David Sacks announced on December 18 that Senate Banking Chairman Tim Scott and Senate Agriculture Chairman John Boozman had confirmed a January 2026 increase for the CLARITY Act.
“We can’t wait to finish the work in January! »
The problem: a January markup ends nothing.
This is the first step in a multi-year pipeline where the most controversial issues have not been resolved and the statutory language is still in parentheses.
The real work won’t begin until the bill gets a Senate vote, conference negotiations and a presidential signature.
The CLARITY Act was passed by the House in July alongside the GENIUS stablecoin bill. He now sits on the Senate Banking Committee, where two separate bills must be merged before any increase can take place.
These drafts still contain bracketed definitions of what counts as “security” and the extent to which DeFi infrastructure falls within the regulatory scope. They also leave open the question of how intrusive reporting requirements become for trading venues.
A January raise means staff have agreed to begin negotiations. This does not mean that difficult decisions are made.
The split and what is still moving
CLARITY’s main move divides crypto into three categories.
“Digital Products” are tokens related to blockchain systems, such as payments, governance and network incentives, excluding securities and stablecoins.
“Investment contract assets” are digital products sold to raise capital. They begin as securities under the jurisdiction of the SEC when issued, then lose their security status in secondary trading and move to CFTC oversight.
“Permissioned payment stablecoins” are national currency tokens issued by supervised entities that fall under the GENIUS framework.
This gives the CFTC exclusive jurisdiction over digital commodity spot markets, beyond its current anti-fraud mission. The SEC retains authority over issuers and asset offerings of investment contracts.
Meanwhile, banking regulators oversee stablecoin issuers. The lines on the field are in ink, but some markings are still in pencil.
The term “security” itself appears in square brackets in the Senate text. The Senate Agriculture bill leaves entire sections of DeFi bracketed and labeled “seeking additional comment” because no one has agreed on what is “decentralized” enough to move beyond title status.
Plumbing that does not yet exist
CLARITY creates a whole series of new registered entities. Digital commodity exchanges must adhere to fundamental principles regarding listing standards, oversight, system safeguards, capital and reporting.
They can only list tokens whose issuers meet disclosure requirements, including source code.
Digital commodities brokers and dealers require CFTC registration, capital standards, recordkeeping, and retail client protections.
Qualified digital asset custodians hold clients’ digital assets on behalf of companies registered under the supervision of the banking regulator, the SEC or the CFTC.
The DeFi exclusions exclude non-custodial activities, such as running nodes, validation and wallet creation, from regulated intermediary status, although anti-fraud powers still apply.
Senate Agriculture leaves these sections in square brackets because the compromise is unresolved: making it too broad risks a collapse of retail protection, but making it too narrow risks moving the protocol overseas.
It is in police custody that the bill hurts. CLARITY requires exchanges and broker-dealers to maintain customer digital assets with qualified custodians and segregate customer assets.
The project calls for regulators to modernize recordkeeping so that blockchain can serve as books and records. It prohibits regulators from requiring banks to treat customers’ cryptocurrencies as balance sheet assets or to hold additional capital beyond operational risk.
The statutory text incorporates most of the actual details into future custody standards, disclosure models and unwritten listing rules.
Additionally, the bill gives regulators 360 days from enactment to write most rules, with some provisions extending up to 18 months in Senate plans. This means years of hybrid status where current market plumbing coexists with partially implemented US legislation.
Politics is not settled
The markup takes place in a controversial context. Democrats are worried about Trump’s control over independent agencies, especially if the Supreme Court allows presidents to fire SEC and CFTC commissioners at will.
The legal analysis noted that excluding the investment contract could allow for regulatory arbitrage, moving SEC oversight past fundraising and leaving a historically underfunded CFTC to control retail spot trading.
Before anything changes on an exchange screen, banks and agriculture merge their deals. Both committees are moving through markups, where Democrats will push for stronger detail protections and limits on presidential control.
Leadership finds 60 votes in the Senate, not a transition path in a divided chamber.
The House and Senate reconcile their versions in conference or by direct acceptance. The president signs it and donors fund a much larger CFTC footprint that former officials say the agency can’t handle without significantly more money and personnel.
Regulators write the rules over a period of 360 days to 18 months. Companies move to interim status while rules are finalized.
The courts have their say, as the Supreme Court’s doctrine on agency power means that key rules regarding token classification and DeFi treatment will be subject to litigation.
David Sacks can hope to finish the job in January, but from a market perspective, January is the start of a multi-year pipeline before anything becomes binding. The hardest part hasn’t started.
