Tag: SEC and CFTC

  • CLARITY Act Prospects Remain Uncertain as Senate Showdown Nears

    CLARITY Act Prospects Remain Uncertain as Senate Showdown Nears

    Kalshi traders see a strong chance that the Senate will hold a vote on the CLARITY Act before Oct. 1, but prediction markets assign the legislation a much smaller chance of becoming law in 2026.

    As of Aug. 31, Kalshi traders priced the probability of a Senate vote before Oct. 1 at 91%. Polymarket, however, gave the CLARITY Act only a 13% implied chance of becoming law this year.

    Image source: Kalshi, Aug. 31, 2026.

    Sept. 15 Senate Vote Sets the CLARITY Act Timeline

    The Senate left Washington on Aug. 8 after Majority Leader John Thune filed a cloture motion, setting up a procedural vote for Sept. 15. Cloture generally requires 60 votes and would allow the Senate to move toward debating and potentially passing the legislation.

    Clearing that hurdle would solve only the first problem. According to reporting by American Banker, Capital Alpha Partners’ Ian Katz cut his estimate for enactment from about 40% to 25%, or potentially lower. He warned that overcoming cloture would not guarantee final passage.

    Galaxy Digital reduced its estimate even further, placing the probability at 10% in August as Congress used up more of the legislative calendar.

    Prediction Markets Expect a Vote but Doubt Final Passage

    Trading activity in prediction markets reflects the same divide. Kalshi’s Senate vote contract has generated more than $1.25 million in volume, while its broader crypto market structure enactment contract has attracted more than $6.8 million.

    Image source: Kalshi, Aug. 31, 2026.

    Polymarket’s market on whether H.R. 3633 will become law in 2026 has drawn roughly $11.5 million. Its implied probability stands at just 13%, down sharply from the 82% odds traders assigned in February.

    Image source: Polymarket, Aug. 31, 2026.

    Three Disputes Threaten the Crypto Market Structure Bill

    The CLARITY Act would establish a federal framework for crypto markets, give the Commodity Futures Trading Commission exclusive authority over spot digital commodity markets, and leave the Securities and Exchange Commission responsible for certain securities offerings and exchange activity.

    Three disputes are putting pressure on the coalition needed to secure 60 Senate votes: ethics restrictions involving government officials and crypto, stablecoin rewards that banks view as competition for deposits, and protections for decentralized finance (DeFi) projects and non-custodial software developers.

    Several Democrats who once appeared open to negotiations have criticized the latest version of the bill. Banking groups have also continued to oppose stablecoin yield provisions. Republicans including Sens. Cynthia Lummis, Tim Scott, John Boozman, John Thune, and Thom Tillis remain among the legislation’s strongest supporters.

    SEC and CFTC Move Ahead as Congress Runs Out of Time

    Federal regulators are not waiting for lawmakers to resolve the legislation. SEC crypto rulemaking and CFTC initiatives involving exchanges, leveraged trading, and decentralized finance could establish major parts of the regulatory framework without congressional action.

    However, future administrations can generally reverse agency rules more easily than federal statutes. That makes the Sept. 15 vote a critical pressure point for the CLARITY Act.

    Even if senators clear the 60-vote procedural threshold, Congress faces a crowded schedule that includes government funding, defense legislation, and the approaching midterm elections. Another failure could push the broader crypto market structure debate into a lame-duck session or into 2027.

    For crypto companies, banks, and investors, the key question is no longer whether Washington will continue discussing the CLARITY Act. It is whether senators can assemble enough votes on Sept. 15 to keep the bill moving.

  • What Would It Take to Bring Hyperliquid to the US? Former SEC Counsel Explains

    What Would It Take to Bring Hyperliquid to the US? Former SEC Counsel Explains

    Hyperliquid could face a 10-to-12-month regulatory process to enter the U.S. market, even if federal agencies move quickly, according to former U.S. Securities and Exchange Commission senior counsel Ashley Ebersole. The estimate follows President Donald Trump’s statement that regulators were working on a compliant route for the perpetual futures platform.

    Ebersole, co-founder and chief legal officer at tx, told crypto.news that the main challenge is not simply obtaining approval for Hyperliquid to operate in the United States. Regulators would first need to determine how offshore-style crypto perpetual futures fit within existing securities and derivatives laws.

    Trump highlighted the issue on Aug. 19 during a White House meeting with crypto and financial industry executives. He said Commodity Futures Trading Commission Chair Michael Selig was working to bring Hyperliquid into the United States in a “fully compliant and legal fashion.” Contemporary reports did not identify an approval, regulatory structure, or timetable for the proposed move.

    The comments came as the administration urged Congress to advance the Digital Asset Market Clarity Act. As previously reported by crypto.news, Trump used the same Aug. 19 meeting to call on lawmakers to pass the legislation, which would establish clearer boundaries between SEC and CFTC oversight of digital assets.

    Hyperliquid would need more than CFTC approval

    U.S. law does not currently provide a straightforward route for offering crypto perpetual futures to American retail customers in the same form commonly available on offshore platforms, Ebersole said.

    The CFTC would probably have primary jurisdiction over perpetual contracts tied to commodities, including crypto assets that are not securities. Contracts based on securities, however, could fall under the SEC’s authority as security-based swaps or other securities-linked products.

    “The threshold issue is that U.S. law does not currently provide a straightforward regulatory pathway for offering crypto perpetual futures to U.S. retail customers in the form in which they trade offshore,” Ebersole said.

    A compliant Hyperliquid structure could require registrations covering the trading venue, clearing operations and intermediaries. Ebersole said designated contract market, or DCM, and derivatives clearing organization, or DCO, infrastructure could form part of the process, with separate SEC requirements applying when securities are involved.

    Registration would address only part of the challenge. Federal agencies would first need to determine whether Congress had already granted them sufficient authority over the products and then establish rules allowing perpetual futures to be legally offered.

    “The harder problem is not simply obtaining a registration; it is that the existing U.S. regulatory architecture was not designed around offshore-style perpetuals, so a lot of regulatory ‘building’ would be needed.”

    Regulators could use formal rulemaking, exemptive relief or a combination of both to create such a pathway, Ebersole added.

    Part of that debate is already underway. In July, the Hyperliquid Policy Center and Phantom asked the CFTC to develop rules tailored to onchain markets instead of applying requirements designed for traditional intermediaries. The groups argued that decentralized software developers and non-custodial wallet providers should not automatically face the same registration obligations as conventional financial firms.

    SEC and CFTC jurisdiction would depend on the underlying asset

    Dividing responsibility between the two federal agencies would create another layer of regulatory work.

    Ebersole compared the issue with the framework established after the Dodd-Frank Act, which divided federal oversight between swaps regulated by the CFTC and security-based swaps overseen by the SEC. In his view, crypto perpetuals could follow a similar principle, with jurisdiction determined by each contract’s economic exposure.

    A perpetual based on a security or group of securities would generally involve the SEC, while a contract tied to a commodity would normally fall under the CFTC’s derivatives authority, he said.

    More complex questions could emerge when spot assets and derivatives interact within the same trading ecosystem. According to Ebersole, those arrangements could create edge cases requiring coordination between both regulators, similar to the detailed jurisdictional boundaries the agencies developed after Dodd-Frank.

    The issue is particularly relevant to equity-linked perpetuals. On Aug. 24, the Hyperliquid Policy Center proposed treating qualifying equity perpetuals as security futures under an existing structure jointly overseen by the SEC and CFTC. The organization said HIP-3 markets had processed more than $480 billion in cumulative notional volume during their first 10 months.

    Several days earlier, the Policy Center and trade[XYZ] had submitted five proposed pillars to the SEC for regulating pre-IPO perpetual contracts. The SEC had published the submission but had not endorsed or approved the proposed products.

    A U.S. Hyperliquid pathway could take 10 to 12 months

    Even with political support, Ebersole expects the administrative process to take considerably longer than the technical work required to offer the products.

    His 10-to-12-month estimate assumes that the SEC and CFTC actively decide to establish a route for perpetual futures. Regulators would first need to identify their statutory authority, develop a framework and prepare any required rules or exemptions.

    A formal rulemaking process could then require the agencies to publish proposals, collect public comments, review those submissions, adopt final measures and implement the resulting framework.

    “The 10-to-12-month estimate assumes a lengthy procedure phase that’s principally about administrative process rather than technological implementation,” Ebersole said.

    A faster process could be possible if regulators relied substantially on powers and exemptions already available to them.

    “Could that happen in six months? Potentially, particularly if the agencies rely heavily on existing authorities or exemptive mechanisms.”

    Ebersole cautioned that the longer estimate already assumes regulators want the process to succeed. Litigation, disagreements between the SEC and CFTC, changing political priorities or a conclusion that Congress must first pass legislation could delay any U.S. launch further.

    U.S. traders already have limited exposure to perpetual products under regulated structures. In June, Kalshi filed with the CFTC to list perpetual futures linked to HYPE after launching Bitcoin and Ethereum perpetual contracts for U.S. customers.

    Access to Hyperliquid itself remains more restricted. Coinbase added more than 290 Hyperliquid-powered perpetual markets to its Base App on Aug. 19, with leverage reaching as high as 50x on supported contracts. U.S. users were excluded, along with users in the United Kingdom and Canada.

    Existing law could offer a faster but less certain route

    Rather than waiting for Congress, the SEC and CFTC could conclude that their existing statutory powers are sufficient to establish a regulated framework, according to Ebersole. That approach could shorten the process, particularly if the agencies used exemptions alongside existing derivatives and securities rules.

    A legal constraint remains after the U.S. Supreme Court’s 2024 decision in Loper Bright Enterprises v. Raimondo, which ended the Chevron doctrine that had directed courts to defer to reasonable agency interpretations of ambiguous federal statutes.

    “An agency cannot create statutory jurisdiction simply by interpreting an ambiguity in its favor,” Ebersole said.

    If an SEC or CFTC interpretation were challenged, a court would independently determine whether Congress had actually granted the agency authority over the product, he said. Agency reasoning could still carry persuasive weight, but it would not receive Chevron-style deference simply because the underlying statute was ambiguous.

    Congressional action would therefore provide a cleaner legal route, according to Ebersole. Lawmakers could expressly authorize perpetual products, divide responsibility between the SEC and CFTC and establish the limits of each regulator’s authority.

    That route carries its own timing problem. Ebersole said the congressional process could take considerably longer and might not result in a law at all.

    The question is particularly relevant while the CLARITY Act remains unresolved in Washington. The legislation seeks to establish federal boundaries between digital commodities and securities, giving the CFTC additional authority over qualifying digital commodity markets while allowing the SEC to retain jurisdiction over securities.

    A U.S. perpetual futures framework would extend beyond Hyperliquid

    Any regulatory route created for Hyperliquid would also affect competing U.S. trading platforms, Ebersole said.

    Federal regulators could not realistically establish a lawful framework that applied only to one company. Once the SEC and CFTC set requirements for offering crypto perpetual futures, other firms meeting the same regulatory standards would have grounds to seek permission to offer comparable products.

    “Whatever pathway regulators create for Hyperliquid cannot realistically be Hyperliquid-specific,” Ebersole said.

    Coinbase, Kraken and other appropriately registered platforms would therefore have a strong basis to pursue similar products if regulators establish a workable U.S. framework, according to Ebersole.

    “The larger significance of onshoring Hyperliquid is not simply whether one offshore platform can enter the United States. It is whether regulators are prepared to welcome a major product category that has largely developed outside the U.S. to regulated domestic competition.”

  • What Happens to Bitcoin, Ethereum, and XRP if the CLARITY Act Passes?

    What Happens to Bitcoin, Ethereum, and XRP if the CLARITY Act Passes?

    The CLARITY Act aims to resolve a question that has challenged U.S. regulators for more than a decade: when should a crypto token be treated as an investment, and when does it function more like a commodity such as gold?

    The answer would determine which regulator oversees a token, what its creators must disclose, and which rules crypto platforms must follow when listing the asset or holding it for customers.

    What Problem Is the CLARITY Act Designed to Solve?

    When a company or development team creates a token and sells it to finance a project, the transaction can resemble an investment. Early buyers may be betting on the team’s ability to build and promote the network.

    Years later, however, the same token could trade broadly across a decentralized network, with its value no longer primarily tied to the original team. At that stage, it may look more like a commodity than a security.

    U.S. law currently provides no clear rule for when a token crosses that line, leaving two federal regulators involved. The Securities and Exchange Commission oversees securities, while the Commodity Futures Trading Commission regulates futures markets and has more limited authority over direct commodity trading. Traditional assets generally fit clearly into one category. Crypto assets often do not.

    How the CLARITY Act Would Treat Bitcoin

    Bitcoin is already generally treated as a commodity, largely because it has no central issuer or company behind it. Under the current system, the CFTC’s authority over spot Bitcoin trading is mostly limited to policing fraud and market manipulation.

    The CLARITY Act would expand that authority, giving the CFTC broader power to directly regulate platforms where Bitcoin is bought and sold rather than intervening only after problems occur.

    How the Bill Would Treat Ethereum and $XRP

    Tokens such as Ethereum and $XRP occupy a more ambiguous position because of their fundraising histories and current decentralized use. The CLARITY Act attempts to draw the regulatory line based on a token’s function rather than solely on its origins.

    Fundraising activity would remain under SEC oversight, while later-stage trading in tokens deemed sufficiently decentralized could move to a new CFTC framework. The bill would not automatically classify every token as a commodity. Instead, it would create a path for tokens to move out of securities treatment when they no longer depend primarily on a central team.

    New Rules for Crypto Platforms and Projects

    Platforms operating under the proposed CFTC framework would have to register, keep customer assets separate from their own funds, and comply with requirements covering disclosures, recordkeeping and conflicts of interest.

    Projects raising money through token sales would need to disclose information about the people behind the project and explain how the underlying technology works. Insiders would also face new restrictions on how quickly they could sell their holdings.

    Why the CLARITY Act Has Been Difficult to Pass

    The central disagreement is not whether the crypto industry needs regulation, but what those rules should require and which agency should enforce them. Three disputes have shaped the bill’s progress.

    The first concerns rewards paid to stablecoin holders. Some platforms offer rewards for holding stablecoins, in a way that can resemble bank interest. Banks have argued that these programs could draw deposits away from the traditional banking system. Crypto companies have countered that restricting such rewards would protect banks from competition.

    After months of negotiations, lawmakers reached a compromise that would prohibit rewards paid solely for holding a stablecoin while allowing rewards connected to actually using one. Coinbase supported the revised agreement, and the Senate Banking Committee advanced the bill in May.

    The second dispute involves state regulatory authority. The CLARITY Act would replace certain state-level requirements with a single federal framework. Supporters say this would create consistency across the country, while critics warn that it could weaken states’ existing tools for investigating scams and holding crypto platforms accountable.

    The third issue concerns potential conflicts of interest among lawmakers and other federal officials. The latest draft would prohibit federal officials and their spouses from being paid to issue or sponsor digital assets while in office.

    Democrats are seeking stricter limits on lawmakers profiting from cryptocurrency. Republicans supporting the bill argue that the current draft already goes far enough. The legislation requires bipartisan support, and identical versions must pass both the House and Senate before it can reach the president’s desk.

    What Would Happen If CLARITY Passes?

    Crypto businesses would receive a clearer federal rulebook for registering and operating in the United States. Because the U.S. accounts for a significant share of global crypto capital and users, businesses and exchanges based outside the country could also adjust their practices to align with the new framework.

    That could extend the CLARITY Act’s influence beyond U.S. borders, particularly among companies serving American customers or seeking access to the U.S. market.

    What Happens If CLARITY Fails?

    Cryptocurrency would not become unregulated if the bill fails. Existing laws would continue to apply through regulators, courts and individual states.

    The main difference would be timing. Many of today’s legal boundaries are clarified only after a product launches, often after something has gone wrong. The CLARITY Act is designed to establish those boundaries in advance rather than after the fact.

    Source: cryptonews.net