On the evening of August 11, the SEC issued a statement: on Friday (August 14) at 10:00 a.m., the Commission will hold an open meeting with a single agenda item—voting on whether to formally propose a “customized issuance regime” for crypto asset investment contracts (Regulation Crypto).

This marks the first formal crypto rulemaking under Chairman Paul Atkins, with only three business days between the announcement and the meeting.

All three Commissioners are Republicans, and approval of this step is expected. However, it must be clarified that Friday’s vote determines only “whether to issue the proposal and solicit public comment,” not final rule adoption. After publication, a typical public comment period lasts 60 to 90 days, followed by revisions based on feedback; the earliest possible official implementation would not occur until 2027.

Where Is the CLARITY Act Stuck?

The context is legislative gridlock in Congress.

The CLARITY Act (Digital Asset Market Clarity Act) is currently the closest thing to a law in U.S. crypto market structure legislation. The House passed it 294:134 in July 2025, and the Senate Banking Committee approved it 15:9 in May. It appeared poised for smooth sailing—but stalled at the full Senate floor vote.

Senate Majority Leader Thune originally planned to push for a vote before the August recess. On August 6, he told reporters Democrats were refusing to vote. At 4:52 a.m. on August 8, during the closing moments of an all-night session, Thune filed a procedural motion that postponed the vote to September 15 at 2:15 p.m.—the first day senators return from vacation.

The reasons for the deadlock are specific. Three contentious issues remain unresolved: details on anti-money laundering and enforcement provisions, regulatory jurisdiction over stablecoin yields, and ethics provisions concerning presidential holdings of crypto assets. Elizabeth Warren’s stance represents the Democratic opposition: “This version of the bill was written by the crypto industry, for the crypto industry.”

A vote requires 60 votes. With Republicans holding 53 seats, at least seven Democratic senators must cross party lines. TD Cowen analyst Jaret Seiberg estimated a 75% chance of failure in his report on August 10. On Polymarket, the odds of the CLARITY Act being signed into law this year have dropped from 82% in February to just 21%, with over $5.5 million wagered on this outcome.

SEC Steps Into the Vacuum

The SEC’s move follows directly after the CLARITY Act’s obstruction. Rather than waiting for Congress, the SEC is writing rules itself. TD Cowen characterized this meeting as “the starting point of a series of rulemakings initiated by the SEC to provide regulatory certainty following the Senate’s legislative stalemate.”

The framework for Regulation Crypto originates from Atkins’ public remarks in March. He then proposed three types of exemptions:

Startup Exemption: Allows early-stage crypto projects to conduct limited fundraising under specific conditions, exempting them from full securities registration obligations. Atkins referenced $75 million within 12 months as a benchmark in his March speech.

Funding Exemption: Provides a streamlined path for larger fundraising rounds, with disclosures potentially resembling the format of a crypto whitepaper rather than a full S-1 prospectus required of public companies.

Investment Contract Safe Harbor: This is the most critical component, potentially offering tokens a “path out of securities regulation”: when a project’s development team no longer actively controls network operations, the token may no longer be classified as an investment contract, thereby falling outside SEC jurisdiction.

If codified into final rule, the safe harbor provision would fundamentally alter compliance logic for crypto projects. Historically, once a token is deemed a security, it remains a security indefinitely, requiring perpetual compliance with securities laws. The safe harbor logic posits that security status can diminish as a project becomes more decentralized.

Two Parallel Tracks

Washington now has two parallel tracks advancing crypto regulation.

The CLARITY Act follows the legislative track. Its advantages include highest authority (law supersedes administrative rule), broadest coverage (simultaneously defining SEC and CFTC jurisdiction), and greatest durability. But it requires 60 votes, cross-party support, resolution of three contentious points—and even if passed via procedural vote on September 15, further debate, amendments, and final passage remain, leaving an extremely narrow window for completion this year.

Regulation Crypto follows the administrative rulemaking track. It bypasses Congress entirely; three Republican Commissioners are sufficient to advance it. Once adopted, a final rule is harder to overturn by a future SEC than staff statements, as reversing it would require repeating the same notice-and-comment-and-vote process. Its disadvantages include limited scope (only covering SEC jurisdiction, not CFTC), and potential legal challenges.

Former SEC official Brett Redfearn captured industry sentiment perfectly on X: “No need to wait for Congress to pass the CLARITY Act! It’s time for regulators to take action themselves.”

The two tracks are not mutually exclusive. If the CLARITY Act ultimately passes, it will supersede Regulation Crypto. If it fails in Congress, Regulation Crypto becomes the best possible outcome for the industry. The SEC is using its administrative power to establish a fallback solution for Congress.

For the crypto industry, there will be no immediate change in compliance obligations. Friday’s vote merely kicks off the rulemaking process—the timeline from proposal to final implementation spans at least six months.

But the signal is immediate. For the past year, the greatest uncertainty facing the crypto industry in the U.S. has been “when will the rules arrive?” With both Congress and the SEC moving forward—despite differing timelines—Washington has shifted decisively from the debate over “whether to regulate crypto” to the practical phase of “how to regulate it.”

September 15 and August 14—two dates, two tracks, one direction.

By: Xiao Bing