I. Introduction
This bulletin summarizes the key provisions of the Digital Asset Market Clarity Act of 2025 (the "CLARITY Act"), a U.S. federal bill that establishes a comprehensive regulatory framework for the classification, offering, trading, and supervision of digital assets. The CLARITY Act seeks to define clear lines of jurisdiction between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), mandate robust compliance standards for digital asset trading platforms, and provide legal certainty to developers and investors alike.
The bill was advanced during the U.S. House's "Crypto Week," held from July 14 to 18, 2025, a coordinated legislative initiative that also featured the GENIUS Act and the CBDC Anti-Surveillance Act. This bulletin complements our previous analysis of the GENIUS Act, which focused on the regulation of stablecoin issuance. Together, these bills represent a maturing bipartisan consensus on U.S. crypto market oversight.
II. Legislative Context and Outlook
The CLARITY Act passed the House with bipartisan support today, July 17, 2025, following its earlier advancement by the Financial Services and Agriculture Committees this month. The CLARITY Act builds upon the principles of the earlier Financial Innovation and Technology for the 21st Century Act and is viewed as the House's principal crypto market structure legislation. At its core, it introduces a dual-agency approach to oversight.
In parallel, the Senate Banking Committee is preparing its own digital asset market structure legislation: the Digital Asset Market Structure and Investor Protection Act. Reconciliation between the House and Senate frameworks will be necessary, particularly around asset classification criteria, enforcement discretion, and scope of decentralized finance (DeFi) coverage. Market observers expect legislative convergence by Q4 2025.
III. Summary of Key Provisions
1. Digital Asset Classification
The CLARITY Act defines digital assets based on their functional characteristics:
- Digital Assets: Natively electronic assets that are issued and transferred using distributed ledger or blockchain technology and may represent value, rights, or access to services or protocols. This umbrella term includes Digital Commodities, Restricted Digital Assets, and Permitted Payment Stablecoins.
- Digital Commodities: Digital Assets that are
decentralized and do not confer rights to profits, governance, or
financial claims against an issuer. These fall under
CFTC's jurisdiction.
- The CLARITY Act defines a "Decentralized System" as a system in which no person or affiliated group can unilaterally modify the protocol or control its governance and a "Decentralized Finance Trading Protocol" as a financial application operating on a Decentralized System—typically without intermediaries and with open-source, autonomous code.
- Example: Bitcoin (BTC) and Ethereum (ETH) — both are considered sufficiently decentralized, with no issuer or embedded financial rights, and have been publicly treated as commodities by U.S. regulators.
- Restricted Digital Assets: Digital assets that
represent investment contracts or confer financial rights. These
remain under SEC's jurisdiction.
- Example: Tokens sold via SAFTs (Simple Agreements for Future Tokens) — typically offered in early-stage fundraising rounds with an expectation of future profits tied to the efforts of a development team.
- Permitted Payment Stablecoins: Fiat-redeemable digital assets designed for use as a means of payment or store of value, typically backed 1:1 by U.S. dollars or high-quality liquid assets such as U.S. Treasuries. Under the CLARITY Act, these assets may fall under joint SEC-CFTC oversight, with primary prudential regulation governed by the GENIUS Act framework.
Title I of the CLARITY Act amends key federal statutes—including the Securities Act, Securities Exchange Act, and Commodity Exchange Act — to codify consistent definitions for digital assets, including the foregoing. These amendments clarify the respective oversight roles of the CFTC and SEC, while also aligning the treatment of stablecoins with the specialized framework established under the GENIUS Act. Collectively, these updates provide legal clarity and help establish coherent regulatory boundaries across the U.S. financial regulatory landscape.
The CLARITY Act also establishes a certification pathway that allows token issuers to seek regulatory clarity by obtaining a formal determination from either the SEC or CFTC on whether their asset qualifies as a Digital Commodity or a Restricted Digital Asset. Issuers may also self-certify and operate under provisional treatment, subject to agency review. A safe harbour is provided for digital assets issued prior to the CLARITY Act's enactment, enabling continued operation if issuers meet specified disclosure and conduct requirements.
2. Offers, Sales, and Trading of Digital Commodities
Title II of the CLARITY Act establishes the regulatory framework for how Digital Commodities may be offered, sold, and traded in the U.S., under the oversight of the CFTC. It mandates the registration of digital commodity brokers, dealers, and trading facilities with theCFTC. These platforms must:
- Segregate customer and proprietary assets;
- Maintain fair trading and anti-manipulation systems;
- Adopt robust AML/KYC and record-keeping programs;
- Ensure accurate, real-time price transparency; and
- Comply with cybersecurity and operational risk standards.
3. Issuance and Intermediary Registration for Restricted Digital Assets at the SEC
Title III of the CLARITY Act confirms that intermediaries facilitating activity in Restricted Digital Assets—i.e., digital assets that represent investment contracts or confer financial rights—are subject to existing SEC oversight. Entities such as brokers, dealers, alternative trading systems (ATSs), and clearing agencies must register under the Securities Exchange Act of 1934 and comply with applicable regulatory standards, including customer protection, market integrity, and disclosure obligations.
While Title III focuses on intermediaries, the broader CLARITY Act reaffirms that issuers of Restricted Digital Assets must comply with the Securities Act, unless they qualify for an exemption under existing SEC frameworks. The CLARITY Act does not create a new exempt offering regime for securities-like digital assets.
4. Issuance and Intermediary Registration for Digital Commodities at the CFTC
Title IV of the CLARITY Act establishes a dual framework for the issuance and market infrastructure of Digital Commodities—i.e., digital assets that are not securities and fall under the exclusive jurisdiction of the CFTC.
On the issuance side, the CLARITY Act introduces a new exempt offering regime that allows digital commodity issuers to raise up to $75 million per year without triggering securities law registration. To qualify, issuers must meet detailed disclosure requirements—including source code availability, governance mechanisms, token functionality, and use of proceeds—and must tie the offering to a "mature" blockchain system, or one expected to reach maturity within four years. Failure to achieve maturity status within the prescribed period may result in the loss of exempt status or the imposition of enhanced obligations. This path provides compliant capital formation options for decentralized token projects while ensuring investor protections through transparency.
On the intermediary side, Title IV establishes new CFTC registration categories for brokers, dealers, trading facilities, custodians, and other market participants that facilitate the trading or settlement of digital commodities. These intermediaries must comply with CFTC-prescribed standards regarding custody, disclosures, market conduct, and operational resilience. A provisional registration pathway allows existing entities to continue operating during the transition period while final rules are being adopted.
Unlike Title III, Title IV does create new registration categories tailored to digital commodity market infrastructure and codifies CFTC exclusivity in regulating spot-market activities involving digital commodities. Exemptions may apply to certain Decentralized Finance Trading Protocols operating without centralized intermediaries, provided they meet specific decentralization criteria and are addressed through future CFTC rulemaking.
That said, even for digital commodities, the SEC retains authority to pursue fraud, manipulation, and misleading disclosure cases. The CLARITY Act reaffirms the SEC's ability to enforce investor protection standards in connection with digital asset trading or token offerings.
5. Implementation provisions
The CLARITY Act includes implementation provisions that direct the CFTC and SEC to issue all final rules necessary to implement the CLARITY Act's definitional and jurisdictional framework within 270 days of enactment. These provisions also authorize both agencies to adopt interim rules or guidance as necessary to facilitate a smooth transition. This timeline underscores House's intent to move promptly from legislative passage to regulatory enforcement, while giving market participants sufficient lead time to adapt.
IV. Observations
- The CLARITY Act's functional classification framework brings long-awaited clarity by distinguishing between digital commodities, securities-like assets, and stablecoins, enabling more predictable compliance paths.
- Issuance and infrastructure are regulated in parallel, with the SEC overseeing financialized assets and the CFTC supervising decentralized commodities.
- The $75 million exempt offering regime provides a structured path for early-stage digital commodity issuers to raise capital, tied to decentralization milestones and clear disclosure standards.
- New CFTC registration categories for intermediaries extend familiar market conduct, custody, and transparency rules to digital commodity platforms.
- Certification and safe harbour mechanisms reduce legal uncertainty for developers and encourage domestic innovation under clearer regulatory guardrails.
V. Relevance and Strategic Importance
The CLARITY Act represents a significant step in building a coherent and functional regulatory framework for U.S. digital asset markets. By clearly defining asset categories and assigning regulatory responsibilities to the SEC and CFTC, the CLARITY Act reduces legal uncertainty for issuers, developers, and intermediaries, while strengthening investor protections and market integrity. It also aligns the U.S. with other major jurisdictions that have introduced dedicated frameworks for digital assets—such as the EU's Markets in Crypto-Assets Regulation (MiCA), Japan's Financial Services Agency administered regime, Singapore's Payment Services Act, and South Korea's Virtual Asset User Protection Act.
VI. Conclusion
As the CLARITY Act moves toward implementation, its impact on the digital asset industry will depend heavily on how agencies translate the legislation into workable rules. Clearer regulatory categories and supervisory boundaries may reduce compliance uncertainty, encouraging more engagement from institutional actors and infrastructure providers. At the same time, emerging projects will need to navigate new disclosure, custody, and governance requirements, which could reshape development priorities and capital formation strategies. In combination with other legislation such as the GENIUS Act, the CLARITY Act could signal the beginning of a more coordinated federal approach to digital asset oversight—one that balances innovation, market integrity, and regulatory accountability. Its implementation will shape the U.S.'s future role in the global digital asset landscape.
VII. About McMillan's Perspective
While McMillan LLP does not practice U.S. law, and the foregoing is only an overview and does not constitute legal advice. Our team, however, our team closely monitors legal, regulatory, and market developments in the digital asset space globally. We remain committed to keeping our clients and audience informed about key international legislative initiatives—such as the CLARITY Act—and reflecting on how such developments may influence Canadian legislative approaches and regulatory positions on comparable digital assets and market structures. By staying ahead of digital innovation and cross-border policy shifts, McMillan supports clients in anticipating change, managing risk, and identifying new opportunities across the evolving digital economy.
The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.
© McMillan LLP 2025
