CLARITY Act Revised to Address Controlled DeFi Platforms and Prediction Markets
A revised version of the CLARITY Act bill has been released by Senate Republicans in response to concerns about controlled decentralized finance (DeFi) platforms, prediction markets, and state authority.
The bill addresses these issues by adding an explicit DeFi control test, which focuses on authority rather than branding. A protocol can be classified as 'non-decentralized' if it meets at least one of three conditions: a person or coordinated group has authority to materially alter the protocol's operation or consensus rules; the system does not operate solely through predetermined, transparent on-chain code; or someone can restrict, censor, or prohibit its use.
The revised bill also clarifies that meeting the control test would not automatically require registration. The Commodity Futures Trading Commission (CFTC) would first have to conduct a public rulemaking process to determine which obligations apply according to the functions performed by the controlling party.