Crypto Bill Languishes in Senate, Leaving Tiny CFTC in Limbo

As the Senate Banking Committee gets ready to take up President Donald Trump’s nomination of Kevin Warsh to lead the Federal Reserve, another item is conspicuously absent from the panel’s agenda next week: legislation demanded by Trump that would set rules of the road for digital assets.

The legislative holdup means even more uncertainty for the Commodity Futures Trading Commission, the US derivatives regulator that stands to gain a sizable swath of crypto jurisdiction but is contending with a slashed workforce and a small budget.

Supporters of the CLARITY Act had targeted late April for the Banking panel to mark up its piece of the bill. But Chairman Tim Scott (R-S.C.) in an April 14 interview on Fox Business said he’s still trying to resolve an impasse between banks and crypto companies over stablecoin yields, while reassuring decentralized finance developers concerned about their liability for illicit activity carried out on their platforms.

That leaves a narrow window for the Senate to strike a deal—with recesses and the midterm elections looming—and to reconcile any differences with a House-passed crypto market structure measure (H.R. 3633).

“If this doesn’t get done soon, it might not get done at all this year,” said Stephen Aschettino, chair of the fintech and digital assets practice at Fox Rothschild LLP.

Other sticking points for the bill include a potential provision that would bar senior government officials, including Trump, from deriving crypto-related profits.

“These poison pill amendments could delay the bill until the midterms, and that would kill it through 2026 in all likelihood,” Aschettino said.

The crypto industry needs “solidified legislation on the books that will provide future-proof clarity for the markets,” CFTC Chairman Michael Selig said at a hearing Thursday before the House Agriculture Committee, warning that a failure to act could drive some companies overseas. The United Arab Emirates and Singapore are among the jurisdictions that have adopted clear rules around digital assets.

‘More on the CFTC’s Plate’

Introduced nearly a year ago, the CLARITY Act prompted anticipation at the CFTC for broad responsibilities overseeing digital commodities, while the larger Securities and Exchange Commission takes on a narrower jurisdiction focused largely on tokenized securities.

The CFTC would be tasked with tackling a host of granular issues downstream of market structure legislation, including how vertically integrated products and platforms should be handled and where to apply licensing requirements to reduce opportunities for fraud.

But the CFTC under Selig’s sole leadership has a long way to go to take on the expansive universe of digital commodities, while also contending with a web of emerging jurisdictional questions around prediction markets, agency watchers say.

“It’s hard to imagine expanding the remit of a federal agency that already punches above its weight in terms of its size and capacity without increasing the resources allocated to the commission,” said Kristin Johnson, a former Democratic CFTC commissioner who’s now a professor at George Washington University Law School.

The CFTC has lost more than 20% of its staff since the end of fiscal 2024, and was down to fewer than 550 employees as of February, according to Office of Personnel Management data. It was hiring for just six full-time roles as of late Thursday, according to USAJobs listings.

Reductions in force last year hit economists and enforcement personnel at the CFTC, as well as licensing and supervision staff, according to Johnson.

“It’s difficult to overstate the importance of these divisions in the markets for novel financial products,” she said, adding that the CFTC needs a “full complement of commissioners” from both parties at the top to ensure any major regulations have staying power.

Selig at Thursday’s hearing said the CFTC is “running more efficiently and effectively than ever before,” using AI tools to help monitor markets and hiring “very talented people.”

But headcount may prove to be a persistent issue, especially under the market structure bill.

“There’s definitely going to be more on the CFTC’s plate,” said Frank Zarb, a partner at Proskauer Rose LLP and former SEC special counsel. “The CFTC is going to have to find a way to increase its staffing in order to perform all the functions that the market structure legislation would allocate to it.”

A CFTC spokesperson didn’t respond to a request for comment.

Legislation Missing

Part of the CLARITY Act approved earlier this year by the Senate Agriculture Committee would authorize the CFTC to collect fees from registered digital commodity companies, while the Trump administration’s budget request proposed funding all of the agency’s activities through industry fees, similar to other financial regulators.

Meanwhile, its appropriated funding has been frozen at around $365 million in recent years.

“There’s no question the CFTC doesn’t have the manpower or the budget that the SEC does,” Aschettino said. “My guess is the CFTC is going to rely on a self-regulatory organization, most likely the National Futures Association, to handle the heavy lifting of registration and routine examinations.”

With no markup scheduled for the Senate Banking Committee to advance the crypto market structure legislation, the CFTC and SEC have continued to act on their own.

The agencies issued joint guidance last month on how digital assets are classified under federal securities laws, seeking to provide more certainty for crypto market participants that the bulk of tokens aren’t securities policed by the SEC.

The SEC made its latest move this week, releasing a statement on broker-dealer registration for crypto platforms, providing five years of relief from registration requirements to certain apps and self-custodial wallets investors use for crypto asset securities transactions.

But any administrative moves by the Wall Street regulators can only go so far.

“The joint guidance didn’t fill all the gaps, it’s not binding legislation,” Aschettino said, calling on lawmakers to finalize the crypto legislation. “It’s needed.”