As the CLARITY Act Fades, the SEC and CFTC Are Quietly Rewriting Crypto’s Rules
Washington has always moved at its own speed, but in the digital asset industry, that speed is becoming a competitive disadvantage. Congress and the regulators are no longer on the same timeline, and the consequences are rippling through every corner of the crypto economy. The CLARITY Act, the U.S. crypto market structure bill meant to settle long-running questions over digital asset issuance and trading, now looks significantly less likely to pass in 2026. According to Galaxy Research’s latest report, legislative momentum has faded, and the center of gravity in crypto regulation is shifting toward faster-moving agency action. The report paints a picture of a market stuck between two worlds: one where Congress may eventually deliver a comprehensive statute, and another where the SEC and CFTC are already making the rules through guidance, exemptions, and enforcement priorities. For exchanges, issuers, and compliance teams, the practical question is no longer whether Washington will act. It is which agency will fill the gap first — and how long their answers will last.
For years, the industry has asked for one clear rulebook. Instead, it has received a patchwork of staff letters, no-action relief, and enforcement actions that sometimes contradict one another. The CLARITY Act was supposed to change that by drawing a statutory line between securities and commodities, clarifying which regulator oversees which digital asset, and creating a workable path for tokens to move from restricted to tradable. But the political calendar is unforgiving, and the coalition behind the bill has struggled to hold together. Galaxy Research’s analysts note that the odds have shifted, not because the bill’s sponsors lack ambition, but because the legislative window is closing and the opposition is organized. The result is a familiar Washington story: a well-intentioned bill, a crowded agenda, and a growing sense that the moment for a grand bargain has passed. Meanwhile, the regulators are not waiting. They are moving with a sense of urgency that Congress cannot match, and in doing so, they are shaping the future of digital assets in ways that will be difficult to reverse.
Banking Pushback and the Senate’s Last-Minute Fight
The banking sector’s resistance to sweeping market structure changes has already been visible in the Senate, where major crypto legislation faced a last-minute lobbying fight. That friction is now part of the broader backdrop for the CLARITY Act. Traditional financial institutions have never been entirely comfortable with a regulatory framework that treats digital assets as a distinct asset class with its own rules. They worry about capital requirements, consumer protection liabilities, and the risk of being drawn into a market they do not fully control. Those concerns have translated into quiet but effective opposition, and the Senate has felt the pressure. The lobbying fight was not about whether crypto should exist; it was about who should control the pipeline, how much oversight is enough, and whether banks would be forced to hold or facilitate assets they view as unpredictable. That battle consumed time and political capital, and it left the CLARITY Act with a narrower path forward than its supporters had hoped.
As the calendar tightens, the practical question for exchanges, issuers, and compliance teams is not whether Congress will act, but which agency will fill the gap first. That is a significant shift in mindset. For most of the past several years, the crypto industry has focused its energy on Capitol Hill, lobbying for legislation that would provide a comprehensive framework. The assumption was that only Congress could deliver the kind of certainty that institutional capital demands. But the legislative process is slow, messy, and subject to forces that have nothing to do with digital assets. A fight over government funding, a contested nomination, or a broader political crisis can push crypto legislation to the back of the line. Agencies, by contrast, can act quickly. They can issue a rule, publish an interpretation, or grant an exemption without waiting for a floor vote. That speed has real value in a market where technology moves faster than law.
Agencies Step In With Faster, Narrower Answers
The SEC and CFTC have responded to the uncertainty by pushing administrative measures: rulemaking, interpretive guidance, and regulatory exemptions. Galaxy Research says the goal is to clarify how digital assets should be issued, traded, and supervised while the legislative path remains blocked. A staff interpretation or an exemption can be more useful in the near term than a bill that may never get a floor vote. Consider a token project waiting on registration guidance or a trading platform trying to understand which regulator has jurisdiction. A clear statement from the SEC or CFTC can allow that project to make operational decisions immediately. It can open the door to a listing, a partnership, or a capital raise. A congressional bill, no matter how well drafted, cannot do that until it becomes law. That distinction is not academic. It determines whether a company can move forward this quarter or wait another year.
The urgency is especially visible in tokenized real-world assets, where issuance and settlement structures are already scaling. Recent tokenization activity shows that market participants are not waiting for Washington to settle every definition before expanding products. Asset managers, banks, and fintech firms are exploring tokenized versions of Treasuries, private credit, real estate, and other traditional assets. Each of those products raises questions about custody, settlement, disclosure, and jurisdiction. In the absence of a statute, the agencies are becoming the de facto rulemakers. Their guidance is not perfect, and it is often incremental, but it is available. For institutional buyers and token issuers, the difference between a statute and an agency exemption is not academic. A statute binds the agency and survives a leadership change. An exemption is only as durable as the current line of thinking at the commission. That creates a different kind of uncertainty, and it is one that compliance teams are only beginning to understand.
The Durability Problem: Why Guidance Is Not a Statute
Galaxy’s caution is straightforward: administrative fixes lack legal durability. Rulemaking and guidance can be revised or reversed by a future administration, and they cannot replace a long-term framework established by Congress. That creates a different kind of uncertainty. Firms can build against an SEC staff position only to have a new chair unwind it after a political transition. A no-action letter can be withdrawn. An interpretive guidance document can be reinterpreted. A rule can be vacated by a court. None of these outcomes require an act of Congress. They can happen quickly, and they can happen without warning. For a company that has spent millions of dollars building a compliance program around a particular regulatory interpretation, that risk is existential. It is the difference between building on bedrock and building on sand.
The result is a two-tier regulatory reality. Congress may still deliver a durable statute, but for now the industry is operating on guidance that is faster to arrive and easier to reverse. That is not a stable foundation for capital-intensive infrastructure decisions. A trading venue cannot easily justify a multi-year technology roadmap if the rules governing its primary asset class could change with a change of administration. An issuer cannot confidently structure a token offering around a staff interpretation that might be abandoned next year. The lack of permanence is not just a legal issue; it is a business issue. It affects hiring, budgeting, product development, and risk management. It also affects the competitive position of the United States. If American regulators are seen as offering only temporary clarity, while other jurisdictions are passing actual laws, capital and talent will continue to flow overseas.
Compliance Teams Face a New Kind of Political Risk
For legal and compliance leaders, the shift also changes the type of risk they have to manage. A legislative process carries one set of lobbying and timing risks. An administrative process carries another: the possibility that a guidance document disappears with a new administration, or that a court reads a rule more narrowly than staff intended. That distinction is now a planning cost, not a theoretical concern. In a legislative world, the focus is on building coalitions, negotiating amendments, and timing votes. In an administrative world, the focus is on monitoring the agencies, understanding their priorities, and anticipating changes in personnel. A new SEC chair, a new CFTC commissioner, or a new enforcement director can alter the landscape overnight. The rules may not change formally, but their application can shift dramatically. That is a much harder risk to model.
Meanwhile, builder activity continues to concentrate in a few dominant ecosystems regardless of the legal noise. Developer activity this week remains clustered among major Layer 1 and Layer 2 networks, but the rules for the assets built on those chains still depend on whatever the agencies do next. The technology is not waiting for Washington. Smart contracts are being deployed, liquidity pools are being formed, and new protocols are launching every day. But the legal environment around those activities is still being defined by administrative action. That creates a strange disconnect between the pace of innovation and the pace of regulation. Developers are shipping code in days; regulators are issuing guidance in months; Congress is moving in years. The mismatch is not sustainable. Eventually, something has to give. It could be the market, which may simply move offshore. It could be the agencies, which may overreach and invite legal challenges. Or it could be Congress, which may finally find the political will to act. But for now, the agencies are in the driver’s seat.
What Happens Next: A Two-Tier System Takes Shape
What happens next is not a single event but a process. If the CLARITY Act continues to stall, the SEC and CFTC will keep filling the vacuum with piecemeal measures. Some of those measures will be helpful; others will be contested. The courts will become an important battleground, as they already have been in several high-profile crypto cases. The result will be a regulatory environment that is more detailed than a complete vacuum but far less stable than a statute. That is not the outcome the industry wanted, but it may be the outcome it gets. The smartest firms are already adjusting. They are building flexible compliance systems that can adapt to different regulatory regimes. They are watching the agencies more closely than Capitol Hill. They are treating every guidance document as a data point, not a final answer. And they are preparing for the possibility that the rules of the game will change again, and again, and again.
In the longer term, the question is whether administrative action can provide enough clarity to support the next wave of crypto adoption. Tokenized real-world assets, institutional custody, stablecoins, and decentralized finance all need a predictable legal environment. Agencies can provide some of that predictability, but only up to a point. They cannot grant the kind of comprehensive authorization that a statute can. They cannot settle the fundamental question of whether a token is a security or a commodity with the same authority as Congress. They cannot create a registration pathway that survives changes in political leadership. For all their speed, the agencies are working within limits that cannot be wished away. Galaxy Research’s report does not predict the end of crypto regulation in America. It predicts something more complicated: a long, messy, administrative slog in which the rules are constantly being written, rewritten, and tested. That may not be the clarity the industry wanted, but it is the clarity the industry is likely to get. The question now is not whether Congress will save the day. It is whether the agencies can hold the line long enough for a new consensus to emerge.
