July 2026 will become one of the most decisive months in the history of U.S. crypto regulation. The House Financial Services Committee has scheduled two key hearings: on July 14, new Federal Reserve Chairman Kevin Warsh will deliver his first congressional testimony on the semiannual monetary policy report; on July 17, the committee will travel to New York for a field hearing on the CLARITY Act. The two hearings are only three days apart, addressing capital costs and the rules of the game — and the latter could fundamentally redefine the regulatory landscape for U.S. digital asset markets.
The biggest pain point in U.S. crypto regulation: The SEC-CFTC jurisdictional dispute remains unresolved after a decade
Whether a digital asset is a security or a commodity determines whether it is regulated by the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC). However, this boundary has remained ambiguous for the past decade.
The SEC uses the "Howey Test" to determine if an asset is an "investment contract," thereby falling under securities law; the CFTC argues that mainstream crypto assets like Bitcoin and Ethereum are commodities. The overlap and conflict between the two legal frameworks mean the same asset could face different regulatory requirements in different scenarios. Senator Cynthia Lummis once said, "Software developers shouldn't need an army of lawyers to know if their code is legal." This uncertainty not only drives up compliance costs but has also pushed many crypto companies and developers outside the United States.
What line does the CLARITY Act try to draw? How the boundary between digital commodities and digital securities is redefined
The core logic of the CLARITY Act is simple: draw a clear line.
Under the bill, highly decentralized digital assets would be classified as "digital commodities," under the exclusive jurisdiction of the CFTC — including full regulatory authority over spot markets. Bitcoin and Ethereum would fall into this category. Assets more similar to traditional securities would be defined as "investment contract assets," continuing to be regulated by the SEC.
The significance of this division goes far beyond technical definitions. Granting the CFTC exclusive jurisdiction over digital commodity spot markets means the U.S. would establish a comprehensive federal regulatory framework for crypto assets for the first time in statutory law. The bill also provides protections for certain non-custodial crypto infrastructure providers — open-source software developers, node operators, oracle providers, and non-custodial wallet developers — who could, under certain conditions, be exempt from money transmission or broker-dealer registration requirements.
Why the New York hearing on July 17 could be a turning point for the bill's fate
The choice of location for this hearing is itself a signal — New York, the global financial capital. The meeting is titled "Building the Future of Finance: How the CLARITY Act Unlocks Innovation" and will gather feedback from exchanges, investors, financial institutions, and blockchain companies.
The timing of the hearing is also critical. The Senate placed the bill on the legislative calendar (Agenda No. 423) on June 1, 2026, making it eligible for a full floor vote. However, the Senate has only three legislative days remaining before the July 4 recess. The July 17 hearing serves both as the last public review of the bill's content and as a potential key public opinion lever to push for a Senate vote.
Notably, the hearing is scheduled after the Fed's semiannual monetary policy hearing (July 14). The sequence is meaningful: Warsh will first set the tone for the macroeconomic and interest rate outlook, establishing the macro backdrop for risk assets; then the CLARITY Act hearing will test whether regulatory clarity can offset the potential pressure of monetary tightening.
From 75% to 43%: Why the probability of the CLARITY Act passing has dropped sharply in the past month
Although the bill passed the House with a bipartisan majority of 294-134 in July 2025 and advanced through the Senate Banking Committee on May 14, 2026, with a 15-9 vote, its legislative prospects have significantly deteriorated in recent weeks.
Clarity Act signed into law in 2026?
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Data from the prediction market Polymarket shows that the probability of the bill becoming law in 2026 has dropped from about 65% to 43%, a decline of 22 percentage points. Galaxy Digital also lowered its probability from 75% to 60% in early June, citing the shrinking Senate schedule and a lack of progress on contentious issues such as ethics and illicit finance.
The decline in probability stems from a combination of factors: the legislative window is rapidly narrowing, bipartisan negotiations over core provisions have stalled, and increasingly intense political gamesmanship is dragging a technical bill into the partisan maelstrom.
The battle over Section 604: How the ethics clause has become the biggest political obstacle to the bill's progress
The biggest controversy currently blocking the bill does not come from technical disagreements within the crypto industry, but from a provision with no direct connection to digital asset regulation — Section 604, the ethics clause.
Some Democrats demand that this clause include language prohibiting federal employees (including the President and members of Congress) from launching, endorsing, or issuing digital assets. Discussions have become highly sensitive due to the Trump family's crypto interests — including a memecoin and World Liberty Financial. Negotiations over this clause have been described as "bumpy" and "unstable."
Meanwhile, four U.S. law enforcement organizations representing about 70,000 professionals sent a letter to the White House on June 23 opposing Section 604 of the CLARITY Act, arguing it would create regulatory loopholes and hinder the monitoring of illicit financial activity. Catholic organizations and anti-human trafficking advocates have also issued similar warnings, fearing the provision could be exploited by traffickers, organized crime groups, and sanctions evaders.
Senator John Kennedy said that a final agreement may require direct approval from President Trump; Senator Adam Schiff said Democrats remain uncertain whether any agreement reached with White House crypto advisor Patrick Witt can pass final White House review.
The intersection of regulatory clarity and market cycles: Can the CLARITY Act become the institutional foundation for the next bull market?
Market expectations for the CLARITY Act are essentially a pricing of "certainty."
If the bill passes, it will mark the first comprehensive U.S. crypto regulatory framework. This would not only potentially end the decade-long SEC-CFTC jurisdictional dispute at the legal level, but also likely clear institutional obstacles for large-scale institutional entry. Some analysts believe its impact could be similar to the wave of institutional capital inflows triggered by the approval of spot Bitcoin ETFs in January 2024.
If the bill stalls, the return of regulatory uncertainty could trigger a sell-off in the crypto market. The SEC's enforcement-first strategy would continue to dominate the market, and its pending cases against multiple crypto trading platforms would continue to cast a shadow over the industry.
FAQ
Q1: What is the core content of the CLARITY Act?
The CLARITY Act aims to clarify the regulatory jurisdictional division between the SEC and CFTC over digital assets through statutory law. Highly decentralized digital assets (such as Bitcoin and Ethereum) would be classified as "digital commodities" under the exclusive jurisdiction of the CFTC; assets with functions more similar to traditional securities would be defined as "investment contract assets," continuing to be regulated by the SEC.
Q2: Why is the July 17 hearing important?
The hearing, held by the House Financial Services Committee in New York, is a key public session before the Senate floor vote. The hearing will gather feedback from exchanges, investors, financial institutions, and blockchain companies, potentially influencing undecided senators.
Q3: What is the current probability of the CLARITY Act passing?
As of mid-June 2026, prediction market Polymarket estimates the probability of the bill passing in 2026 at 43%, down about 22 percentage points from earlier.
Q4: What are the main obstacles facing the bill?
Current main obstacles include: the two-party political deadlock over Section 604 (ethics clause), the urgent time window with only three legislative days remaining before the Senate's July recess, and concerns from some law enforcement organizations that the bill could weaken monitoring of illicit finance.
Q5: If the bill passes, what does it mean for the crypto market?
If the bill passes, it would end the decade-long SEC-CFTC jurisdictional dispute and establish the first comprehensive federal regulatory framework for the U.S. crypto market. This could push regulated institutions such as pension funds and insurance companies to formally include crypto assets in their portfolios, and provide clear compliance pathways for crypto exchanges to expand their businesses.
Q6: If the bill stalls, what impact would it have on the market?
If the bill stalls, the return of regulatory uncertainty could trigger a sell-off in the crypto market. The SEC's enforcement-first strategy would continue to dominate the market, and its pending cases against multiple crypto trading platforms would persist.
