As the CLARITY Act moves closer to a full Senate vote, one of its most important contributions may ultimately be a mechanism for separating a token’s secondary-market status from the transaction through which it was originally sold — a distinction that courts and regulators have failed to settle for over a decade.
The Digital Asset Market Clarity Act, or CLARITY Act, moved a step closer to the Senate floor on 14 May 2026. The Senate Banking Committee advanced its version of the digital asset market-structure bill by a vote of 15-9. Several hurdles remain however, before any final version becomes law, including a full Senate vote, reconciliation with the House version passed in July 2025 and final approval by both chambers.
With the August recess approaching, the Act’s passage this year remains far from guaranteed.
Whatever the exact timeline, one of the most interesting but, until now, largely overlooked questions the Act seeks to address is what happens to a crypto token once it has left the issuer and begun trading between unrelated buyers and sellers on secondary markets. For over a decade, the uncertainty this question carries has created a significant challenge for market participants, including exchanges, custodians and liquidity providers.
Its resolution could prove key to determining the future of the US as a global leader in the next phase of digital asset market structure.
From Token Sales to Secondary-Market Risk
The roots of the “secondary-market problem” lie in how US securities law has traditionally distinguished between an asset and the transaction through which it is sold.
Under the Supreme Court’s 1946 Howey test, an investment contract exists where a person invests money in a common enterprise with an expectation of profits derived from the efforts of others. Applied to crypto, that framework has given the Securities and Exchange Commission (SEC) a straightforward argument against many token launches ever since the initial coin offering (ICO) boom of 2017, often characterising them as unregistered securities transactions.
More controversially, the SEC has often argued this status can remain attached to the digital asset itself as it moves into secondary markets, making later spot trades potentially unregistered securities transactions, even where buyers had no relationship with the original issuer.
In practical terms, the question is whether a token bought on an exchange years after launch should be treated like the original fundraising contract, or like a separate market asset.
Several high-profile court cases challenging subsequent SEC enforcement actions have failed to produce a definitive answer, with some rulings distinguishing blind exchange trades from direct issuer fundraising and others accepting the SEC’s argument that issuer promises and ecosystem-building could carry securities-law characteristics into downstream markets.
A joint interpretive release from the SEC and Commodity Futures Trading Commission (CFTC) in March 2026 partly addressed this problem, moving away from the older blanket treatment of tokens as securities. The position now is that the transaction is what matters legally, not the asset itself. Nevertheless, the joint release left open the question of whether a given token has genuinely moved beyond the issuer’s promises. That judgment remains case-by-case.
Nevertheless, the joint release left open the question of whether a given token has genuinely moved beyond the issuer’s promises. That judgment remains case-by-case.
The result of this continued ambiguity has been a patchwork of trial-court rulings and subjective agency interpretations. Exchanges, custodians, liquidity providers and other market participants expect a clear legal framework they can confidently build around.
Separating the Contract from the Asset
The House version of the CLARITY Act answers this by creating a new statutory category called the “investment contract asset,” designed to separate the securities transaction from the digital asset that was sold through that transaction. The Senate Banking draft uses different terminology, centred on “ancillary assets,” but shares a broad policy objective aimed at separating the token from the securities transaction through which it may originally have been sold.
Firstly, it formalises the rules around primary issuance. Projects that sell tokens through investment-contract-style fundraising would be subject to clearer disclosure and certification requirements, covering information about the issuer, the token, the network, risks, insiders, token economics and the use of proceeds. As such, the framework would give projects a clearer legal route to raising funds through token sales, but only by bringing those sales into a more explicit compliance framework overseen by the SEC.
Secondary markets would be treated less stringently. Under the House version of the bill, once a qualifying digital asset sold through an investment contract is resold or transferred by someone other than the issuer or its agent, it would lose its investment contract asset status and become a digital commodity under CFTC jurisdiction. The original sale may remain regulated and any misconduct subject to penalties, but the asset’s later trading life would no longer automatically be treated as a continuation of that fundraise.
The key distinction is between ordinary secondary-market sellers and the issuer or its affiliates. For unrelated buyers and sellers, the legal character of the original offering does not permanently follow the asset into every later trade. For issuer and insider sales, however, both the House and Senate approaches remain more restrictive. Founders, affiliates and related parties would remain subject to disclosure obligations, resale limits and maturity or decentralisation tests, designed to show that the network has moved beyond their control.
In the House version, a network may be considered mature when no single person or group controls 20 percent or more of the token supply or governance rights. The Senate Banking draft uses a more qualitative “common control” test, asking whether the network remains meaningfully controlled by the issuer, insiders or affiliated parties.
Both approaches aim to prevent issuers and insiders from using secondary markets to evade securities-law obligations or sell large token allocations while they still effectively control the network.
Trading Clarity for Compliance
If the final law preserves this secondary-market framework, the practical implications would be felt across the secondary trading market.
For exchanges, a statutory commodity designation would provide a clearer basis for listing, custody and market-making in tokens with contested issuance histories, replacing risk-based judgment with a defined legal framework. Custodians, clearing infrastructure and wallet providers would operate on the same footing. Developers building on a protocol would meanwhile have clearer grounds for distinguishing their activity from the original fundraise. Traders would feel the effects more indirectly through which assets are listed, which markets have liquidity and whether US-facing platforms are willing to support them at all.
Greater clarity would also come with heavier obligations. Under current bill versions, intermediaries would face requirements such as mandatory CFTC registration, customer-asset protection rules and market surveillance, as well as anti-money laundering (AML) and know-your-customer (KYC) requirements.
The difference is that these obligations would be knowable in advance, rather than inferred from enforcement actions after the fact.
An Uncertain Path, but a Clearer Direction
The final version of the CLARITY Act may ultimately look different from the House framework. The Senate Banking draft takes a more qualitative approach to network maturity and common control, while political questions around potential roadblocks related to issues like stablecoin yield and rules for public officials holding digital assets remain unresolved. Coming to an agreement on those details will be important as the more discretion the final framework leaves to regulators, the less certainty it may ultimately provide to market participants.
US policymakers are nevertheless moving towards a framework that treats a crypto token and the transaction through which it was first sold as distinct legal objects. For secondary markets, that distinction is foundational, serving to determine who can list, who can custody, who can provide liquidity and on what legal basis.
Until now, US securities law has lacked a statutory mechanism for recognising that an asset’s regulatory character can change as the network behind it matures. The CLARITY Act is the most developed attempt yet to build one around secondary-market transition.
Whether it passes in 2026 or not, the question it addresses will not go away — nor will the need for greater legal clarity.