tl;dr
The Senate unveiled a preliminary draft of crypto market legislation complementing the House’s CLARITY Act, both aiming to create a clear legal path for crypto startups to raise funds via ICOs. The Senate Banking Committee’s draft focuses on securities and the SEC, proposing amendments to New Deal-e...
The Senate recently unveiled a preliminary draft of its crypto market structure legislation, complementing the House’s bipartisan-passed CLARITY Act. While the bills differ, both aim to establish a clear legal pathway for crypto startups to raise funds through ICOs like never before. The current Senate Banking Committee draft focuses on securities and the SEC, with an upcoming Senate Agriculture Committee bill to address commodities and the CFTC.
The securities-focused portion of the Senate bill mirrors many goals of the CLARITY Act by proposing amendments to New Deal-era securities laws, thereby formally defining crypto assets and shifting much oversight from the high-regulation SEC to the CFTC’s lighter touch. The language is nuanced, allowing regulatory discretion for future interpretations and rulemaking, but the core intent is straightforward: to reduce legal barriers for crypto projects to raise capital without fear of SEC retaliation.
One key feature of the Senate bill is its creation of a fundraising pathway permitting token issuers to raise up to $75 million annually for four years through token sales, given these tokens lack certain security-like benefits—such as equity interests, liquidation rights, or entitlement to dividends. Tokens meeting these criteria are classified as “ancillary assets,” thus exempt from SEC jurisdiction, a concept borrowed from the earlier Lummis-Gillibrand bill. Tokens initially failing the criteria can later qualify if they show minimal entrepreneurial efforts influencing their value for at least a year.
This ancillary asset framework exemplifies the Senate’s effort to balance carving crypto out of traditional securities regulation while preventing abuse that might affect conventional equities markets. Legal experts commend the Senate bill's concise and targeted approach, contrasting it with the House CLARITY Act’s broader yet more complex rules on token ownership and sales.
However, industry reactions remain mixed regarding whether this legislation would wholeheartedly reopen ICO fundraising. Amanda Fischer, a policy expert and former SEC chief of staff, praises the clarity of the House bill’s wholesale exemptions but critiques them for potentially serious unintended consequences. She views the Senate bill as more cautious, noting its prohibition on SEC-exempt tokens offering any “express or implied financial interest” in the issuing entity—which could affect governance or implied earnings ties—raising concerns about token eligibility.
A Senate GOP aide stresses the shared goal of both bills: ensuring many crypto tokens won’t be classified as securities. Ambiguities around which tokens qualify will be clarified through future SEC and CFTC rules and exemptions. The aide also points out that the Senate bill’s less aggressive stance likely aims to reassure Democrats sensitive to protecting traditional securities markets, depicting this approach as a "fig leaf" to maintain necessary regulatory guardrails.
Despite reservations, experts anticipate the bill will significantly hinder the SEC’s ability to broadly pursue enforcement actions against crypto companies and token issuers. The heightened legal thresholds set by the bill will place the SEC “on its back foot,” making enforcement more challenging and signaling a new era of regulatory leniency designed to invigorate crypto fundraising and industry growth.