Ex-CFTC Chair Warns Clarity Act Could Undermine Securities Law

Former CFTC Chair Warns Clarity Act Could Complicate Crypto Regulation, Recommends Joint SEC-CFTC Oversight Instead

  • Former CFTC Chair Timothy Massad cautioned U.S. lawmakers against the Digital Asset Market Clarity Act of 2025.
  • Massad argued the Clarity Act could disrupt existing U.S. securities law and lead to confusion.
  • He pointed out flaws in the bill, including its reliance on decentralization and complex legal terms.
  • Massad suggested a joint regulatory system between the SEC and CFTC as a better approach.
  • The proposed model aims to improve investor protection in digital asset markets without unnecessary legal changes.

Former Commodity Futures Trading Commission (CFTC) Chair Timothy Massad told the House Financial Services Committee that the proposed Digital Asset Market Clarity Act of 2025 could add confusion to cryptocurrency regulations instead of making them clearer. The hearing took place in Washington as lawmakers examined new ways to regulate digital assets.

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Massad said the Clarity Act risks weakening parts of existing U.S. securities law. He explained that current stock and bond rules support about $120 trillion in U.S. markets, making them critical to the country’s economy.

In his testimony, Massad criticized the bill’s focus on “decentralization” as an unclear standard, stating, “it’s difficult to define and measure, can change over time, and isn’t necessarily the right metric for judging innovation.” He also noted that the bill’s definition of “digital commodities” would only apply to a limited number of tokens, while most assets on trading platforms like Coinbase, Kraken, and Gemini would remain unregulated.

Massad said that the Clarity Act’s lengthy 236-page structure and detailed terms might invite legal loopholes. He warned, “many, many lawyers will spend huge amounts of time developing ways to exploit this legislation and engage in regulatory arbitrage strategies on behalf of their clients.”

Instead of adopting the Clarity Act, Massad proposed a different path. He recommends creating a self-regulatory organization (SRO) for digital asset platforms, with strict oversight from the SEC and CFTC. This SRO would set common rules on governance, customer asset safety, conflicts of interest, and fraud controls, extending to platforms that trade Bitcoin, ether, and other digital asset tokens.

Massad argued this approach would quickly improve investor protections, especially for most digital asset trades that happen through centralized platforms. He believes this method avoids the bill’s technical problems and supports high-level regulatory standards instead of detailed definitions that could be unclear or open to manipulation.

Massad’s recommendations follow ongoing debates about digital asset laws in the U.S. He stressed the importance of keeping new rules simple and not harming the established financial system.

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