Revised CLARITY Act Would Shift DeFi Compliance to Controllers

A revised version of the CLARITY Act would put regulatory obligations on people or coordinated groups controlling “non-decentralized finance trading protocols.” The revised bill defines a non-decentralized protocol as one whose functionality, operation, or rules can be materially altered by an identifiable person or coordinated group.

Under the framework, the SEC and CFTC would write activity-based rules covering registration, conduct, disclosure, recordkeeping, and supervision. Treasury would then determine how existing Bank Secrecy Act obligations apply to affected controllers.

BREAKING: Senate Republicans are reportedly circulating a revised CLARITY Act text ahead of the September 15 cloture vote.

The full text has not been made public.

Key disputes remain unresolved, including:

– Ethics rules targeting the president, who reported more than $1.4… pic.twitter.com/pXJ0yZ1ojT

Software and distributed-ledger systems would not be required to register in their own capacity under the text. Participation in an incident-response or security council would not, by itself, establish control over a protocol. This is a carve-out aimed at preserving emergency-response mechanisms without pulling their participants into regulatory scope.

However, the September 15 vote still depends on Democratic crossover votes, given unresolved disputes over ethics provisions, anti-money-laundering protections, and stablecoin rewards.

The core shift in the revised CLARITY Act is definitional rather than structural. Instead of treating all DeFi trading protocols as a single regulatory category. The bill draws a line between protocols that behave like neutral infrastructure and those where an identifiable controller retains the ability to alter functionality, restrict users, or override pre-established code logic.

Practically, this means the SEC and CFTC would be tasked with building activity-based rulebooks aimed at controllers rather than protocols in the abstract. Treasury’s piece addresses how Bank Secrecy Act obligations map onto those same controllers.

For market participants tracking how the CLARITY Act could reshape institutional access to crypto markets, this is the mechanism that determines which DeFi front-ends and governance structures face compliance exposure and which remain entirely outside registration requirements.

The bill still faces the same political friction that has slowed it for months. Ethics restrictions, AML protections, and stablecoin-yield treatment remain contested, and the ethics section in the newly released text is largely unchanged from the prior draft despite being one of the central sticking points in negotiations.

Crypto Council for Innovation CEO Ji Hun Kim called the pending vote a pivotal moment for digital assets and innovation. American leadership argues the US needs a framework that pairs consumer protections with business conduct standards.

Coinbase CEO Brian Armstrong told CNBC the bill was ready for a yes vote, saying Coinbase’s previously identified must-have issues had been resolved, though he did not specify which provisions changed or where ethics negotiations landed.

JUST IN: Coinbase CEO Brian Armstrong says crypto wins no matter how the CLARITY Act vote turns out.

“If it passes, we get legislation,”

“If it doesn’t pass, the SEC and CFTC are ready to issue rules.”

Armstrong said the Sept. 15 Senate vote will bring regulatory clarity… pic.twitter.com/A38qUeLF7d

Not everyone shares that confidence. Democratic Senator Ruben Gallego warned in August against rushing a vote before lawmakers resolved disputes over ethics and stablecoin yield, arguing that a fast vote does not guarantee the outcome supporters want.

The September 15 cloture vote decides only if the Senate opens debate, not if the CLARITY Act becomes law. Clearing the 60-vote threshold requires Republicans to secure Democratic support despite the open fights over ethics language, AML protections, and stablecoin rewards, the same issues Gallego flagged weeks ago.

Armstrong noted that if the legislation stalls, the SEC and CFTC could still pursue rulemaking and innovation exemptions under their existing authority, meaning DeFi regulation would proceed agency by agency rather than through a single statutory framework.

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