CLARITY Act Faces Years of Delays Despite January Markup

When investor David Sacks announced that Senate Banking Chair Tim Scott and Senate Agriculture Chair John Boozman confirmed a January 2026 markup for the CLARITY Act, the message was one of momentum: “We look forward to finishing the job in January!” However, in the intricate world of legislative process, a committee markup is not an endpoint but a starting gate. It signifies that staff have agreed to begin formal negotiations on merging the two separate Senate drafts—one from Banking, one from Agriculture—that currently exist. The real work, as detailed in the source analysis, has not yet begun.

The core of the delay lies in the unresolved, bracketed language within the drafts. Critical definitions, including the foundational question of what constitutes a “security,” are still in flux. Entire sections pertaining to DeFi (Decentralized Finance) infrastructure are bracketed and labeled “seeking further feedback,” reflecting a fundamental lack of consensus on how to define “decentralized” enough to exit securities regulation. Furthermore, the scope of reporting requirements for trading venues remains an open question. A January markup, therefore, is an agreement to negotiate, not an agreement on substance.

The CLARITY Act’s primary regulatory innovation is its division of crypto assets into three distinct categories, each with a designated overseer. “Digital commodities”—tokens tied to blockchain functions like payments and governance—would fall under the exclusive spot market jurisdiction of the Commodity Futures Trading Commission (CFTC), expanding its role beyond its current anti-fraud authority. “Investment contract assets,” sold for capital-raising, would start as securities under Securities and Exchange Commission (SEC) oversight at issuance but would lose that status in secondary trading, flipping to the CFTC. “Permitted payment stablecoins,” national-currency tokens issued by supervised entities, would be regulated by banking authorities under the parallel GENIUS Act framework.

While these lines are inked, the source text emphasizes that “some markings are still in pencil.” The bracketed definition of “security” is the most glaring example, as it determines which bucket most assets fall into. The unresolved DeFi sections highlight the regulatory trade-off: a carve-out that is too broad risks a “retail protection collapse,” while one that is too narrow could push protocol development entirely offshore. The bill also creates a new cast of registered entities—exchanges, brokers, custodians—with principles-based requirements, but the detailed rules for listing standards, capital, and custody are punted to future regulatory processes.

The journey from a January 2026 markup to enforceable law is a protracted one, fraught with political and procedural hurdles. First, the Senate Banking and Agriculture Committees must successfully merge their drafts and pass them through markups, where Democrats are expected to push for tighter retail protections. The merged bill then requires 60 votes to pass the full Senate, a significant challenge in a divided chamber. It must then be reconciled with the version that passed the House of Representatives in July, either through a formal conference committee or direct acceptance, before reaching the President’s desk for a signature.

Even upon enactment, the clock resets for a lengthy rulemaking phase. The statutory text directs regulators—primarily the CFTC and SEC—to write the detailed implementing rules, a process allotted 360 days to 18 months in the Senate drafts. This period would create a “years of hybrid status” where today’s market operates alongside partially implemented U.S. law. Furthermore, the CFTC, which would gain significant new responsibilities over digital commodity spot markets, lacks the funding and staff to execute this mandate without a major congressional appropriation, a separate political battle.

Finally, the source analysis predicts that “the courts weigh in.” Given evolving Supreme Court doctrine on agency power, key rulemakings around token classification and DeFi treatment are almost certain to face litigation, potentially adding years of additional delay and uncertainty. Therefore, while the January markup is a necessary step, it is merely the opening move in a complex, multi-year process before the CLARITY Act’s vision becomes a binding reality for the crypto market.