SEC Will Come After Crypto If Clarity Bill Dies, Warns Expert as Divisions Remain

Failure to pass the Clarity Act could one day see the Securities and Exchange Commission reverse its stance and “treat nearly all crypto as securities,” says a proponent of the bill.

The future of Clarity, a draft US law that seeks to consolidate and solidify crypto regulations and guidelines, remains in the balance. Negotiations on the bill have “not been pretty,” Ripple CEO Brad Garlinghouse said on Friday.

“Without Clarity [...], the SEC will resurrect its effort to redefine the Exchange Act so broadly that developers and infrastructure providers can be swept up as brokers, dealers, or exchanges whenever their software touches a tokenised security,” Peter Van Valkenburgh, the executive director of the crypto pressure group Coin Center, wrote on X.

While Garlinghouse said he expected lawmakers, banks, and crypto firms to eventually reach a consensus on the bill, some experts say time is “running out” for Clarity.

The bill’s prospects of passage this year will vanish altogether if the bill fails to reach the floor of the Senate by May, a researcher at the crypto and data centre operator Galaxy Digital said earlier this month.

‘No to Short-termism’

“There are [...] nihilists in crypto,” Van Valkenburgh said. “And if they win the day, well then we will all be in crypto hell.”

He accused crypto industry opponents of Clarity of “rejecting developer protections” in favour of “short-term business interests.”

Depending on the “continued goodwill” of the ruling Trump administration is a major gamble, the Coin Center chief said.

“The point of passing Clarity is not to trust this administration,” he said. “It is to bind the next one.”

“There is a very cool but very ramshackle coalition of technology- and freedom-loving lawmakers in Congress right now,” he opined.

Rival authoritarian “factions, Van Valkenburgh warned, are “eager to treat crypto” as a “political enemy, as inseparable from the Trump administration, or as little more than big-tech-fueled speculation and grift.”

Tightening the Noose

The US’ increasingly vocal, active, and well-funded crypto lobby would fight back against the dangers of a legislation-free future if the Clarity ship sinks, the Coin Center boss said.

“We will be forced back into the courts again and again. We are prepared for this,” he wrote. “We would be fighting on every front at once. […] We will fight. We may lose.”

The pro-crypto Senator Cynthia Lummis is among those continuing to back the bill in the face of criticism from the industry.

She dismissed allegations the bill will fail to protect software developers against designation as money transmitters.

“We have worked on a bipartisan basis for the last few weeks to [...] make this bill the strongest protection for decentralised finance and developers ever enacted,” Lummis wrote on X. “We have to pass the Clarity Act to get these protections.”

But Van Valkenburgh warned that divisions in the crypto industry could prove the bill’s undoing.

If Clarity is derailed, he said, “we will have helped tie the noose ourselves, handing it to the future officials who will be only too happy to pull it tight.”

Tim Alper is a News Correspondent at DL News. Got a tip? Email him at [email protected].