The US Senate’s failure to advance the crypto market structure bill, known as the Clarity Act, on September 15 has coincided with a rally in the cryptocurrency market. This outcome suggests a trade-off where the industry may have gained faster, albeit less durable, regulatory actions from agencies in exchange for legislative certainty.
Following the procedural vote in the Senate, which fell short of the 60 votes required to move forward, Bitcoin saw gains of approximately 8%, and Ether rose by about 7%. Tokens such as NEAR, Uniswap, and Avalanche experienced even more substantial increases. This market reaction aligns with the view that the industry may have prioritized immediate regulatory flexibility over the long-term stability that legislation could have provided.
Bitwise Chief Investment Officer Matt Hougan argues that several compromises within the Clarity Act would have been less favorable to certain segments of the crypto industry than regulatory actions subsequently taken by federal agencies. For instance, Hougan said the bill’s failure benefits platforms like Coinbase that utilize stablecoin rewards to attract customers. He also noted that with the legislation stalled, established crypto exchanges can retain advantages derived from their existing state licenses and infrastructure.
In the wake of the legislative setback, regulators have moved more swiftly than Congress might have on key issues. Two days after the Senate vote, the Securities and Exchange Commission (SEC) approved a five-year conditional “innovation exemption.” This exemption allows qualifying venues to trade tokenized US-listed stocks through permissioned automated market makers and liquidity pools without needing to register as traditional exchanges. Certain liquidity providers also received conditional relief from dealer registration.
Further clarifying the regulatory landscape, SEC staff provided guidance on September 25 regarding revenue-generating tokens. This clarification, which is not an SEC rule and does not carry the force of law, stated that announcing a buyback program for a non-security crypto asset does not, by itself, constitute a promise of “essential managerial efforts” under the Howey test, a key factor in determining if an asset is an investment contract. This guidance reduces uncertainty for protocols including Hyperliquid, NEAR, and Uniswap.
However, Hougan acknowledged that the accelerated pace of agency action comes with a trade-off in durability. Rules and exemptions established by agencies like the SEC and the Commodity Futures Trading Commission (CFTC) can be modified by future administrations or challenged in courts, unlike legislation, which provides a more difficult-to-reverse framework. JPMorgan analysts have also commented on this distinction between the durability of agency action versus legislation.
Despite the potential for future shifts, the growing adoption of digital assets by major financial institutions could eventually make a broad reversal of current regulatory approaches increasingly difficult. The current environment presents a complex interplay between immediate regulatory opportunities and the inherent uncertainties of agency-driven frameworks compared to congressionally enacted laws.
Why This Matters
The materials describe a narrow update: The US Senate failed to advance the crypto market structure bill (Clarity Act) on September 15. The long-term durability of agency interpretations and exemptions compared to legislative rules.
Broader Context
Source materials place the market analysis in this context: The Clarity Act was a crypto market structure bill.
