Clarity's failure could speed crypto innovation while shielding incumbents

SEC and CFTC initiatives could expand regulated onchain trading and institutional access.

Legal experts expect gradual progress, with gaps Congress must address.

Executives see opportunities for DeFi, but established exchanges could retain their competitive advantage.

The Digital Asset Market Clarity Act’s failure to advance in the Senate has shifted the next phase of U.S. crypto regulation to the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), opening prospects for more trading and investment to move onchain while leaving a central question unresolved: how much certainty can regulators deliver without Congress?

Interviews with senior executives and legal experts suggest broad agreement that regulation will keep moving. Their expectations diverge over whether agency action can become a durable foundation or leave businesses adapting to rules vulnerable to political and legal change.

Lev Breydo, an assistant professor of law at William & Mary Law School, said Clarity exposed divisions within the industry, from ethics provisions to the yield fight with community banks.

“A coalition that looked unified against Gensler found out definitions create winners and losers,” he said.

Despite the setback, agencies are moving quickly to fill the regulatory gap.

The SEC’s five-year “Innovation Exemption” introduced September 17 lets qualifying venues trade tokenized U.S. stocks through blockchain liquidity pools while it works on permanent rules.

The CFTC followed on October 5, seeking feedback on rules for leveraged retail crypto trading and a new registration category for crypto markets. That starts a lengthy public comment and rulemaking process, rather than putting rules into effect.

Meanwhile, the SEC’s October 1 custody proposal would let state trust companies safeguard client crypto and allow advisers and funds to hold it themselves under certain conditions.

Looking into 2027, Breydo said he expects the SEC to focus on completing offering and custody rules and building on its tokenized-stock exemption. He sees the agencies’ March joint interpretive release as an important foundation, superseding earlier guidance and allowing coordination within existing law.

But a key gap remains: ordinary, unleveraged spot trading still lacks comprehensive federal oversight, beyond the CFTC’s anti-fraud and anti-manipulation powers. Closing that gap was a central goal of Clarity.

More activity, sooner

For some executives, the legislative setback could produce faster commercial opportunities.

“The SEC and CFTC are already moving proactively to provide the regulatory certainty markets need, and that’s unlocking a wave of M&A across digital assets, traditional financial services, and fintech alike,” said Paul McCaffery, head of digital assets at investment bank KBW.