Unpacking the latest on the Senate Ag vote and CLARITY Act

Topline

• CLARITY Act sees movement in the Senate

• SEC outlines the rules of the road for tokenized securities 

• SEC Small Business Forum: March 9

• Quick hits

CLARITY Act sees movement in the Senate

The Senate Agriculture Committee advanced its portion of the crypto market structure framework, notching a win for the crypto industry. The measure, which is largely in line with the version passed by the House last year, focuses on digital commodity intermediaries and expanding Commodity Futures Trading Commission (CFTC) authority over crypto spot markets:

• Regulatory scope: Creates a registration and regulatory system for digital assets under CFTC purview, grants fee-collection authority, and instructs joint rulemakings with the SEC.

• Operational requirements: Mandates that digital exchanges, dealers, and certain custodians meet minimum capital requirements and register with the CFTC.

• Consumer protection: Establishes guardrails including risk disclosures, anti-fraud prohibitions, and marketing standards.

Despite initial bipartisan support, the current version only garnered support from Republicans. Democrats offered amendments addressing longstanding concerns over ethics, consumer protection, and government financial assistance, all of which failed along party lines. But in response to Democrats’ desire for a bipartisan deal, Senate Ag leadership committed to working across the aisle as the bill moves toward the floor.

Meanwhile, Senate Banking negotiations got some help from 1600 Pennsylvania. The White House convened banking trades and crypto industry representatives to resolve CLARITY Act disagreements over stablecoin interest and rewards. The latest version attempts to close a gap left by the GENIUS Act, which prohibits stablecoin issuers, but not crypto exchanges, from paying interest to stablecoin holders. Discussions were constructive, although no immediate compromise was reached. Both sides are working to reach a solution by the end of February, aligning with White House expectations.

Why it matters: Positive progress, but there are a number of issues to solve before CLARITY makes its way to the president’s desk. In addition to stablecoin yield, concerns around tokenization and DeFi need to be addressed, as well as ethical issues to ensure bipartisan support, particularly as new reports emerge regarding Trump family crypto ties. Finalizing a market structure package is an administration priority, adding pressure to reach consensus as the legislative window tightens. The crypto industry (and its $193 million warchest) will help prevent deprioritization on the legislative agenda, meaning other priorities, like capital formation, may slip—which is why engagement is so important.

What to watch: While market structure legislation stalls in Congress, the CFTC and SEC are moving ahead to lay out rules to foster industry growth. Last week, SEC Chairman Paul Atkins and CFTC Chairman Mike Selig previewed Project Crypto, a joint initiative that aligns the two agencies’ approaches to digital asset markets, tokenization, and on-chain financial infrastructure. The agency leaders emphasized coordination around jurisdictional boundaries, reaffirming that assets functioning like securities remain under the SEC’s remit, while commodities-like tokens and derivatives activity fall to the CFTC. Importantly, regulators signaled growing openness to regulated tokenized securities, on-chain settlement, and new trading models, so long as they operate within existing statutory frameworks. Rather than proposing sweeping new rules, Project Crypto is framed as an effort to clarify how current regulations apply to evolving market structures and to reduce uncertainty that has stalled institutional adoption.

SEC outlines the rules of the road for tokenized securities 

Last week, the SEC’s Divisions of Corporation Finance, Investment Management, and Trading and Markets issued a joint statement delivering a clear message to markets: tokenization changes the plumbing, not the policy. Changing how ownership is being recorded does not change the nature of what is being sold. A tokenized security is still a security, and the federal securities laws apply the same way they do to traditional book-entry ownership. The SEC staff categorized tokenized securities and anchored them firmly within existing law.

• Issuer-sponsored tokenization: An issuer or transfer agent tokenizes a security either by issuing the security directly in its tokenized form, where ownership is recorded on the blockchain, or by using a token as part of the transfer mechanism for a security whose ownership is recorded and maintained off-chain. 

• Custodial model: Unaffiliated third-party holds securities or security entitlements as crypto assets on a ledger.

• Synthetic model: Third-party issues its own tokenized security that provides synthetic economic exposure to the value, performance, or other attributes of a referenced security, but is not an obligation of the underlying issuer.

Why it matters: The statement resolves ambiguity about whether placing a security on a blockchain changes its legal status. Further, it reinforces a technology-neutral approach to regulation, permitting blockchain technology to modernize market infrastructure without rewriting the securities laws. That framing matters even more as Congress attempts to legislate digital asset market structure. The SEC’s clarification comes as there is a growing dispute on Capitol Hill and within the crypto industry itself on how tokenization should be addressed and interpreted in legislation. 

Bigger picture: Chairman Atkins has framed tokenization as a pivotal force that could modernize U.S. financial markets within a very short timeframe, likening it to the electronification of markets. Atkins argues that tokenization can boost transparency and efficiency by enabling on-chain settlement that narrows the gap between trade execution and final settlement, which could streamline functions ranging from dividend payments to shareholder communications. While emphasizing that tokenized securities remain subject to federal securities laws, the SEC is developing a clear token taxonomy and regulatory framework that distinguishes between token types and provides predictable rules of the road for innovators and intermediaries. This posture signals a deliberate shift toward embracing digital finance innovation and accommodating tokenization within regulated markets. Traditional institutions, from large banks to asset managers to major infrastructure players like the DTCC and NYSE, are bringing tokenized assets mainstream.

SEC soliciting policy recommendations for 45th Annual SEC Small Business Forum

​​Mark your calendars: The 45th Annual SEC Small Business Forum is back with opportunities to improve capital formation for public and private startups, small companies, and their investors. Members of the public can propose and vote for policy recommendations, which will be reported directly to Congress. Several bipartisan efforts originate from the innovation suggested in this forum. You can submit your policy recommendations by 12:00 p.m. ET on March 5.

Quick hits

• Partial government shutdown is short-lived. The House passed a spending package today that funds the majority of the federal government through September. However, temporary funding for the Department of Homeland Security will expire on Feb. 13, setting up additional battles as Democrats push for reforms following the fatal shootings in Minneapolis.

• Trump names Powell’s successor. President Trump has nominated Kevin Warsh to serve as the next Federal Reserve Chair and succeed Jay Powell when his term ends in May. A former Fed governor and Morgan Stanley executive, Warsh was one of the more conventional choices, but the path to Senate confirmation will be challenging as Democrats and Republicans have concerns over Fed independence. Sen. Thom Tillis has vowed to oppose any Fed nominee until the Justice Department’s investigation into Powell has concluded.

• CFTC signals regulatory shift for prediction markets. CFTC Chairman Michael Selig announced the agency will draft new regulations for the prediction markets industry. Selig directed staff to withdraw both the 2024 proposal that would have banned political and sports-related event contracts and the 2025 staff advisory cautioning against sports contracts. This shift reduces legal uncertainty for market participants and signals that prediction markets are being treated as a legitimate derivatives product subject to oversight, rather than activity to be discouraged outright.

• SBIR/STTR stalemate continues. Small businesses, universities, and industry groups are increasing pressure on Sen. Joni Ernst to reauthorize the lapsed SBIR/STTR programs, a $6 billion federal R&D funding pipeline that expired nearly four months ago. Ernst has held firm on adding tougher safeguards against Chinese influence and reforms targeting “SBIR mills,” even as Democrats and House leaders have backed a short-term or yearlong extension. Known as “America’s seed fund,” SBIR/STTR are critical to early-stage innovation, defense tech, and commercialization by small firms, and the ongoing lapse is already disrupting research pipelines, capital planning, and U.S. competitiveness. Carta will continue to work with our ecosystem partners to push to get this important program reauthorized.

Upcoming events

• House Financial Services Committee Hearing: The Annual Report of the Financial Stability Oversight Council (FSOC) - February 4 at 7:00 a.m. PT/10 a.m. ET

• House Financial Services Committee Hearing: A New Day at the SEC: Restoring Accountability, Due Process, and Public Confidence - February 4 at 11 a.m. PT/2:00 p.m. ET

• Carta Event: Fund Economics: Demystifying Operations, Fees, and Expenses - February 5 at 10:00 a.m. PT/1:00 p.m. ET

• House Financial Services Committee Hearing: Oversight of the Securities and Exchange Commission - February 11 at 7:00 a.m. PT/10 a.m. ET

• SEC Small Business Advisory Committee: Regulatory Framework for Finders - February 24 at 7:00 a.m. PT/10:00 a.m. ET

• 45th Annual SEC Small Business Forum: March 9 at 1:00 p.m. - 5:00 p.m. ET/10:00 a.m. - 2:00 p.m. PT

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