Former CFTC chair says US crypto rules can advance despite CLARITY Act failure

Giancarlo told journalist Eleanor Terrett on Sept. 16 that Securities and Exchange Commission Chairman Paul Atkins and CFTC Chairman Michael Selig remain prepared to use their agencies’ existing powers to establish digital asset frameworks even without new legislation from Congress.

“@SECPaulSAtkins and @ChairmanSelig are determined to do what their jobs require them to do and put in place sound regulatory frameworks that ensure that financial innovation, market modernization and economic growth take place under U.S. law and not outside it,” Giancarlo said.

The comments came hours after senators rejected cloture on the motion to proceed to H.R. 3633, the House-passed Digital Asset Market Clarity Act. The Senate’s official roll call recorded 49 votes in favor and 50 against, leaving the motion 11 votes short of the 60 needed to advance.

Giancarlo, who chaired the CFTC from 2017 to 2019 and became known in the crypto industry as “CryptoDad,” is scheduled to join former CFTC Chairman Timothy Massad and former SEC Commissioners Troy Paredes and Caroline Crenshaw for a panel hosted by Terrett at the Avalanche Summit in New York later Wednesday.

CLARITY Act failure turns attention to SEC and CFTC

The Senate vote has put more attention on the SEC and CFTC after months of work by both agencies on digital asset rules that do not depend on passage of the CLARITY Act.

The bill would have created a statutory division of responsibilities between the SEC and CFTC for digital assets, while establishing registration routes for exchanges, brokers and dealers. It contained provisions covering ethics restrictions for senior government officials and Treasury authority related to payment stablecoins.

Republicans had revised the legislation during negotiations with Democrats before the Sept. 15 vote. The dispute was not limited to how many Democratic proposals were incorporated into the text. Democratic lawmakers maintained that the ethics provisions remained insufficient, particularly in addressing crypto interests connected to President Donald Trump and his family. Associated Press reported that Democrats sought stronger restrictions even after concessions were made on enforcement powers and restrictions covering federal officials.

The ethics issue had remained one of the main unresolved parts of the negotiations in the days before the vote. As crypto.news previously reported, an earlier revised draft restricted public officials, government employees and their spouses from issuing or sponsoring digital assets, while leaving primary enforcement authority with the Justice Department and setting the provision to expire in January 2029.

All Democrats who participated in Tuesday’s vote opposed cloture. Republicans Susan Collins of Maine, Josh Hawley of Missouri, Jerry Moran of Kansas and Thom Tillis of North Carolina voted against the motion as well. Tillis changed his vote for procedural reasons, preserving the ability to seek reconsideration. Reuters reported that the last-minute revisions were not enough to overcome disagreements over ethics and banking provisions.

Sen. Chris Coons of Delaware did not vote. Democratic negotiators including Sens. Kirsten Gillibrand, Mark Warner, Cory Booker, Raphael Warnock, Ruben Gallego, Angela Alsobrooks and Catherine Cortez Masto were among those who voted against advancing the measure.

Industry executives turn to regulators for crypto rules

Coinbase CEO Brian Armstrong said after the vote that the industry “can’t wait on Congress anymore,” arguing that the SEC and CFTC can use existing authority to establish digital asset rules.

His comments followed a position he had taken before the vote. Armstrong had said the industry could receive regulatory clarity regardless of the Senate result because federal agencies were preparing to act if Congress did not. His pre-vote position was reported on Sept. 10, when negotiations over the legislation were still underway.

Ripple CEO Brad Garlinghouse described the result as “this one stings” and called on Atkins and Selig to “fill the legislative gap.”

Senate Banking Committee Chairman Tim Scott, one of the lawmakers behind the bill, took a similar position after midnight Wednesday, saying the SEC and CFTC should “set clear rules of the road for digital assets until Congress legislates.”

Sen. Cynthia Lummis of Wyoming blamed Senate Democrats for the result and argued they were not serious about passing market structure legislation. Democrats disputed the Republican account of the negotiations and maintained that unresolved ethics concerns, including restrictions involving public officials’ crypto interests, required stronger language before they would support the measure.

House Financial Services Committee Chairman French Hill and House Agriculture Committee Chairman Glenn Thompson said after the vote that only Congress could provide lasting statutory certainty, while supporting regulators’ use of existing authority until lawmakers reach an agreement.

Regulators have prepared rules outside the CLARITY Act

Giancarlo has argued for months that agency rulemaking could continue if Congress failed to enact market structure legislation. He retired from law practice at Willkie Farr & Gallagher in April to focus on digital assets, artificial intelligence and public policy.

The SEC has already moved forward with its own crypto framework. On Aug. 18, the agency proposed Regulation Crypto Assets, a 402-page framework containing two registration exemptions and a conditional safe harbor for certain crypto asset investment contracts.

The proposal would allow qualifying issuers to raise up to $5 million over four years under one exemption and as much as $75 million during a rolling 12-month period under another. The Regulation Crypto Assets proposal contains disclosure requirements alongside a pathway under which qualifying tokens could leave investment contract treatment once specified conditions are met.

Atkins had been developing the framework while lawmakers negotiated the CLARITY Act. Before the Senate vote, he said the agency was prepared to continue its crypto work regardless of whether Congress completed market structure legislation. The SEC’s rulemaking does not settle every issue addressed by the bill, including the statutory allocation of jurisdiction between the SEC and CFTC.

Selig has taken a similar approach at the CFTC. The agency has prepared digital asset market structure proposals that could proceed under its existing powers, with the CFTC chairman saying in August that its work would continue regardless of what happened to the legislation. The agency’s planned crypto rules were being developed before the Senate’s September vote.

CLARITY Act can still return to the Senate floor

The failed cloture vote does not remove H.R. 3633 from the Senate calendar. Whether leadership will try again before lawmakers leave Washington ahead of the November elections remains unclear.

Sen. John Kennedy of Louisiana told Terrett after the vote that he “wasn’t surprised” by the result and said the legislation could return during a lame-duck session after the elections. Sen. Ted Cruz of Texas described the measure as “mostly dead.”

Time had already become an issue before Tuesday’s vote. House Republican leaders removed eight voting days from the September calendar, leaving the chamber scheduled to depart Washington on Sept. 17. Any Senate changes to the House-passed legislation would require further House action before a final bill could be sent to the president, as detailed in earlier coverage of the shortened House calendar.

Tillis’s procedural no vote leaves the Senate with an avenue to reconsider the cloture motion. The House-passed version of H.R. 3633 remains on the Senate calendar following Tuesday’s 49-50 vote.