SEC and CFTC Expand Crypto Rules After Senate Block

The United States Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have launched a series of regulatory actions to provide industry certainty after the Digital Asset Market Clarity (CLARITY) Act stalled in the Senate on September 15. The legislation failed to reach the 60-vote threshold, passing 50-49 in a procedural vote.

In response, the SEC granted a five-year Innovation Exemption, expiring September 17, 2031, which allows qualifying Tokenized Securities Venues to trade tokenized U.S.-listed stocks via automated market makers and liquidity pools without registering as exchanges. The agency is also reviewing modernized custody rules to facilitate 24/7 trading.

Simultaneously, the CFTC submitted a crypto rulemaking proposal to the White House Office of Management and Budget for review. The agency also issued a market-wide no-action letter for passive software providers, such as self-custodial wallet developers, allowing them to connect users to derivatives markets without registering as introducing brokers, provided they do not hold customer assets.

These agency-level moves follow opposition from a coalition of 18 state attorneys general, led by New York Attorney General Letitia James, who argued that federal legislation would undermine state powers to protect citizens from fraud. Brian Armstrong, CEO of Coinbase, urged federal agencies to act, stating that the industry cannot wait on Congress.