Crypto market structure if the CLARITY Act is enacted: what would follow for allocators

The CLARITY Act (H.R. 3633) is pending legislation and is not law: it passed the House 294–134 on 17 July 2025, and on 15 September 2026 the Senate rejected cloture on the motion to proceed by 49–50, so formal Senate debate has not begun (H.R. 3633, Digital Asset Market Clarity Act of 2025 (CLARITY Act), passed the House July 17, 2025; Senate cloture on the motion to proceed rejected 49–50 on Sept. 15, 2026 — the bill is not law). If it were enacted, most of the operating detail would be written in agency rulemaking, which would decide how custody, classification and reporting apply to advisers, and the Act would place digital commodities under the CFTC and investment-contract assets under the SEC. This analysis covers the rulemaking sequence that would follow, the custody questions it would raise, and what committees should update; every consequence described below is conditional on enactment.

Key takeaways

• The CLARITY Act (H.R. 3633) is pending legislation and is not law: it passed the House 294–134 on 17 July 2025 and Senate cloture on the motion to proceed was rejected 49–50 on 15 September 2026 (H.R. 3633, Digital Asset Market Clarity Act of 2025 (CLARITY Act), passed the House July 17, 2025; Senate cloture on the motion to proceed rejected 49–50 on Sept. 15, 2026 — the bill is not law; U.S. Senate Roll Call Vote No. 234 (Sept. 15, 2026)).
• If the Act were enacted, rulemaking rather than the statute alone would determine how the framework applies to registered advisers and institutional allocators.
• If enacted, the Act would place digital commodities under the CFTC and investment-contract assets under the SEC.
• Custody definitions may change if legislation is enacted; committees should expect to revisit investment policy statement language and DDQ questions.
• Every consequence on this page is conditional on enactment, and every timeline is an expectation, not a date, until a statute is enacted and agencies publish proposed and final rules.

What would happen to crypto regulation if the CLARITY Act passes?

The CLARITY Act is not law. H.R. 3633 passed the House 294–134 on 17 July 2025 and, on 15 September 2026, the Senate rejected cloture on the motion to proceed by 49–50, so the Senate has not begun formal debate on it (H.R. 3633, Digital Asset Market Clarity Act of 2025 (CLARITY Act), passed the House July 17, 2025; Senate cloture on the motion to proceed rejected 49–50 on Sept. 15, 2026 — the bill is not law). Everything that follows is conditional on enactment. A statute of this kind would set the framework, and agency rulemaking would supply the operating detail. If the CLARITY Act became law, each agency with jurisdiction would be expected to propose rules on classification, registration of intermediaries, disclosure and recordkeeping, and to coordinate where an asset could fall under either regime. Prudential regulators may also address how banks and trust companies engage with digital assets. Until such rules were final, a statute could be in force while much of what it means in practice was not yet written.

For an institutional allocator, that sequence matters more than the headline. The questions a committee cares about, which custodians qualify, how a holding is classified, and what a manager must report, would be answered in proposed rules, comment periods and final rules rather than in the text of the Act. A committee that waits for a single effective date would find there is not one.

For a registered investment adviser such as Abra Capital Management, the immediate questions are which rules would govern advice on each asset type, how the custody rule would interact with any new framework, and what reporting changes would follow. This analysis tracks those questions and is updated as the bill moves and as proposals are published. It is general regulatory analysis, not legal advice.

Which agencies would take the lead, and how would assets be classified?

The CLARITY Act (H.R. 3633), which passed the House in July 2025 and remains pending in the Senate, would assign primary jurisdiction over digital commodities to the Commodity Futures Trading Commission and over investment-contract assets to the Securities and Exchange Commission (H.R. 3633, Digital Asset Market Clarity Act of 2025 (CLARITY Act), passed the House July 17, 2025; Senate cloture on the motion to proceed rejected 49–50 on Sept. 15, 2026 — the bill is not law). The distinction is the hinge of the framework. Under the bill, an asset classified as a digital commodity would be regulated, at the intermediary and market level, by the CFTC; an asset that remains an investment contract stays under securities law and the SEC (SEC, Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets, Rel. No. S7-2026-09 (Mar. 23, 2026)).

For that assignment to work in practice, each agency would be expected to propose rules on how classification is determined, how intermediaries register, what disclosures apply and what records must be kept. The agencies would also be expected to coordinate where an asset could plausibly fall under either regime, and that coordination is where much of the practical uncertainty for allocators sits.

The classification question is also a diligence question. A manager should be able to state how it classifies each asset it holds, which regulator it treats as primary for each, and what registrations it holds or intends to seek. A manager that cannot answer those questions clearly is harder for a committee to approve, whatever any eventual rules say.

How long would the rulemaking be expected to take?

Timing is uncertain, and this page does not offer dates. Statutes of this kind typically set deadlines for initial rulemaking — the GENIUS Act, for example, required the Treasury Secretary and the federal and state payment stablecoin regulators to promulgate implementing regulations within one year of July 18, 2025 (12 U.S.C. § 5913 (GENIUS Act, Pub. L. No. 119-27, enacted July 18, 2025)) — but proposed rules, comment periods and final rules can extend well beyond those deadlines, and litigation can delay effectiveness further. If market structure legislation were enacted, allocators should expect a period during which the statute is in force but detailed rules are not, and during which existing guidance continues to apply.

The practical response is to track provisions rather than the Act as a whole. Classification rules, custodian definitions and adviser reporting requirements may move on different schedules, and a committee that needs one of them settled can watch that provision specifically. The CFTC and the SEC publish proposed and final rules on their own rulemaking pages, the CFTC's Federal Register Documents index and the SEC's Rules and Regulations hub, and those pages are the primary record (CFTC, Federal Register Documents (proposed and final rules); SEC, Rules and Regulations, sec.gov).

A shorter refresh cycle for regulatory diligence is reasonable while rules are in motion. Tying DDQ refreshes to the publication of proposed and final rules, rather than to a fixed annual calendar, keeps the committee's record current without asking managers for the same answers every quarter.

How would custody requirements change for institutional allocators?

Custody requirements may change in definition more than in substance. Today a registered adviser that has custody of client assets must hold them with a qualified custodian (SEC Rule 206(4)-2 under the Investment Advisers Act of 1940 (custody rule); see SEC, Custody of Funds or Securities of Clients by Investment Advisers: A Small Entity Compliance Guide (Mar. 12, 2010)), and digital asset custody has fit into that rule with some interpretive difficulty. If digital asset market structure legislation is enacted, the implementing rulemaking is expected to clarify which entities qualify as custodians for digital commodities and for investment-contract assets, and whether state-chartered trust companies, federally chartered institutions and custodians registered under a new framework would be treated alike. No such legislation has been enacted as of September 2026, so no such rulemaking is under way (U.S. Senate Roll Call Vote No. 234 (Sept. 15, 2026) (cloture on motion to proceed to H.R. 3633 rejected 49-50); H.R. 3633, Digital Asset Market Clarity Act, sec. 405 (as passed the House, July 17, 2025)).

Abra's current structure does not depend on the outcome of those definitional questions. Client assets are held in separately managed accounts titled to the client, held segregated, with Fireblocks MPC key management and the custody arrangement specified in the applicable client agreement and product documentation, and no rehypothecation for Abra's own account; strategy-specific deployment or use is governed by the applicable client authorization and product disclosures; qualified custody is available on select assets and strategies, and the arrangement for a given product is set out in the client's advisory agreement and product documentation. That structure rests on title, segregation and control, which are the properties any revised definition is expected to test, rather than on a particular regulatory label for the custodian.

Allocators should nonetheless plan for change. If a new qualified custodian definition were adopted, it may require a manager to document its custodian's status again, may alter independent verification requirements, and may change what balance confirmation evidence a committee should request. These are DDQ questions, and they are addressed below.

Related: What is a qualified custodian for digital assets?

What should investment committees update in their allocation policies?

Committees should review investment policy statement language, benchmark classification and reporting requirements. IPS language written before any such Act often defines digital assets loosely or by exclusion. If a framework were enacted that classifies assets as digital commodities or investment-contract assets, an IPS could reference those categories directly, state which are eligible, and specify the custody standard required for each.

Benchmark classification may also need attention. A digital commodity held in a segregated account is closer in character to a commodity allocation than to a private fund interest, and its benchmark, liquidity assumptions and risk budget may belong in a different sleeve. Committees should decide whether to keep digital assets as a standalone sleeve or to fold them into an existing real asset or alternatives category, and document the reasoning.

Reporting requirements should anticipate what any such rules may demand of managers. If advisers become subject to new reporting on digital asset holdings, committees can require that the same data be delivered to them. Updating the IPS now to require a manager to disclose its regulatory classification of each holding avoids a second revision later.

Related: Abra's digital asset investment methodology, published in full

How would DDQ processes need to adapt?

If the framework is enacted, DDQ processes would need new questions on classification, registration and custodian status. A manager should be asked how it classifies each asset it holds under any new framework, which regulator it treats as primary for each, and what registrations it holds or intends to seek. It should also be asked whether its custodian's status has changed or is expected to change, and what evidence it can provide.

Evaluation criteria may shift as well. A manager's ability to explain its regulatory position clearly becomes a diligence signal in its own right. Managers that cannot state which regime applies to a given holding, or that rely on informal custody arrangements, will be harder to approve. Abra's DDQ library includes a regulatory transition section so that allocators can ask these questions of every manager in a consistent format.

Committees should also revisit how often DDQs are refreshed during any rulemaking period that follows enactment. A shorter refresh cycle, tied to the publication of proposed and final rules, would be reasonable until a framework is settled. The blank DDQ templates in Abra's library are manager neutral and can carry the new questions to any manager under review.

Related: Crypto DDQ library: due diligence questionnaires for evaluating digital asset managers

What would the transition mean for a registered adviser like Abra?

For Abra Capital Management, LP, an SEC-registered investment adviser, a transition of this kind would be a documentation exercise rather than a structural one. The firm already operates under the Investment Advisers Act: it files Form ADV, owes clients a fiduciary duty, is subject to SEC examination and maintains SMA assets under the custody arrangements specified in the applicable client agreement and product documentation, and can support qualified custody on select assets and strategies (SEC Rule 206(4)-7 under the Investment Advisers Act of 1940; Compliance Programs of Investment Companies and Investment Advisers, Advisers Act Release No. IA-2204 (Dec. 17, 2003)). What would change is which rules govern advice on each asset type once classification is settled, and what additional reporting may follow.

Abra's position is that the properties a committee should test, title, segregation, control and independent verification, are already present and do not depend on the label a rule eventually gives the custodian. That is also the honest limit of the claim: Abra cannot say today whether the legislation will be enacted or what any final rules would require, and neither can any other manager. What it can do is document its current arrangement in enough detail that a committee can re-test it against whatever definition emerges.

Wealth managers and advisers who need the practitioner view of the bill itself, rather than the allocator view of what would follow it, can read the companion guide. Abra Capital Management, LP is an SEC-registered investment adviser. Registration does not imply a certain level of skill or training.

Related: CLARITY Act guide for wealth managers

Disclaimer. This page is general regulatory analysis, not legal advice. The CLARITY Act (H.R. 3633) is pending legislation and is not law; every consequence described on this page is conditional on enactment. Statements about future legislation and rulemaking are expectations that may not occur as described, and allocators should consult their own counsel. Abra Capital Management, LP is an SEC-registered investment adviser. Registration does not imply a certain level of skill or training. Nothing on this page is an offer of advisory services or investment advice.