Revised CLARITY Act Targets Fake DeFi Protocols

Highlights

Senate Republicans released a revised 630-page CLARITY Act draft incorporating more than 114 provisions requested by Democrats.
The new text requires “non-decentralized finance trading protocols” — those a person or group can still control — to register with the CFTC.
DeFi provisions are now limited to spot and cash digital commodity transactions, addressing tribal government concerns about prediction markets.
A first procedural vote on the bill is scheduled for September 15, with Democratic support still uncertain.

Senate Republicans have circulated a revised draft of the CLARITY Act, the crypto market-structure bill that has dominated Washington's digital-asset agenda for months, days ahead of a scheduled September 15 procedural vote. Sen. Cynthia Lummis said the new 630-page text folds in more than 114 separate provisions requested by Democratic colleagues, an attempt to broaden support before the Senate returns to session with limited time to advance the legislation. The most consequential substantive change targets what regulators have called “decentralized-in-name-only” protocols: DeFi platforms that market themselves as autonomous but remain under the practical control of a company or founding team.

Under the revised bill, any protocol that qualifies as a “non-decentralized finance trading protocol” would be required to register with the Commodity Futures Trading Commission, with the CFTC and Treasury Department directed to write implementing rules. The bill's decentralization test is specific: a protocol fails to qualify as truly decentralized if a person or group acting in concert retains the authority — whether through contract, arrangement, or informal understanding — to control or materially alter its functionality, consensus rules, or governance, or if it doesn't run solely on pre-established, transparent, encoded rules, or if someone retains the ability to censor or restrict its use. That standard would pull a meaningful slice of today's DeFi ecosystem, particularly protocols with active multisig admin keys or centralized upgrade authority, into the same registration regime as traditional derivatives platforms. In a further concession, the DeFi provisions now apply only to spot and cash digital commodity transactions, narrowing the bill's reach after Native American tribal governments raised objections tied to prediction-market oversight.

The stakes extend well beyond the bill's text. The Block reported that the ethics section of the bill remains largely untouched despite the broader rewrite, leaving unresolved questions about President Trump's own crypto holdings — now running into the hundreds of millions of dollars through World Liberty Financial and the TRUMP memecoin — hanging over the vote. For the DeFi sector specifically, the registration requirement functions as a forcing mechanism: protocols that want to avoid CFTC oversight will need to demonstrate genuine decentralization under a legally defined test rather than relying on marketing language, a shift that could reshape governance structures across major lending and trading protocols well before any enforcement action is filed. Projects with lingering admin-key control or centralized fee-switch authority face the clearest exposure, while protocols that have already moved to immutable, non-upgradable contracts stand to benefit from regulatory clarity relative to less decentralized competitors.

The immediate marker is the September 15 procedural vote, which requires 60 votes to advance and still lacks confirmed Democratic backing despite the added provisions. Even if the bill clears that hurdle, unresolved disputes over stablecoin yield rules, illicit-finance safeguards, and the unresolved ethics fight over Trump's own crypto exposure could still stall final passage. The CFTC has already warned it will write its own crypto rules if the bill stalls again, and the coming days will show whether the concessions to Democrats were enough to convert procedural momentum into an actual floor vote.

FAQ

What does the revised CLARITY Act change for DeFi protocols?
It adds a CFTC registration requirement for “non-decentralized finance trading protocols” — platforms that remain under the practical control of a person or group despite being marketed as decentralized.

How does the bill define a “non-decentralized” protocol?
A protocol fails the decentralization test if someone can control or materially alter its functionality or consensus rules, if it doesn't run solely on pre-established transparent code, or if someone can censor or restrict its use.

When is the next vote on the CLARITY Act?
A procedural vote requiring 60 votes to advance is scheduled for September 15, though Democratic support for the revised text remains unconfirmed.

Does the bill still cover prediction markets under DeFi rules?
No — the revised text narrows DeFi provisions to spot and cash digital commodity transactions only, after tribal governments raised concerns about prediction-market oversight.