A new draft of the CLARITY Act surfaced before the Senate vote

Core Points

The Commodity Futures Trading Commission (CFTC) obtains clear decentralized finance (DeFi) control test standards. Registration obligations depend on the activities performed. DeFi protection only covers the spot market. The emergency committee was granted narrow exceptions. Forecast market disputes remain unresolved. 60 votes are needed to advance the bill.

The revised text of the CLARITY Act retains the market structure in the July draft, but significantly rewrites Section 20209, which covers software developers and decentralized finance.

The main change is an attempt to distinguish autonomous software from platforms that claim to be decentralized but leave identifiable people with operational control. The legislation aims to protect code development and truly decentralized activities, while allowing regulators to apply existing requirements to those controlling financial functions.

Senator Loomis presented the amendment as a compromise

Senator Cynthia Lummis said the new text reflected negotiations that took place during August and contained "more than 100 changes requested by Democrats." The updated Clarity Act text reflects the arduous efforts of both parties in August to clarify when the only nominally decentralized DeFi agreement must be registered with the CFTC and limit the DeFi terms to cash and spot transactions in response to concerns about forecasting markets...

She highlighted the new treatment of the controlled DeFi protocol and the decision to limit DeFi protection to cash and spot transactions. According to Lumis's statement, the changes were in part in response to concerns about the forecast market. However, the proposed changes do not necessarily imply Democratic support. A September 15 vote will show whether the amendment received enough votes to start debate.

Four major changes compared to the July draft

When to Consider DeFi Protocol Controlled

The July draft already includes control tests in the section of the bill dealing with Securities and Bank Secrecy Act requirements. The revised version adds a corresponding framework to the Commodity Exchange Law section administered by the CFTC.

Under the new language, a protocol may be classified as "decentralized" if it meets one of three conditions: an individual or coordinating group has the right to materially change the protocol's operating or consensus rules; the system is not operating entirely through predetermined, transparent on-chain code; or someone may be able to restrict, review, or ban its use.

This test focuses on authority rather than brand. If a company, foundation, or coordinating group can still change the way it operates or block user access, calling a platform decentralized will not determine its legal treatment.

Triggered control does not cause automatic registration

Satisfying control tests does not automatically require registration. After consulting with the Securities and Exchange Commission (SEC) and the Treasury Department, the CFTC must first conduct public rulemaking. The process will determine the applicable obligations based on the functions performed by the controlling party. The bill lists brokerage, trading, trade execution, clearing and custody as examples. Controllers performing one of these functions will be regulated in a similar manner to market intermediaries.

The Ministry of Finance will separately define how existing Bank Secrecy Act and anti-money laundering requirements apply when the controlling party is subject to registration. The bill does not assume that every developer, governance participant or protocol operator falls within these rules.

The bill also states that software code and distributed ledger systems cannot be required to register in their own identity. Regulators will assess the behavior of those who control regulated activities, rather than the existence of underlying code.

DeFi exemptions are now limited to the spot market

The most obvious reduction is reflected in the protection given to DeFi-related activities. The July version uses broader Commodity Exchange Act language, although anti-fraud, anti-manipulation and false reporting enforcement is still available.

The draft revision separates general software development from activities involving DeFi transaction agreements. Protection that maintains agreements, operates liquidity pools, or provides interfaces applies only to digital commodity cash and spot market rules. It does not extend to the entire Commodity Exchange Law.

This distinction is crucial for forecasting markets because event contracts are within the derivatives framework rather than the spot market framework. DeFi Forecasting Platform cannot rely on the 20209 spot market exemption to avoid the rules governing event contracts.

Prediction market controversy only partially resolved

In July, 12 Democratic senators raised concerns about prediction markets similar to sports betting or casino games. They argue that broad federal protection could allow such platforms to bypass state regulations, tribal gaming rights and the Indian Gambling Regulation Act.

Limiting the DeFi clause to the spot market addresses the specific possibility that prediction platforms may use the DeFi exemption to circumvent derivatives supervision. But that did not resolve broader jurisdictional disputes.

The revised bill does not include clear Indian Gambling Regulation Act security provisions requested by senators, nor does it implement their proposed ban on CFTC registered platforms listing similar sports betting contracts. The change closes a potential DeFi avenue, but does not address all concerns raised in the July letter.

Safety Board gets limited exceptions

The revised text also explains when participating safety committees will not independently establish control of the agreement. This exception applies to scheduled and temporary emergency powers used in response to a recorded cybersecurity incident or imminent threat.

These powers must be exercised through publicly disclosed on-chain authorization rules, limited in scope and duration, and prevent any individual person from exercising unilateral control. They must not be used for unrelated protocol upgrades, governance decisions, or economic changes.

As a result, a committee with broader or permanent powers could still lead to a finding that the agreement is under control.

Federal priority does not eliminate all state powers

The draft gives the CFTC exclusive jurisdiction over registered digital goods intermediaries in respect of activities covered by federal law. Still, it retains specific areas of state and local law enforcement.

States may sue registrants for fraud, fraud, manipulation, and violations of the Commodity Exchange Act. They can also enforce generally applicable consumer protection laws, banking laws, payment laws, property laws, contract laws and criminal laws against unregistered parties.

Certain protected software and DeFi activities will be exempt from state securities, commodities and digital asset laws. The state's anti-money laundering, anti-fraud and anti-manipulation powers remain available.

Broader market structure remains intact

The revision does not replace the broader framework negotiated in the July draft. The bill still divides regulatory powers into the SEC and CFTC, establishes federal registration categories for digital commodity exchanges and brokers, and sets rules for custody, disclosure and customer protection.

The new language focuses on how the framework touches DeFi projects with identifiable controllers. It did not create a separate registration system for blockchain or software developers.

September 15 is a procedural test

The Senate is expected to hold a procedural vote on September 15. Advancing the bill requires 60 votes, which means Republicans need Democratic support before senators consider an amendment or ultimately pass it.

A previous evaluation of the CLARITY Act vote explains why meeting this threshold remains difficult. Loomis claimed that the new draft includes more than 100 Democratic requests, indicating where negotiators are seeking compromise, but it does not establish how many senators will support the motion.

Even if a procedural vote is successful, it will not make the bill law. The Senate still needs to debate and pass legislation, while the House must approve the Senate's revised or reconciled versions.

This amendment provides senators with more precise language on controlled DeFi, forecasting markets and regulatory responsibilities. A vote on September 15 will determine whether those concessions are enough to obtain the 60 votes needed to start the debate.