The Digital Asset Market Clarity Act, or simply the CLARITY Act, is an act of the US Government that simplifies cryptocurrency regulations (other than stablecoins). It clears the ambiguity about cryptocurrency regulations between the Commodities Futures Trading Commission and the Securities and Exchange Commission.
The Act was introduced on May 29, 2025, and was passed by the US House of Representatives on July 17, 2025. The House of Representatives voted 297 in favour and 134 against the act.
Details of the Act
The CLARITY Act is a bipartisan act of the United States that clarifies the scope of regulatory powers of the CFTC and the SEC in the cryptocurrency markets. The Act was proposed by Senator French Hill on May 29, 2025 ,and was passed as a law on July 18, 2025, along with the GENIUS Act and the Anti CBDC Surveillance Act.
This act ends years of contention between the SEC and the CFTC for regulatory oversight in the crypto markets. Prior to the CLARITY Act, the SEC pursued a policy of regulatory overreach under Chairman Gary Gensler, ultimately losing and compromising on many cases against crypto projects like Consensys (MetaMask), Ripple Labs (XRP), and Uniswap.
It builds upon the previously passed bipartisan law called the US FIT-21, which provides classification of cryptocurrencies into decentralized and centralized projects and also defines the degree of regulation to some extent.
Decentralized vs Centralized Cryptocurrencies
Building upon the foundation of the previous act on cryptocurrencies, i.e., the Financial Innovation and Technology for the 21st Century Act (FIT21), the CLARITY Act distinguishes cryptocurrencies into three major categories: payment stablecoins, decentralized cryptocurrencies, and centralized cryptocurrencies.
However, there is also an implied classification (by omission) of non-payment stablecoins.
The act puts the centralized cryptocurrencies in i.e, any cryptocurrency that has at least 20% of the supply with one individual or legal entity (company, LLP, bank, etc) under the purview of the SEC. It also puts all cryptocurrencies under the purview of the SEC that are traded on an SEC-regulated exchange, such as the CME.
Decentralized cryptocurrencies are classified as those that do not have 20% of the token supply held by a single person or legal entity. They are put under the purview of the CFTC and classified as commodities. This is where Bitcoin and Ethereum would be put.
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Regulatory Powers of the SEC
As stated in the previous section, the SEC has an overview of all projects that are not sufficiently decentralized.
It also has regulatory reach for those exchanges where centralized cryptocurrencies are traded. However, in this case, the regulatory power is shared with the CFTC.
Interestingly, the SEC has also been granted anti-fraud authority over exchanges and platforms that were already subject to its regulatory oversight, and even if they trade payment stablecoins.
Regulatory Powers of the CFTC
The CFTC has been granted regulatory power over decentralized cryptocurrencies in the belief that these coins and tokens are digital commodities and not securities.
In addition, the CFTC oversees exchanges, brokers and dealers where “digital commodities” are traded.
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Exemptions
Some exemptions are also provided under this act to facilitate financial innovation in the country.
Those exchanges and blockchains that are set to mature into decentralized projects within a set timeframe are exempted from SEC registration, provided that their net total token sales remain under $75 million per year.
This provision of the act could be hailed as a supporter of projects where token distribution takes place for the sake of the community and not for profit-making at higher prices.
Consumer Protection
Consumer Protection has also been under focus while drafting this act. It mandates Anti Money Laundering for all entities.
However, it remains a mystery on how these AML laws would be applied to Bitcoin.
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How Did Markets React to the Act?
The Act got praises from people inside the government as well as those in crypto markets.
Majority Whip Tom Emmer said the bill would bring much needed regulatory clarity.
Anthony Pugliese, President and CEO of the Institute of Internal Auditors, said that the Act would bring clarity for investors and would boost American confidence.
Crypto Council for Innovation hailed it as a historic moment. The organization said GENIUS and CLARITY discourage misleading practices and define how regulatory oversight is shared between the CFTC and SEC.
The Decentralization Research Center commented on the act, saying it addresses a critical aspect of cryptocurrencies, specifically the transition from a security to a commodity.
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Criticisms
The act did face some criticisms from Democrats. Senator Elizabeth Warren said that the act diminishes the power of the SEC by exposing investors to fraud. She also said that it would disrupt traditional markets.
Future Scope
The Act would perhaps merge with an existing bipartisan Act in the Senate called the Digital Asset Market Structure and Investor Protection Act, which is expected to pass within the second half of 2025.
