Analysis: How Does the Senate Agriculture Committee's Bipartisan Crypto Market Structure Discussion Draft Build on the CLARITY Act?
On November 10, 2025, Senator John Boozman (R-AR), Chairman of the Senate Committee on Agriculture, Nutrition, and Forestry, and Senator Cory Booker (D-NJ) released the bipartisan discussion draft on crypto market structure in the United States, which builds upon the Digital Asset Market Clarity Act of 2025 ("CLARITY Act") passed by the House of Representatives earlier this year. Following up on our earlier summary, this note delves deeper into the bipartisan discussion draft and explores the areas where the discussion draft expands and deviates from the CLARITY Act, and also discusses where the crypto market structure regulatory framework in the United States may be headed.
Definitions and Oversight
Although the discussion draft leaves open a number of key definitions subject to further negotiations, including those relating to blockchain systems, decentralized finance, and most notably a "security," the discussion draft provides further progress toward reaching clarity on what is, and what is not, a digital commodity and adopts the CLARITY Act's provision of exclusive spot crypto market oversight by the CFTC. The discussion draft defines "digital asset" as "any representation of value which is recorded on a cryptographically-secured distributed ledger," as well as "digital commodity" as "any fungible asset that can be exclusively possessed and transferred, person to person, without necessary reliance on an intermediary, and is recorded on a cryptographically secured public distributed ledger." The proposed definition of a "digital commodity" in the discussion draft also excludes securities (to be defined), permitted payment stablecoins, banking deposits, pooled investment vehicles, collectibles (that are not traded among unaffiliated individuals at market scale), and other non-commodity assets. Additionally, digital assets that "reference, represent an interest in, or are functionally equivalent to" another commodity, security, deposit, or tangible or intangible good are likewise excluded from the definition of a digital commodity pursuant to the discussion draft. With the proliferation of tokenization of real-world assets, this exclusion would result in most tokenized products remaining subject to existing SEC and CFTC regulatory regimes for securities and derivatives.
The exclusion of a security from the definition of a digital commodity is in line with recent comments made by SEC Chair Atkins proposing a possible token taxonomy. The proposed taxonomy would not consider digital commodities and network tokens, as well as digital collectibles and digital tools, to be securities. However, under Atkins' proposed token taxonomy, tokenized securities would continue to be securities as those crypto assets represent the ownership of a financial instrument enumerated in the definition of a "security" that is maintained on a crypto network.
Notably, the discussion draft does not take up the CLARITY Act's trading requirements for other tradeable assets. However, the Senate Banking Committee's Responsible Financial Innovation Act of 2025 ("RFIA draft") addressing SEC-related matters, as we previously summarized, sets forth a number of proposed definitions that are not in the House's CLARITY Act, including that of an "Ancillary Asset," which is "an intangible asset, including a digital commodity, that is offered, sold, or otherwise distributed to a person pursuant to the purchase and sale of a security through an arrangement that constitutes an investment contract." The RFIA draft subsequently notes that ancillary assets are not securities and that ancillary assets are not considered securities when traded on secondary markets. Section 101 of the RFIA puts new language in Section 4B of the Securities Act of 1933 that would address required disclosures for transactions with ancillary assets by the ancillary asset originator and would also require the SEC to issue guidance on the disclosure responsibilities for those considered joint and several ancillary asset originators within 360 days from enactment. Oversight over ancillary assets that are digital commodities will likely be subject to further coordination and rulemaking between the SEC and CFTC.
Registration Regime
The discussion draft adopts several new categories of entities established in the CLARITY Act that would have to register with the CFTC, including digital commodity exchanges, digital commodity brokers, and digital commodity dealers. Unlike the CLARITY Act, however, the discussion draft notably does not provide for expedited registration of these new regulated entities nor allow for provisional status during the rulemaking process.
The registration process for digital commodity exchanges is similar to that set out in the CLARITY Act; however, the discussion draft requires further rulemaking by the CFTC on the contents of the registration application, including governance, resources, systems safeguards, surveillance, and conflict management. Consumer protection is an additional focus of the discussion draft as it requires CFTC rules imposing customer protection requirements that require disclosures by the digital commodity exchange to a customer. Provisions calling for additional regulations imposing customer protections are also added to the CLARITY Act's listing standards for digital commodities. In this vein, the discussion draft proposes to amend the private right of action in the Commodity Exchange Act to include digital commodity transactions and digital commodity exchanges. The discussion draft also builds upon the CLARITY Act by specifically outlining areas for the CFTC to establish and enforce rules minimizing conflicts of interest to address transactions with affiliates or as a result of multiple registrations. In addition, the discussion draft would require digital commodity exchanges to be governed by a board of directors, and for digital commodity exchanges to establish robust and professional risk management systems.
The discussion draft's registration regime for digital commodity brokers and dealers likewise builds upon the registration framework set forth in the CLARITY Act. Potentially shadowing SEC Chair Atkins' call for a "Reg Super App," where entities offering securities and non-securities could trade under a single license, and the harmonization efforts jointly announced by the SEC and CFTC, the discussion draft calls for the CFTC to avoid "duplication, inconsistencies, or burdens for a person registered in multiple capacities." The discussion draft also includes a provision where digital commodity brokers and dealers could only permit trading in digital commodities that are not readily susceptible to manipulation, which is not included in the CLARITY Act and would require CFTC rulemaking on the execution of digital commodity transactions addressing fair and objective pricing, disclosure, price discovery protections, and requirements specific to retail customers. Similar to additional rulemaking areas for digital commodity exchanges, the discussion draft would require CFTC rulemaking to minimize conflicts of interest. In this vein, the designation of a chief compliance officer for a digital commodity broker and dealer provisions in the discussion draft includes a further limitation not included in the CLARITY Act that would limit the role to an individual who shall "solely" be responsible to the digital commodity broker or dealer, and not to any other affiliated entity. Moreover, the discussion draft adds an inspection provision that would allow the CFTC to inspect and monitor digital commodity brokers and dealers on an ongoing basis to ensure compliance.
CFTC Offices and Resources
The discussion draft also provides resources for implementation and enforcement as set forth in the CLARITY Act, and would permit the CFTC to collect fees from these new registrants. However, given his comments made during his nomination hearing, it remains to be seen whether the incoming CFTC Chair would accept these additional funds despite the CFTC's expanded mandate. The discussion draft does not incorporate the CLARITY Act's codification of the CFTC's LabCFTC but instead establishes the Office of the Spot or Cash Market Digital Commodity Retail Advocate.
Next Steps
In September 2025, the Senate Banking Committee released its RFIA draft addressing SEC-related matters, and Senator Tim Scott is reportedly seeking a markup by the end of the year. The Senate Banking Committee and Senate Agriculture Committee will have to combine their respective discussion drafts into a single comprehensive bill that will have to be reconciled with the House's CLARITY Act. The bracketed provisions in the discussion draft relating to blockchain systems and decentralized finance will have to be ironed out between the committees. The treatment of DeFi firms, noncontrolling service providers, and developers as compared to regulated intermediaries is also subject to further negotiation and remains a topic of much debate. Further, the definition of a "security" that would not be considered a digital commodity still remains to be worked out. Democrats are reportedly concerned over the payments of interest or yield on stablecoin balances pulling deposits from the banking system, illicit finance, and limitations on elected officials and their families from issuing, endorsing, or profiting from digital assets while in office. That said, there does not appear to be a dispute over token classification and therefore, the lines are starting to become clear where the CFTC will have oversight over the spot and cash markets for crypto and non-securities under the discussion draft and the CLARITY Act, with the RFIA allowing the SEC to regulate digital asset securities with its disclosure regime.
It is clear from both discussion drafts that there will be much rulemaking to be done should a crypto market structure regulatory framework be enacted. Indeed, the discussion draft would expand the effective date of the legislation to 18 months from the CLARITY Act's 360 days or 270 days after the date of enactment depending on the provision. However, both the SEC and CFTC are moving forward with their respective crypto initiatives by seeking industry feedback, using their interpretative and exemptive relief, and announcing harmonization efforts between the two agencies. Indeed, SEC Chair Atkins has noted that the SEC and CFTC have operated in parallel in lanes for too long, and that the agencies should now "operate in concert, side by side, hand in glove, so that American innovation and investment can thrive."
For example, the SEC is expected to announce an innovation exemption in the next month and the CFTC recently approved, for the first time, leveraged spot crypto trading by a CFTC-registered designated contract market. The CFTC also issued guidance and a pilot program permitting the use of tokenized collateral as margin for derivatives positions. These regulations will be especially helpful in the event crypto market structure legislation is not enacted in its current form, forcing the negotiators in Congress to go back to the drawing board. In any event, we may experience the unusual situation of having a decent sized body of regulations in place before the effective date of crypto market structure legislation. Not only will the efforts by the SEC and CFTC facilitate the implementation of rules when, and if, crypto market structure legislation is enacted, these initiatives are also pushing towards the goal of increased regulatory clarity over digital assets in the United States as negotiations over the legislation continue.
Elizabeth Davis, who leads the commodities and derivatives business practice at Davis Wright Tremaine, previously served as Chief Trial Attorney at the CFTC. Steve Gannon has advised several of the country's largest financial institutions and focuses on helping the industry adapt to the burgeoning fintech and digital asset spaces. For more insights, contact Liz, Steve, or another member of our financial services team or sign up for our alerts.