Senate Staff Slams CLARITY Act Over Five Major Loopholes
The Digital Asset Market Clarity Act (CLARITY Act) has been criticized by Senate Banking Committee minority staff for leaving five major loopholes in its text. The bill, which aims to clarify jurisdictional lines between the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), fails to meet five minimum standards set out by staff.
The main concerns revolve around protecting pensions from securities-law gaps, blocking illicit finance, shielding taxpayers from bailouts, stopping presidential self-dealing, and preserving consumer protections. However, the CLARITY Act misses all of these requirements.
One major issue is that companies issuing cryptocurrency could self-certify their exemption from securities requirements, removing disclosure and supervision tools available to the SEC and state regulators. This would weaken SEC antifraud enforcement and strip state and tribal authorities of their authority to enforce their own securities, consumer protection, and gaming laws.
Additionally, businesses tied to decentralized finance (DeFi) platforms would be exempt from counter-illicit finance duties even when earning millions from platform transactions. The bill also fails to establish an enforceable private right of action and does not address the use of forced arbitration in crypto disputes.