Four lawyers take on the question of agency power in the case of a broad regulatory bill written by a relatively crypto-friendly Congress.
The first version of the Digital Asset Market Clarity Act of 2025, a bill creating a regulatory market structure for digital assets in the United States, is out and circulating. At 236 pages, the bill, also known as the CLARITY Act of 2025, is clearly comprehensive. The question now is whether it’s a good one.
For that, as always, the devil is in the details.
The devil, in this case, is the Securities and Exchange Commission (SEC), which under its Biden-era leadership did everything it could to kill off the crypto industry. In this it was assisted by an alphabet soup of agencies, including the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the currency (OCC), which used tactics collectively dubbed Operation Choke Point 2.0 to de-bank the industry.
“This is likely the strongest version of a market structure bill we’ve thus seen — clearer jurisdictional lines, a credible framework for Commodity Futures Trading Commission (CFTC) oversight, and meaningful movement toward useful digital asset classification,” Mike Katz, a partner at law firm Manatt, Phelps & Phillips told The Defiant. He continued:
“It reflects how far the conversation has come. But it’s not finished work and several critical issues — like how to handle secondary markets, custody, and when SEC jurisdiction kicks in — are still punted for future rulemaking.”
That ambiguity could be a problem, he said, because “the industry understandably has PTSD from the Gensler-era SEC and wants statutory specificity to avoid open-ended regulatory discretion.”
The CLARITY Act’s answer to the industry’s “PTSD” from the SEC under Gary Gensler’s leadership is to give crypto the alphabet soup agency it arguably wants: The CFTC as the primary regulator of digital assets.
The CFTC as an agency has not historically been hostile to the cryptocurrency industry like the SEC has, and many feel that most cryptocurrencies more naturally fit the definition of a commodity than a security.
But the CFTC primarily regulates derivatives and commodities, so it would need new statutory authority to regulate spot markets. The Clarity Act gives it that.
“It would impose affirmative regulation over spot markets that rests with the CFTC, which would be first of its kind,” explained Brandon Ferrick, general counsel of blockchain infrastructure company Douro Labs, in an email to The Defiant. “Today, no spot markets are regulated by the CFTC other than being policed for market manipulation and fraud.”
Agencies will make the rules
While there are many details in the CLARITY Act that are worth discussing, the big one is, “how much discretion are we comfortable giving to regulators,” which lawyer and long-time crypto industry advocate Jake Chervinsky asked in a recent X post.
The CLARITY Act in its current form “leaves many issues unresolved, instead authorizing — and frequently requiring — the SEC and CFTC to figure them out in rulemaking,” noted Chervinsky, who is chief legal officer of venture capital firm Variant Fund and a board member of the Blockchain Association, as well as the DeFi Education Fund. He continued:
“This is typical for legislation: Congress sets out a regulatory framework and then empowers the agencies to fill up the details.”
Historically, giving more authority and leaving legal interpretation up to the agencies has been anathema to the crypto industry, given the SEC’s “‘kill the industry’ mode” under Gensler, he argued, adding:
“Legislation clearly giving the SEC more authority was unthinkable in that environment, since it was obvious that the SEC would use any new power it received to destroy crypto.”
Indeed, past discussions about market structure bills with Congress mostly focused on narrowing agencies’ authority, not expanding it, Chervinsky added.
The problem with this is there’s just no practical way around the reality that any broad market structure bill would have to give a great deal of control over creating the actual rules on the ground to the regulating agencies.
“There’s just no way to hammer out every detail of a new regulatory framework this significant in Congress,” Chervinsky concluded.
But that PTSD still exists, even with friendly, well-informed and pro-crypto leaders at the SEC and CFTC — for now.
Uncertain for years to come
“The eventual impact of a law based on this bill will depend heavily on regulatory guidance and interpretation and likely eventual court cases,” Eli Cohen, chief legal officer of real-world asset (RWA) tokenization firm Centrifuge told The Defiant. “This means that a full assessment of the benefits of the law would be uncertain for many years to come.”
Personally, Cohen — who is also chief compliance officer at Centrifuge-native web3 asset manager Anemoy — said he would have “preferred a more focused bill” that only made clear that cryptocurrencies are not securities and gave the regulatory authority needed to issue licenses to digital asset service providers.
Indeed, as Chervinsky noted, there could be another Gensler in charge at one of the agencies in four years.
“Fear of that risk is a primary driver of the politics underlying the market structure bill today,” Chervinsky said in the same X post. But a bill that gives the agencies so little control that they can’t harm the industry likely wouldn’t make it into law at all, he added.
“The devil is in the details here — what authorities do they have, and how exactly can they abuse them — but it’s hard to deny that this scenario is a plausible one,” Chervinsky said.
Meanwhile, the lawmakers behind the bill are gathering feedback before a hearing scheduled for tomorrow, followed by a markup for the bill set for next week.
