CLARITY Act Update: DeFi Carve-Out, Digital Commodities, and the Next Phase of Crypto Market Structure

Introduction

Washington is preparing a January markup for the Digital Asset Market Clarity Act (CLARITY Act) of 2025, a major U.S. crypto regulation proposal designed to reduce the long-running SEC vs CFTC jurisdiction fight and create clearer rules for digital assets trading. The bill’s core pitch is a workable market-structure framework: clarify when tokens in secondary markets should be treated differently from the original investment-contract style sale, and establish a registration pathway for trading venues that provide real crypto liquidity. Even with momentum, the next phase matters because the hardest questions are practical—how definitions operate in real markets and whether rules will hold up under enforcement and litigation.

A central feature is the DeFi carve-out, which aims to prevent regulators from treating blockchain infrastructure like a regulated intermediary simply for running code or network components. The exclusion covers activities such as operating nodes, relaying or validating transactions, providing wallets and software, publishing or maintaining protocols, offering oracle services, and participating in spot-trading liquidity pools—a direct response to pressure points around who is “in the middle” of a trade. At the same time, the carve-out preserves anti-fraud and anti-manipulation authority, keeping enforcement tools available even when actors claim they are “just software” or “just a front end.” The unresolved tension is where a “user interface” or pool participation crosses into effectively operating a trading venue, especially given realities like admin keys, governance capture, order routing defaults, and MEV/front-end manipulation concerns.

The other major lever is state preemption: the bill would treat a “digital commodity” as a “covered security,” limiting states’ ability to impose their own registration-style requirements and reducing the compliance burden of a 50-state patchwork. Supporters frame this as necessary for a unified national crypto market; critics argue it could weaken fast-moving state-level investor protection at a time when consumer protection and scam enforcement remain urgent. Key unknowns heading into markup include whether “DeFi” is defined by technology vs business reality, how quickly promised clarity becomes real given rulemaking timelines (often up to roughly a year after enactment), and whether the bill’s token-classification architecture withstands regulator and court challenges that could determine how much of the market truly falls under the “digital commodity” umbrella.

Background

U.S. lawmakers are moving closer to a comprehensive framework for crypto market structure. The Digital Asset Market Clarity Act of 2025 (the “CLARITY Act”) is designed to reduce ongoing uncertainty over whether a token is regulated as a security or a commodity, and—just as importantly—which federal agency is in charge when markets don’t fit neatly into either bucket. The bill has already passed the U.S. House and is now positioned for further Senate work, with a January markup expected to shape the final contours of U.S. crypto regulation and enforcement boundaries. The full legislative text is available via Congress.gov, along with a section-by-section overview from the House Financial Services Committee (PDF) and a Congressional Research Service explainer (CRS IN12583).

At a high level, CLARITY aims to (1) clarify the SEC vs. CFTC split, (2) define key categories like digital commodity and related concepts, (3) create a registration and oversight path for crypto trading venues, and (4) reduce state-by-state fragmentation through federal preemption in targeted areas. For DeFi builders, fintech compliance teams, exchanges, brokers, custodians, and institutional participants, the important detail isn’t the headline “clarity”—it’s how definitions and carve-outs behave under real-world conditions such as front-end control, liquidity pool mechanics, governance influence, and market integrity risks like manipulation.

Where the bill stands (and why process matters)

Public tracking shows H.R. 3633 passed the House with a bipartisan vote and moved onward in the legislative process (GovTrack bill page; House vote record). That status matters because even if the bill ultimately becomes law, the operational “rulebook” won’t materialize overnight. The CRS summary highlights that implementation relies heavily on subsequent agency rulemaking and timelines tied to enactment (CRS IN12583). For market participants, this interim period is often when policy risk is highest: business decisions continue, while supervisory expectations and registration processes are still being written.

The core policy objective: end the jurisdiction tug-of-war

Crypto regulation in the U.S. has repeatedly run into a structural problem: tokens can be distributed through capital-raising patterns associated with securities law, while later trading activity often resembles commodities-style spot markets. CLARITY attempts to draw cleaner lines by separating:

• The fundraising transaction (which may involve an “investment contract” analysis under securities law), from

• The asset itself once it is broadly transferable and traded, especially in secondary markets.

This separation is central to the bill’s architecture. It is also central to whether compliance becomes more predictable for exchanges, market makers, broker/dealers, and fintech platforms that want to support token trading without inheriting perpetual uncertainty.

Key terms expanded: “digital asset,” “digital commodity,” and related classifications

CLARITY introduces and operationalizes definitions intended to anchor regulation in statute rather than enforcement-by-theory. The bill text defines a digital asset broadly as a digital representation of value recorded on a cryptographically secured distributed ledger or similar technology (Congress.gov text).

More consequential is digital commodity—a category meant to cover certain blockchain-linked assets whose value is tied to the use or operation of a blockchain system (for example, network fees, validation, transfer functionality, or governance features), while excluding instruments that remain firmly in other regimes (e.g., securities, certain stablecoins, derivatives, and traditional deposits), as described in the statutory language and summarized by the House committee.

Two additional concepts matter for fintech and DeFi audiences:

• Investment contract asset: CLARITY contemplates the idea that a token sold “pursuant to an investment contract” should not automatically remain an investment contract forever in every context—especially for certain types of person-to-person transfers without an intermediary. This is part of the bill’s effort to treat some secondary trading differently than the original distribution pathway.

• Mature blockchain: The bill includes a framework that turns on whether a network and related asset are controlled by any person or coordinated group—an attempt to formalize the difference between a project still dependent on a promoter and a network that is meaningfully decentralized in control terms.

These definitions will likely determine how much of the market can confidently adopt a “commodities-style” compliance posture versus remaining inside securities-style requirements.

The DeFi carve-out: infrastructure vs. intermediary

One of the most closely watched pieces is the DeFi exclusion/carve-out, which aims to prevent certain decentralized finance activities from being treated as regulated intermediaries solely because they involve software or network participation. The bill’s language covers activities commonly associated with permissionless infrastructure—operating nodes, validating/sequencing/relaying transactions, publishing software (including wallets), providing interfaces that allow users to access blockchain data, and participating in liquidity pools for spot trades, among other functions.

This approach reflects an important policy position: operating infrastructure is not automatically the same as operating a market.

At the same time, CLARITY explicitly preserves anti-fraud and anti-manipulation authority. In practice, that means even if a party is not treated as a registrable intermediary under market-structure rules, regulators may still pursue deceptive conduct or manipulation. This distinction matters for DeFi and fintech teams because it separates:

• Registration/compliance obligations (surveillance programs, intermediary controls, venue rules), from

• Enforcement exposure when conduct is alleged to be fraudulent or manipulative.

The unresolved edge: “front ends,” control, and market integrity

Many real-world disputes in DeFi do not turn on whether smart contracts exist; they turn on whether someone meaningfully controls critical components such as:

• UI defaults and routing decisions

• Admin keys or upgrade authority

• Governance outcomes dominated by insiders or concentrated delegates

• Fee switches and parameter changes that influence execution quality

• Liquidity incentives and listing choices that create conflicts of interest

CLARITY’s carve-out narrows the assumption that providing software or an interface makes you a regulated intermediary, but it does not eliminate difficult classification calls where business reality looks like venue operation. Markup discussions are likely to focus on where to draw lines so that genuine infrastructure is not regulated as a broker/exchange, while functionally centralized coordination is not able to re-label itself as “just a UI.”

The “covered security” preemption move: fewer state-by-state rules, different trade-offs

Another major component is state-law preemption. CLARITY includes language that treats a digital commodity as a “covered security” for purposes of limiting state registration and qualification requirements—often referred to as reducing “blue sky” fragmentation. The policy goal is straightforward: a national market functions more efficiently when participants aren’t forced to navigate dozens of overlapping state frameworks for the same activity.

For fintech operators, this could reduce compliance complexity for certain token categories by making it easier to design a uniform product and distribution approach across the U.S. However, preemption is also where consumer-protection debates intensify. State securities regulators often move quickly on fraud and abusive practices, and any reduction in their authority can raise concerns about whether enforcement becomes slower or more centralized. CLARITY’s structure attempts to preserve anti-fraud authority even while restricting certain state registration requirements.

What changes for exchanges, brokers, and fintech platforms

CLARITY is designed to create a clearer registration and oversight perimeter for entities that provide liquidity and market access, especially for spot markets in digital commodities. The House committee summary and CRS overview describe a framework that would expand the CFTC’s role in overseeing certain digital commodity spot market activity while coordinating with the SEC where securities remain involved.

From an operational standpoint, key implications for market participants include:

• More predictable listing and classification logic (if definitions hold up under implementation and court scrutiny)

• A clearer compliance roadmap for platforms that want to support token trading without assuming every asset is a security in perpetuity

• A transition period risk where firms may need to make strategic decisions before rules are fully implemented, even if statutory deadlines are set

Open questions heading into markup

Even with a strong statutory framework, the most important outcomes will likely turn on how policymakers refine edge cases and how agencies implement rules. Areas to watch include:

1. DeFi definition by technology vs. business reality

If the carve-out is too broad, critics will argue it enables de facto intermediaries to avoid market-structure obligations. If it is too narrow, builders will argue it reintroduces “regulation by chokepoint” for infrastructure and open-source development.

2. Digital commodity classification robustness

The preemption and market-structure perimeter relies on the “digital commodity” category meaningfully capturing what Congress intends. If courts or regulators determine that many tokens remain securities throughout their lifecycle, the practical impact of preemption and CFTC-focused spot oversight could be reduced.

3. Market integrity and accountability around interfaces and control

Markup changes could focus on controls, disclosures, or conditions that better address conflicts of interest, execution-quality risks, and manipulation vectors—without collapsing DeFi into traditional intermediary regulation.

4. Rulemaking execution and sequencing

Statute can set deadlines, but implementation quality and coordination matter. The CRS overview underscores that meaningful clarity often depends on the follow-on regulatory process.

Bottom line for DeFi and fintech readers

The CLARITY Act is a serious attempt to build a durable U.S. framework for digital assets, DeFi, and crypto market structure, with clearer lines between SEC and CFTC roles, explicit definitions like digital commodity, and an infrastructure-focused approach to certain DeFi activities. The most consequential debates are now less about slogans and more about boundaries: how “interface,” “control,” and “market operator” are treated; how state preemption affects enforcement dynamics; and how quickly rulemaking can translate statutory intent into day-to-day compliance expectations.

References (primary and supporting)

• CLARITY Act text (H.R. 3633): Congress.gov

• House Financial Services Committee section-by-section: PDF

• CRS overview: IN12583

• Legislative tracking and vote: GovTrack bill page, House vote