Crypto rules are ‘not a favor,’ says SEC as CLARITY Act stalls in the Senate
U.S. Securities and Exchange Commission (SEC) Chairman Paul Atkins has pushed back strongly against the idea that the administration is doing the crypto industry any special favors by pursuing clearer regulations.
In a recent speech, Atkins argued that the agency’s latest initiatives are not handouts to digital asset firms, but part of a broader effort to give markets the legal certainty they need to function efficiently.
According to him, the SEC is taking “historic steps” to update its rulebook so that modern markets can increasingly operate on-chain:
> “Over the past year, we have moved purposefully to answer President Trump’s call to make America the crypto capital of the world. We are taking historic steps to modernize our rules and regulations to facilitate markets moving on-chain.”
Atkins stressed that, after years in which crypto projects operated in a regulatory gray zone, regulators are finally providing long-term certainty to token issuers and intermediaries:
> “After years of obscurity, we’ve delivered long-hauled certainty for digital asset issuers. This is not a favor to the industry; it’s what markets require to function: clear rules for the road without preference.”
SEC and CFTC attempt to coordinate under the CLARITY Act vision
As envisioned under the proposed CLARITY Act, the SEC and the Commodity Futures Trading Commission (CFTC) would be the primary federal regulators overseeing digital asset markets. In anticipation of such a framework, both agencies have tried to better align their approaches and supervisory roles.
The SEC has published multiple staff-level guidance documents touching on key issues such as:
– how different crypto assets should be classified under existing securities laws,
– what standards exchange-traded funds (ETFs) holding digital assets must meet,
– and how traditional financial rules apply when assets are issued or traded on public blockchains.
While these documents are nonbinding, they have been widely used by lawyers, issuers, and platforms to interpret the SEC’s expectations and to structure new products. The regulator has also signaled that more guidance and staff opinions are on the way as the market continues to evolve.
“We broke trust,” SEC official admits
The push for clarity is not only about market efficiency; it is also about reputation. In a separate interview with Bloomberg, Brian Daly, the SEC’s Head of Investment Management, acknowledged that the agency’s track record on crypto has undermined confidence:
> “We did a bad job with crypto, broke trust, but we are looking to get back to a good place and make an orderly process to deal with the 200(!) ETF filings they get every month, including novel stuff like prediction markets.”
Daly’s comments highlight two realities: first, the SEC understands that its past actions have been perceived as inconsistent or overly hostile by many in the industry; and second, the scale of interest in crypto-linked financial products is enormous, with hundreds of ETF proposals and new structures awaiting review.
The reference to “novel stuff like prediction markets” underscores just how far digital finance has moved beyond simple spot trading of Bitcoin or Ethereum. The SEC is now being forced to decide how tools for forecasting elections, economic data, or sports outcomes fit into existing securities law.
Guidance without law: a legal gray zone
Despite the increased volume of staff bulletins and interpretive memos, a fundamental problem remains: much of the SEC’s “clarity” is not embedded in formal legislation or even binding rules. It is instead rooted in the agency’s internal interpretations.
Because staff guidance does not carry the same legal weight as statutes passed by Congress or formal regulations adopted through a full rulemaking process, it can be – and often is – challenged in court. Market participants that feel the SEC is stretching existing laws to cover new technologies have already shown a willingness to litigate, sometimes successfully.
This legal fragility is one reason why the SEC’s planned “tokenization innovation exemption” has been delayed. The proposal, which was expected to carve out limited regulatory relief for certain experimentation with blockchain-based assets, faced pushback over whether the agency actually had the authority to implement it without explicit support from Congress.
Prediction market platforms illustrate the tension particularly well. Many of these services argue that they offer information markets and hedging tools, not traditional gambling products or investment contracts. Yet they find themselves simultaneously battling state-level gaming regulators and established betting operators, while also navigating federal scrutiny from financial regulators.
Why the CLARITY Act matters
Against this backdrop, the CLARITY Act has been touted as a way to move beyond piecemeal interpretations and contested staff guidance. The bill aims to establish a comprehensive market structure for digital assets in the United States, spell out which agencies oversee which activities, and define how tokens should be treated across their lifecycle.
In practice, that could mean:
– clearer distinctions between securities, commodities, and other types of tokens;
– standardized rules for trading venues listing digital assets;
– explicit protections and obligations for retail investors;
– and a better-defined pathway for projects to launch and gradually decentralize without constant fear of retroactive enforcement.
Proponents argue that only federal legislation can provide the type of “lasting clarity” both regulators and the industry say they want. Without it, the SEC and CFTC are left trying to retrofit decades-old laws onto technologies that behave very differently from traditional stocks or futures.
Political progress – and the bottleneck in the Senate
The CLARITY Act has already jumped one major procedural hurdle by clearing a key committee markup. That step signaled that there is enough interest and agreement among lawmakers to move the bill forward in at least a preliminary form.
But momentum has stalled since then. The legislation has not been scheduled for a vote on the Senate floor, leaving its ultimate fate uncertain. Until leadership decides to bring it to a full vote, it effectively remains in limbo.
This delay has frustrated many in the digital asset space, who argue that the U.S. is losing ground to other jurisdictions that have already adopted comprehensive crypto frameworks. Even some traditional financial institutions have voiced concerns that the lack of a definitive U.S. rulebook makes it more difficult to develop long-term strategies around tokenization and on-chain financial infrastructure.
Global competition: MiCA raises the stakes
Regulatory competition is no longer hypothetical. The European Union’s Markets in Crypto-Assets (MiCA) framework is now in force, offering a unified set of rules for crypto issuers and service providers across the bloc.
MiCA provides:
– licensing requirements for exchanges and custodians,
– disclosure and governance rules for stablecoin issuers,
– and a standardized supervisory approach across all EU member states.
With MiCA live, the contrast with the United States is sharper. Firms that operate globally can compare a clearly defined European regime with a patchwork of U.S. enforcement actions, guidance notes, and state-by-state interpretations.
This has intensified pressure on Washington to move faster. A prominent industry-backed advocacy group funded by Coinbase captured the sentiment succinctly:
> “Every day without clear rules, innovation drifts overseas. The window is narrow. Tell your Senators to schedule a vote for Clarity.”
The balance between innovation and investor protection
The debate over the CLARITY Act and the SEC’s evolving stance is ultimately about balancing two priorities: harnessing innovation and protecting investors. Regulators are acutely aware that crypto markets have been plagued by frauds, hacks, and high-profile collapses, costing retail investors billions.
From their perspective, tightening rules and clarifying obligations is not about boosting token prices but about making sure the next generation of financial infrastructure does not repeat the worst excesses of the last one. That means:
– enforcing disclosure standards on token issuers,
– ensuring platforms properly segregate and safeguard customer assets,
– and making sure complex products are not sold to retail users without appropriate safeguards.
Industry players, on the other hand, warn that if the rules are too rigid, innovation will migrate to friendlier jurisdictions where experimentation is easier, even if investor protections are weaker. They argue that clear, flexible rules – not enforcement-by-ambush – are the best way to keep both capital and talent in the U.S.
What “clarity” would look like in practice
For entrepreneurs and investors, regulatory clarity is not an abstract concept. If the CLARITY Act or similar legislation were enacted, some tangible changes could include:
– Predictable token launches: Startups could know in advance whether their tokens will be treated as securities, commodities, or something else, and what steps they must take at each stage.
– Defined decentralization thresholds: Projects might have clear criteria for when a network is considered sufficiently decentralized to move out of certain securities-law obligations.
– Streamlined ETF review processes: Asset managers seeking to launch crypto-related ETFs could operate under clear, codified guidelines rather than negotiating each product individually.
– Regulated prediction markets: Platforms facilitating trading on event outcomes could be licensed under a specific regime instead of fighting overlapping gambling and securities rules.
Such clarity would not guarantee success for every project, but it would allow companies to plan multi-year roadmaps without constantly recalibrating around new speeches, staff bulletins, or lawsuits.
The risks of legislating too slowly
If Congress continues to delay action on the CLARITY Act, several risks loom:
– Regulatory drift: Agencies will continue to expand their interpretations of old laws, leading to more legal challenges and uneven enforcement.
– Capital flight: Institutional investors may allocate more resources to jurisdictions with better-defined frameworks, reducing U.S. leadership in digital finance.
– Consumer confusion: Without standardized protections and disclosures, retail users will struggle to understand their rights and the risks they face.
– Technological fragmentation: Global crypto markets may split along regulatory lines, complicating cross-border operations and compliance.
These dynamics are not theoretical; they are already playing out in decisions by exchanges, custodians, and infrastructure providers about where to base operations and launch new products.
A turning point for U.S. crypto policy
Atkins’s insistence that “crypto rules are not a favor” underscores a shift in tone from regulators. Rather than treating digital assets as a niche or speculative sideshow, U.S. authorities increasingly frame them as core components of the future financial system – and therefore subject to robust oversight.
Whether that oversight becomes predictable and law-based, or remains reliant on evolving staff interpretations and court battles, hinges in large part on what happens next with the CLARITY Act and related legislation.
For now, the U.S. stands at a crossroads: it has the technological talent, capital markets, and institutional interest to be a global hub for digital assets, but still lacks the cohesive legal framework that other regions have already put in place. The longer that gap persists, the more difficult it may be to reclaim leadership in a sector that moves at the speed of software, not the pace of politics.