The CLARITY Act, officially known as the Digital Asset Market Clarity Act of 2025, is a landmark U.S. law designed to bring clarity and order to digital asset regulation by clearly defining the roles of the SEC and CFTC over different types of crypto assets. This act was passed by the U.S. House of Representatives on July 17, 2025, and is now being considered by the Senate.

The Act replaces the ambiguous Howey Test with a new classification system based on asset characteristics and decentralization levels,creating three main categories:

👉Digital Commodity: Commodities such as Bitcoin, Ethereum, utility tokens, and decentralized mature blockchain assets fall under the exclusive jurisdiction of the CFTC. This includes extending registration requirements for digital commodity exchanges, brokers, and dealers, along with provisional registration status to ease transitional compliance.

👉Investment Contract Asset: These are tokens functioning as securities, mainly early-stage projects or centrally managed tokens with profit expectations, governed by the SEC's registration, reporting, and enforcement rules.

👉Mature Blockchain System: This transitional status allows blockchain projects to achieve a fully decentralized state within four years, enabling them to be treated as digital commodities rather than securities, thus reducing regulatory burdens.


👉The Act grants the CFTC exclusive authority over antifraud and antimarket manipulation enforcement in digital commodities, including spot (cash) markets, which was previously unclear.


👉The SEC maintains jurisdiction over the registration and oversight of investment contract assets, including primary offerings and issuers. It also keeps antifraud authority over securities-related transactions on SEC-registered platforms.

👉For stablecoins intended as payment methods, the Act assigns primary supervisory authority to banking regulators, though both the CFTC and SEC retain antifraud enforcement powers over their respective platforms.

👉 The CLARITY Act preempts state-level securities laws for digital commodities, designating these as covered securities, thereby harmonizing regulation across states.

👉 It also revises accounting rules (replacing SAB 121) to facilitate traditional financial institutions’ custody of digital assets, encouraging broader institutional participation.

Impact and Significance

The CLARITY Act concludes the long-standing regulatory ambiguity by:

👉 Providing a clear, functional framework that allocates the CFTC as the primary regulator for commodities and spot markets and the SEC as the overseer of security tokens and primary offerings.

👉Creating a legal pathway for projects to transition to decentralized, mature blockchain systems, fostering innovation and compliance.

👉Enhancing investor protections with clear disclosure and registration rules while promoting market integrity through defined antifraud enforcement.

👉Aligning U.S. digital asset regulation with international standards, increasing the U.S. competitiveness in the global crypto market.

This legislative clarity is expected to reduce compliance risks, promote innovation, and provide a more stable environment for crypto investors, exchanges, and developers in the U.S.