proposal, the CFTC would receive broader authority over certain digital commodities, while the SEC would continue to oversee assets that qualify as securities. Supporters say the bill would give companies, traders and regulators a clearer rulebook after years of uncertainty.
But the measure remains stuck in Senate negotiations. Lawmakers have yet to settle disputes over decentralized finance, illicit finance controls, ethics provisions tied to political figures’ digital asset activities, protections for software developers and the treatment of rewards connected to stablecoins.
The delay has narrowed the window for action. The Senate is expected to return on July 13, leaving only a few weeks before the August 7 recess target. Selig’s warning adds pressure to a process that has already missed an expected deadline for releasing updated legislative text around the July 4 holiday.
“If Congress does not act, regulators will continue filling the void,” Selig said in an interview, making clear that agency-led policy would remain the practical alternative to legislation.
A fight over who writes the rules
At the center of the debate is a basic question: should cryptocurrency policy be written by elected lawmakers through a national statute, or should it continue emerging through enforcement actions, agency interpretations and state-level licensing regimes?
Selig has argued that relying on regulators alone creates inconsistency. Without congressional direction, agencies must interpret existing laws that were not designed for blockchain-based assets, tokenized networks or decentralized trading systems. That can leave businesses unsure which rules apply, while traders and consumers face different protections depending on where a company operates.
The CFTC chair said a federal standard is needed to reduce legal ambiguity and improve consumer protection. His comments reflect a broader concern among digital asset companies and some lawmakers that the United States has moved too slowly compared with other major markets that have adopted more specific rules for crypto assets.
The CFTC and SEC have long differed in how they classify digital assets. The SEC has often treated many tokens as securities that should comply with securities laws, while the CFTC has described Bitcoin and some other assets as commodities. The Clarity Act attempts to formalize the boundary between those jurisdictions, although the details remain politically sensitive.
A successful bill would not end all disputes, but it would give agencies a statutory structure for deciding which assets fall under which regulator. Supporters say that would reduce the risk of conflicting interpretations and give market participants a clearer path for compliance.
Senate negotiations remain difficult
The Senate Banking Committee moved the legislation forward on May 14, with two Democratic members joining Republicans in support. That bipartisan support gave the bill momentum, but it has not been enough to resolve broader disagreements in the Senate.
Senate Digital Asset Subcommittee Chair Cynthia Lummis said talks have been underway since Labor Day last year. According to Lummis, the most recent discussions have focused on decentralized finance, illicit finance provisions and ethics clauses. Earlier rounds of negotiation centered partly on stablecoin terms sought by banks.
Lummis has warned that a failure to advance the measure this year could push a comprehensive U.S. digital asset framework much further into the future. She has also argued that continued delay could weaken the country’s position in financial technology as other jurisdictions create clearer rules.
The Senate had been expected to release legislative text near the July 4 holiday, potentially setting up a summer vote. That did not happen. The missed target suggests negotiators still have not reached agreement on key language.
The August recess is now being treated as an informal deadline. If lawmakers leave Washington without a deal, the legislation could lose momentum heading into the fall, when election-year politics and other priorities may consume the Senate calendar.
Ethics language becomes a sticking point
One unresolved issue involves ethics provisions linked to President Donald Trump and his family’s business interests in digital assets. Some senators have pushed to add language addressing potential conflicts of interest connected to crypto ventures involving political figures or their relatives.
Those provisions have complicated negotiations because they move beyond the bill’s central objective of dividing regulatory authority between the CFTC and SEC. Selig said debates over additional provisions not directly tied to the core regulatory framework have slowed progress.
Supporters of stronger ethics language argue that digital asset policy should address the possibility of public officials benefiting from rules that affect their own financial interests. Opponents say such provisions risk turning a market-structure bill into a broader political fight, making final passage harder.
The dispute illustrates a recurring challenge for major financial legislation. Bills that begin as technical frameworks often become vehicles for wider policy debates, especially when they touch fast-growing markets, campaign politics and consumer protection.
For the Clarity Act, the timing is particularly important. Each unresolved issue reduces the amount of time available for lawmakers to review final text, build support and prepare for a floor vote before the August break.
Concerns over developer protections
Law enforcement agencies have raised separate concerns about Section 604 of the bill, known as the Blockchain Regulatory Certainty Act. The provision is intended to protect certain non-custodial software developers from being treated as financial intermediaries when they do not control customer funds.
Supporters of Section 604 say developers who merely publish code or maintain decentralized infrastructure should not face the same regulatory obligations as exchanges, brokers or custodians that hold assets for customers. They argue that without such protections, software development in the United States could be chilled by legal uncertainty.
Law enforcement officials have taken a more cautious view. Several agencies have warned that the language could make it harder to investigate illicit finance by shielding some participants in decentralized systems from oversight. They fear broad exemptions could allow bad actors to exploit non-custodial tools while limiting the ability of authorities to identify responsible parties.
The dispute reflects one of the hardest questions in crypto regulation: how to supervise financial activity when no single company holds customer assets or operates a traditional platform. Decentralized finance platforms can allow users to trade, lend or borrow through automated software, but responsibility for compliance is often difficult to assign.
Lawmakers must decide whether the bill’s developer protections are narrow enough to safeguard neutral technology providers without creating loopholes for illegal activity. That balance remains one of the major obstacles to a final agreement.
Stablecoin rewards add another layer
Stablecoins have also shaped the Senate talks. Earlier negotiations focused on terms sought by banks, including questions about whether stablecoin issuers or related platforms should be allowed to offer rewards that resemble interest.
Banks have argued that reward-bearing stablecoins could compete with deposits if they are not subject to comparable rules. Digital asset firms have countered that stablecoins function differently from bank deposits and should not be forced into the same regulatory model.
Although stablecoin legislation has at times moved separately from broader market-structure reform, the issues overlap. Stablecoins are widely used in cryptocurrency trading and settlement, and their regulation affects liquidity across the digital asset market.
The debate over rewards is especially sensitive because it touches both consumer protection and competition with traditional finance. If rewards are permitted, lawmakers may need to decide who can offer them, what disclosures are required, and whether issuers must meet banking-style standards.
The Clarity Act’s broader focus is market structure, but stablecoin language has continued to influence negotiations because banks, fintech firms and digital asset companies all have competing interests in the final framework.
Market expectations have weakened
The prolonged negotiations have reduced confidence that the Clarity Act will pass on the current timeline. Market research firms have lowered their expectations for the bill’s approval, citing time constraints and limited progress.
Galaxy Research cut its projection for the bill’s 2026 success to 50% from 60%, while TD Cowen said approval before the November midterm elections remains uncertain because of continuing political disagreements. Prediction-market pricing has also suggested that expectations for passage have softened after rising earlier in the year.
The weakening outlook comes as the cryptocurrency market remains under pressure. Total market capitalization is near $2.3 trillion, down sharply from the peak recorded in October 2025. Daily trading volumes have also fallen, a sign that many traders are waiting for clearer signals before taking larger positions.
Regulatory uncertainty is not the only factor affecting market activity, but it remains a major one. When the legal status of assets, platforms and intermediaries is unclear, firms may delay product launches, traders may reduce exposure, and institutions may hesitate to expand digital asset operations.
A clear federal framework could improve confidence by reducing legal risk. But if Congress fails to act, the market will continue operating under the existing mix of state rules, federal enforcement actions and uncertain agency guidance.
What passage would change
If passed, the Clarity Act would create clearer jurisdictional lines between the CFTC and SEC. Assets that meet the definition of digital commodities would generally fall under the CFTC, while securities-like tokens would remain under SEC oversight.
That distinction matters because the two agencies apply different legal standards. Securities regulation focuses heavily on issuer disclosures, registration and protections for buyers of financial instruments tied to an enterprise. Commodity regulation places more emphasis on market integrity, derivatives oversight, fraud prevention and manipulation controls.
For companies building blockchain networks, a clearer classification process could reduce the risk of later enforcement actions. For traders, it could make it easier to understand which protections apply when using platforms or buying specific assets.
The bill could also help federal agencies coordinate more effectively. Today, overlapping claims of authority can create confusion for both regulators and the market. A statute that defines responsibilities more precisely could reduce duplication and improve enforcement.
Still, passage would not instantly resolve every question. Agencies would need to write rules, issue guidance and build supervisory programs. Courts would likely continue to play a role in interpreting the law. But supporters say legislation would at least create a foundation that is currently missing.
Failure would preserve the current system
If the Senate does not pass the bill before the August recess, the practical result would be more of the same. Federal agencies would continue shaping policy through enforcement actions and rule interpretations, while companies would keep navigating state-by-state requirements.
That outcome is what Selig has warned against. In his view, the lack of congressional action leaves regulators with no choice but to continue applying existing laws to new technologies, even when those laws do not provide a perfect fit.
The SEC and CFTC would likely remain central players in determining the legal treatment of digital assets. State regulators would also continue enforcing licensing, consumer protection and money transmission rules. For businesses operating nationally, that means compliance would remain fragmented and costly.
The uncertainty could also affect the United States’ role in global digital finance. Other regions have moved ahead with dedicated crypto frameworks, giving firms clearer expectations about licensing and supervision. U.S. lawmakers who support the Clarity Act say the country risks falling behind if it cannot agree on a national approach.
For now, the bill’s fate depends on whether senators can resolve the remaining disputes quickly. The coming weeks are expected to be highly sensitive for the cryptocurrency market, with traders watching for any sign that negotiators have reached a compromise.
Selig’s message was direct: Congress still has the opportunity to write the rules, but time is running short. If lawmakers fail to act, regulators will keep doing the job by default.
For a deeper dive into U.S. crypto oversight battles, explore the possible future of crypto regulation in the US today.
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