US Crypto Regulators Race to Fill the Vacuum: CLARITY Act Stalls in Senate as SEC and CFTC Move Quickly to Fill the Gap

Title context: US Crypto Regulators Race to Fill the Vacuum: CLARITY Act Stalls in Senate as SEC and CFTC Move Quickly to Fill the Gap Text: After the comprehensive crypto regulatory proposal, the Clarity Act, stalled in the Senate, U.S. federal and state regulators are racing to fill the digital asset regulatory vacuum. Just two days after the Clarity Act failed to advance in the Senate, the U.S. Securities and Exchange Commission (SEC) expanded its crypto regulatory rulebook under its existing authority. The agency issued an order creating a temporary pathway for certain tokenized stock trading, bringing financial markets one step closer to round-the-clock trading. On the same day, the U.S. Commodity Futures Trading Commission (CFTC) submitted a crypto rulemaking proposal to the White House for review. Details of the proposal were not made public, but a notice from the White House Office of Management and Budget (OMB) confirmed that the rules remain under review. The crypto industry, which had supported the Clarity Act, says it is eager for regulatory guidance for this emerging industry and has been working to shape a regulatory environment that serves its own interests. Summer Mersinger, CEO of the Blockchain Association and a former CFTC commissioner, said: "When traditional finance considers entering and using some crypto technology, they are currently constrained by regulatory uncertainty. Regulators providing some certainty will truly open up more investment for the industry, deeper integration with traditional finance, and drive growth in this space." Coinbase CEO Brian Armstrong is a key industry figure urging Congress to act on the Clarity Act. After a procedural vote in the Senate failed on September 15, he told CNBC: "At this point, I think we can't wait for Congress and the Senate." Senate Banking Committee Chairman Tim Scott, a Republican senator from South Carolina, also called on federal agencies to establish "clear rules of the road" for digital assets before Congress legislates. But new rules from federal agencies will not happen overnight. When asked how it plans to regulate crypto, the CFTC cited a September 16 statement from Chairman Michael Selig. Selig said: "U.S. President Donald Trump has promised that, no matter what, he will deliver a future-proof regulatory market structure for crypto assets, and we will use our existing statutory authority to help him get this done." Foreign media also contacted the SEC regarding the next steps for regulating the digital asset industry. A spokesperson said the agency will consider a proposal to "modernize custody rules for investment adviser client assets and fund assets, including addressing crypto assets." Caroline Pham served as CFTC acting chair from Trump's second inauguration day until December. She told CNBC: "A Plan B at the agency level has always been under consideration." Pham is now CEO of crypto service provider MoonPay Institutional and also serves as MoonPay's chief legal officer and chief administrative officer. She said: "You have to have contingency plans." She explained that since the start of Trump's second term, the CFTC and SEC have been advancing related work and taking this into account. This includes the "Project Crypto" initiative launched in July 2025, aimed at modernizing securities regulation and coordinating and unifying crypto rules between the SEC and CFTC. In August 2025, Pham announced that the CFTC would begin implementing recommendations from the president's digital asset markets working group. States Target Crypto Scams As the United States struggles to advance crypto regulation, states are also competing for regulatory authority over the asset class. In a September 14 letter, a bipartisan coalition of state attorneys general urged the Senate Banking Committee to oppose the Clarity Act, arguing that the bill weakens states' ability to regulate the securities market. In their letter to Scott and the committee's top Democrat, Massachusetts Senator Elizabeth Warren, they said: "We write to urge the Senate to explicitly preserve the states' police powers and ensure that states still have the tools necessary to protect the American people from predatory scammers." Aaron Klein, a senior fellow in economic studies at the Brookings Institution, said he believes states are not the best entities to regulate domestic and international capital markets. Klein, a former senior staffer on the Senate Banking Committee, said: "Capital markets regulation should be done at the federal level. But when it comes to combating fraud and scams, states have a lot of power." He said that in the absence of a federal crypto framework, states should more aggressively monitor payment processing and prosecute criminals. Mersinger noted that state enforcement only steps in after a crime has already occurred. She said: "What we really need is federal oversight to ensure that we don't end up in a situation where, because bad actors are involved, or residents of a state are harmed in some way, a state attorney general has to step in and file a lawsuit." The midterm elections are now the focus, but lawmakers have not completely abandoned the Clarity Act. North Carolina Republican Senator Thom Tillis switched his vote to oppose, allowing him to file a motion to reconsider the bill.