For nearly a decade, the cryptocurrency industry has operated in regulatory limbo, caught between two federal agencies with conflicting claims to jurisdiction. That uncertainty may finally be ending. The CLARITY Act—landmark legislation that would establish clear rules for digital assets—heads to Senate hearings this month, setting up what could be the most consequential crypto vote in congressional history.

White House crypto adviser David Sacks confirmed that the Senate expects to hold hearings and markups in January 2026, putting the legislation on track for a potential vote before the November midterm elections. Industry experts estimate a 50-60% chance that comprehensive crypto legislation will finally become law this year.

What the CLARITY Act Would Do

The CLARITY Act for Digital Asset Market Structure aims to resolve the fundamental question that has plagued cryptocurrency regulation: which federal agency has authority over digital assets?

Currently, both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) claim jurisdiction over various aspects of the crypto market. This overlap has created confusion for businesses, uncertainty for investors, and legal jeopardy for companies that guess wrong about which regulator to satisfy.

Key provisions of the legislation include:

  • Clear jurisdiction boundaries: The bill would establish which tokens fall under SEC oversight (those functioning as securities) versus CFTC oversight (those functioning as commodities).
  • Token taxonomy framework: A classification system would help determine whether specific cryptocurrencies are securities, commodities, or something else entirely.
  • DeFi oversight: Decentralized finance protocols would receive clearer guidance on compliance obligations.
  • Consumer protection: New requirements for disclosures, custody, and market integrity would apply to exchanges and token issuers.

The Path to January Hearings

The CLARITY Act passed the House of Representatives in July 2025 with strong bipartisan support—a rarity for any legislation, let alone one touching the controversial cryptocurrency sector. The vote reflected growing consensus that regulatory uncertainty is harming American competitiveness as crypto businesses relocate to jurisdictions with clearer rules.

The Senate, however, delayed action in late 2025 as lawmakers negotiated key issues. Primary sticking points include:

  • Stablecoin treatment: How should dollar-pegged tokens like USDC and Tether be regulated? Some lawmakers want bank-like oversight; others prefer lighter-touch regulation.
  • DeFi liability: Who is responsible when a decentralized protocol facilitates illegal activity? Holding developers accountable could stifle innovation; not doing so could enable money laundering.
  • Market manipulation: What surveillance and enforcement tools should regulators have to police crypto markets for manipulation?

January's hearings will address these questions, with testimony from industry participants, consumer advocates, and regulatory officials.

The SEC's Parallel Track

While Congress debates legislation, the SEC under Chair Paul Atkins has embarked on its own regulatory initiative. Atkins, who replaced Gary Gensler in early 2025, has taken a dramatically different approach to crypto oversight.

Key SEC developments include:

  • Enforcement pullback: The SEC has dismissed or paused cases against major firms like Coinbase and Binance that were initiated under Gensler.
  • Project Crypto: Atkins has launched an initiative to update SEC rules around digital assets, potentially creating a parallel regulatory framework.
  • Innovation exemption: The SEC is developing a fast-track process for crypto products that could arrive within weeks.

"Chairman Atkins has repeatedly said he thinks most tokens are not securities," noted one industry observer. "The current guidance the SEC is working on is far-reaching, covering every aspect of tokens, not just issuance or offerings."

CFTC's Expanded Role

If the CLARITY Act passes, the CFTC would assume primary responsibility for most cryptocurrency spot markets—a significant expansion of the agency's traditional focus on derivatives. New CFTC Chair Selig is preparing for this possibility, though the agency would need substantial additional resources to effectively oversee the crypto market.

Industry analysts expect more SEC-CFTC coordination in 2026, regardless of whether legislation passes. The turf war that characterized the Gensler era has given way to a more collaborative approach as both agencies recognize that regulatory uncertainty benefits no one.

State-Level Complications

Even as federal lawmakers work toward clarity, states are implementing their own crypto regulations. Most significantly, California's Digital Financial Assets Law takes effect on July 1, 2026, requiring anyone engaged in "digital financial asset business activity" with California residents to obtain a state license.

This patchwork of state regulations creates compliance burdens that federal legislation would ideally preempt. However, states jealously guard their authority over consumer protection, and any federal bill that attempts to override state laws will face opposition from state-level regulators and their congressional allies.

What It Means for Crypto Prices

Cryptocurrency markets have historically responded positively to regulatory clarity—even when the rules impose new burdens. The logic is straightforward: institutional investors who have been waiting on the sidelines due to regulatory uncertainty could deploy substantial capital once clear rules are established.

Passage of the CLARITY Act could unlock:

  • Pension fund investment: Many institutional investors are prohibited from investing in assets without clear regulatory status.
  • Bank custody services: Major banks have hesitated to offer crypto custody due to unclear capital treatment and regulatory risk.
  • Additional ETF products: While Bitcoin and Ethereum ETFs have been approved, a clear regulatory framework could enable ETFs for other tokens.

The Political Calculus

The CLARITY Act's fate may ultimately depend on political considerations beyond cryptocurrency policy. With midterm elections approaching in November, both parties have incentives to demonstrate legislative accomplishment—or to deny the other side a victory.

Cryptocurrency has become increasingly partisan-coded, with Republicans generally favoring lighter-touch regulation and Democrats emphasizing consumer protection. However, the bipartisan House vote suggests that crypto legislation can still command cross-party support if crafted carefully.

The Bottom Line

January's Senate hearings mark the most advanced stage any comprehensive crypto legislation has reached. While passage is far from certain, the 50-60% odds that industry observers cite represent a dramatic improvement from years of total regulatory paralysis. For cryptocurrency investors, traders, and businesses, the coming months could finally deliver the clarity that the industry—and the CLARITY Act—have long promised.