Analysis
Two agencies are writing the rules Congress couldn’t pass. The SEC proposed Reg Crypto in August; the CFTC filed with the White House two days after the CLARITY Act died. The structural question is whether targeted rulemaking can substitute for comprehensive legislation – or whether it creates a patchwork firms must navigate alone.
Washington often treats legislative gridlock as a cue to pause. But when the CLARITY Act failed its cloture vote on September 15, 2026 – falling eleven votes short of the 60 required in a 49-50 split – the SEC and CFTC did not retreat. They accelerated.
The signal was immediate. Just 48 hours after the Senate shelved the bill until after the midterms, the CFTC submitted its crypto market structure rulemaking to the White House Office of Information and Regulatory Affairs. The filing (RIN 3038-AF80, “Regulation Crypto Asset Transactions and Regulation Crypto Asset Markets”) is at the pre-rule stage, but the intent is plain: the agency is moving to codify its oversight, with a binding rule anticipated by late 2027. “We are locked in and ready to ship rules,” CFTC Chair Michael Selig said on the day the bill died.
The CLARITY Act was designed to be the definitive map – splitting oversight between the SEC and CFTC, establishing federal registration requirements, and strengthening anti-money laundering protections. It passed the House in 2025 but stalled in the Senate for months. Ethics provisions restricting senior officials’ crypto business ties became the sticking point; four Republicans (Moran, Collins, Hawley, Tillis) joined all Democrats in blocking the procedural vote. The bill is effectively shelved until after the November midterms.
The SEC had already moved first. On August 18, the commission proposed Regulation Crypto Assets (Release 33-11434), a framework for “covered investment contracts” involving assets that are not themselves securities. It includes a $5 million startup exemption, tiered fundraising exemptions modeled on Regulation A ($20 million and $75 million tiers), an investment contract safe harbor defining when the contract ceases to exist, and state law preemption for primary offerings. Comments close October 20.
Both chairs have made their positions explicit. SEC Chair Paul Atkins has stated the commission will press ahead under existing authority. “It also acknowledges what the former administration refused to recognize – that most crypto assets are not themselves securities,” Atkins said in the March joint interpretation with the CFTC. Selig, in a January 29 speech announcing the merger of the CFTC’s Crypto Sprint into the joint Project Crypto initiative, was more direct: “I have already directed CFTC staff to make full use of the agency’s existing authorities to begin upgrading our regulations for America’s Golden Age. We cannot and will not let this opportunity pass us by while Congress continues its work.”
The unilateral moves are already stacking up. The SEC’s five-year innovation exemption for tokenized-stock platforms, issued in September, creates a regulatory hinge for tokenized equities while preserving a 30-day issuer veto. The CFTC, on the same day it filed with OIRA, issued a no-action letter exempting passive software providers – wallets, trading apps – from registering as introducing brokers under ten conditions. Project Crypto, formalized by a March 11 memorandum of understanding, provides coordination through six core areas including joint interpretations, clearing and collateral modernization, and streamlined reporting. But the agencies are operating as independent engines, not a single regulatory body.
There is a structural limit, though. The CFTC cannot grant itself full authority over the spot market for digital commodities; that power remains reserved for Congress. Agencies are bound by their existing statutory mandates, and any final rule is subject to challenge under the Administrative Procedure Act. The risk of litigation is structural, not hypothetical – particularly for rules that stretch the boundaries of what “existing authority” means in a market Congress has not yet defined.
For firms navigating this landscape, the trade-off is legibility versus durability. Agency rulemaking moves faster than legislation – the SEC proposed Reg Crypto in August, and the CFTC filed two days after the CLARITY Act died – but it lacks the permanence of statute. A new administration, a successful APA challenge, or a shift in congressional appetite could unwind any of it. The GENIUS Act for stablecoins proved that bipartisan crypto legislation is possible. The CLARITY Act proved it is not guaranteed. In the gap between those two outcomes, the agencies are building the regulatory infrastructure one rule at a time – and the industry is left to hope the foundation holds.
Nolan Pratt works for Forkast.
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