The reasons for the stall are specific. Three contentious issues remain unresolved: the details of anti-money laundering and enforcement provisions, the regulatory jurisdiction over stablecoin yields, and government ethics clauses involving presidential crypto asset holdings. Elizabeth Warren's stance represents the Democratic opposition's position; she says this version of the bill was "written by the crypto industry, for the crypto industry."
The vote requires 60 votes. Republicans hold 53 seats, requiring at least 7 Democrats to cross party lines. TD Cowen analyst Jaret Seiberg gave a 75% probability of failure in a research note dated August 10. On Polymarket, the odds of the CLARITY Act being signed into law this year have fallen from 82% in February to 21%, with over $5.5 million wagered on this outcome.
SEC Fills the Void
The SEC's move comes right on the heels of the CLARITY Act's setback. The SEC isn't waiting for Congress; it's writing its own rules. TD Cowen characterized this meeting as "the starting point of a series of rulemakings the SEC is initiating to provide regulatory certainty after the Senate impasse."
The framework for Regulation Crypto comes from Atkins' public remarks in March. He proposed three categories of exemptions:
Startup Exemption: Would allow early-stage crypto projects to conduct limited fundraising under specific conditions without triggering full securities registration obligations. The reference figure Atkins used in March was no more than $75 million within 12 months.
Funding Exemption: Would provide a streamlined path for larger fundraising rounds, with disclosures potentially closer to crypto whitepaper formats rather than full S-1 prospectuses for public companies.
Investment Contract Safe Harbor: This is the most critical part, potentially offering a path for tokens to "exit securities regulation": when a project's development team no longer continuously dominates network operations, the token may no longer be considered an investment contract, thereby falling outside SEC jurisdiction.
If the safe harbor provision is written into the final rule, it would fundamentally change the compliance logic for crypto projects. The core issue in the past has been: once a token is deemed a security, it is always a security, and the project team must bear securities law obligations indefinitely. The safe harbor logic is that security status can recede as a project becomes more decentralized.
Two Tracks
There are now two parallel tracks advancing crypto regulation in Washington.
The CLARITY Act follows the legislative track. Its advantages are the highest authority (laws rank above administrative rules), broadest coverage (dividing jurisdiction between the SEC and CFTC simultaneously), and greatest durability. But it needs 60 votes, requires cross-party support, and must resolve three contentious issues. Moreover, even if it clears the procedural vote on September 15, debates, amendments, and a final vote still lie ahead—leaving an extremely narrow window to complete the entire process this year.
Regulation Crypto follows the administrative rulemaking track. It doesn't require a congressional vote—three Republican commissioners are enough to advance it. Once a final rule passes, it's harder for a future SEC to overturn than a staff statement, because overturning a formal rule requires going through the same notice-comment-vote process. Its disadvantage is its limited scope: it only covers SEC jurisdiction, doesn't involve the CFTC, and may face legal challenges.
Former SEC official Brett Redfearn's reaction on X captures the industry sentiment: "No more waiting for Congress to pass the CLARITY Act! It's time for regulators to take matters into their own hands."
The two tracks are not mutually exclusive. If the CLARITY Act ultimately passes, it would supersede Regulation Crypto; if CLARITY fails in Congress, Regulation Crypto would be the best outcome the industry can get. The SEC is using administrative power to create a safety net for Congress.
For the crypto industry, no compliance obligations will change in the short term. Friday's vote is just the starting point of the rulemaking process—at least six months remain from proposal to final effectiveness.
But the signal-level impact is immediate. Over the past year, the biggest uncertainty facing the crypto industry in the U.S. has been "when will the rules actually come." With Congress and the SEC moving forward simultaneously, even at different paces, it at least means Washington has shifted from the debate over "whether to regulate crypto" to the operational phase of "how to regulate it."
September 15 and August 14—two dates, two tracks, one direction.
