SEC to Propose Crypto Regulation as CLARITY Act Stalls in Senate

Written by Xiao Bing

On the evening of August 11, the SEC issued an announcement: On Friday, August 14, at 10:00 a.m., the Commission will hold a public meeting with a single agenda item: to vote on whether to formally propose a "customized issuance framework" (Regulation Crypto) for investment contracts involving crypto assets.

This is the first formal crypto rulemaking since Paul Atkins became SEC chair, with only three business days between the announcement and the meeting.

All three commissioners are Republicans and are expected to approve this step. However, it is important to clarify: Friday’s vote determines only whether to issue the proposal and seek public comment—not the final rule. After the proposal is published, there is typically a 60- to 90-day public comment period, after which the SEC will revise it based on feedback; the earliest the rule could take effect is 2027.

For the market, signals are more important than schedules.

The context is a legislative deadlock in Congress.

The CLARITY Act (Clear Legal Framework for Digital Asset Markets Act) is the closest the U.S. has come to enacting legislation that structures the cryptocurrency market. It passed the House of Representatives in July 2025 by a vote of 294 to 134, and the Senate Banking Committee approved it in May of this year by a vote of 15 to 9. It appeared to be on a smooth path, but it has stalled at the stage of a full Senate vote.

Senate Majority Leader Thune originally planned to push for a vote before the August recess. On August 6, he told reporters that Democrats refused to vote. At 4:52 a.m. on August 8, at the end of an all-night session, Thune filed a procedural motion to postpone the vote to September 15 at 2:15 p.m., the first day senators return from recess.

The reasons for the impasse are specific. Three contentious issues remain unresolved: the details of anti-money laundering and law enforcement provisions, the regulatory oversight of stablecoin yields, and government ethics clauses regarding the president’s holdings of crypto assets. Elizabeth Warren’s stance reflects the Democratic opposition’s position, stating that this version of the bill was "written by the crypto industry, for the crypto industry."

Sixty votes are required to pass the vote. The Republican Party holds 53 seats, meaning at least seven Democratic lawmakers would need to cross party lines. Analyst Jaret Seiberg of TD Cowen stated in an August 10 report a 75% probability of failure. On Polymarket, the odds of the CLARITY Act being signed into law this year have dropped from 82% in February to 21%, with over $5.5 million wagered on this outcome.

The SEC’s actions follow the setback of the CLARITY Act. Rather than waiting for Congress, the SEC is drafting its own rules. TD Cowen characterized this meeting as "the starting point of a series of rulemakings by the SEC to provide regulatory clarity after the Senate’s impasse."

The framework for Regulation Crypto comes from Atkins' public speech in March, during which he proposed three categories of exemptions:

Startup exemption: Allows early-stage crypto projects to conduct limited fundraising without triggering full securities registration requirements, provided certain conditions are met. The reference figure used by Atkins in March is no more than $75 million within a 12-month period.

Exemption from registration: Provides a streamlined pathway for larger fundraising efforts, with disclosure requirements more aligned with the format of a cryptocurrency whitepaper than a full S-1 prospectus of a public company.

Investment Contract Safe Harbor: This is the most critical section, potentially providing a pathway for tokens to "exit securities regulation": when a project’s development team no longer actively dominates network operations, the tokens may no longer be considered investment contracts and thus fall outside SEC jurisdiction.

If included in formal rules, the safe harbor provision would fundamentally alter the compliance logic for crypto projects. Previously, the core issue was that once a token was classified as a security, it remained a security indefinitely, requiring project teams to bear securities law obligations indefinitely. The safe harbor’s logic is that the security status can diminish as the project becomes more decentralized.

In Washington, two parallel tracks are advancing cryptocurrency regulation.

The CLARITY Act follows the legislative path. Its advantages include the highest authority (law supersedes administrative rules), the broadest scope (simultaneously defining the jurisdictions of the SEC and CFTC), and the greatest durability. However, it requires 60 votes, cross-party support, and resolution of three contentious issues. Even if it passes the procedural vote by September 15, there remain debates, amendments, and a final vote—leaving an extremely narrow window to complete the entire process within the year.

Regulation Crypto operates through administrative rulemaking. It does not require congressional approval, and three Republican commissioners are sufficient to advance it. Once a formal rule is adopted, it is harder for the next SEC administration to overturn than a staff statement, as overturning a formal rule requires going through the same notice-and-comment-vote process. However, its scope is limited, covering only the SEC’s jurisdiction and not extending to the CFTC, and it may face legal challenges.

Former SEC official Brett Redfearn’s reaction on X perfectly captures industry sentiment: “No more waiting for Congress to pass the CLARITY Act! It’s time for regulators to take action themselves.”

The two paths are not mutually exclusive. If the CLARITY Act ultimately passes, it will replace Regulation Crypto; if CLARITY fails in Congress, Regulation Crypto becomes the best outcome the industry can achieve. The SEC is using its administrative authority to establish a fallback option for Congress.

For the cryptocurrency industry, there will be no changes to compliance obligations in the short term. Friday’s vote is only the beginning of the rulemaking process, and at least six months will pass from proposal to final implementation.

But the impact at the signal level is immediate. Over the past year, the biggest uncertainty facing the crypto industry in the U.S. has been "When will the rules actually arrive?" The fact that Congress and the SEC are both moving forward—even at different paces—means Washington has moved beyond the debate of "whether to regulate crypto" and into the practical stage of "how to regulate it."

September 15 and August 14, two dates, two tracks, one direction.