Background

The US Senate has been steeped in debate over a crypto market structure bill, which, if passed, would bring sweeping changes to the US digital assets markets and the regulatory regime governing them. The Senate bill builds off of a House bill titled the Digital Asset Market Clarity Act of 2025 (the CLARITY Act), which passed the House on July 17, 2025 with 78 Democratic votes. Our client alert on that bill is available online.

The Senate bill is currently divided into two discussion drafts: one issued by the Senate Committee on Agriculture, Nutrition, and Forestry (the Agriculture Committee) and the other by the Senate Committee on Banking, Housing, and Urban Affairs (the Banking Committee). The Agriculture Committee has jurisdiction over the Commodity Futures Trading Commission (CFTC) and the Senate Banking Committee has jurisdiction over the Securities and Exchange Commission (SEC), so the Senate approached the initial drafting process by bifurcating the sections that pertain to CFTC and SEC oversight between those committees.

Collectively, these discussion drafts would establish a comprehensive spot-market framework for “digital commodities,” regulated primarily by the CFTC. The discussion drafts leave a number of issues undecided, though, in that several provisions include bracketed language and, in some cases, multiple options for the same provision or concept.

Senate Republicans were hoping to vote a bill out of committee by year-end 2025, but any markup will likely be delayed until early 2026 because Senate Democrats have sent multiple “counter-offers” to Republicans identifying high-level changes they would like to make before it is considered. Much of that debate relates to the Banking Committee’s discussion draft – titled the “Responsible Financial Innovation Act of 2025” – and the regulations and prohibitions that would apply when a digital asset is initially issued. The Agriculture Committee’s discussion draft, in contrast, primarily relates to trading that occurs after a digital asset becomes more decentralized.

This client alert focuses on the Agriculture Committee’s discussion draft and the oversight that would be provided by the CFTC, but identifies areas where the Democratic “counter-offers” would impact that discussion draft. Below we summarize the discussion draft’s core definitions, the registration regime for exchanges and intermediaries, custodial standards, jurisdictional scope, timelines, and notable open issues.

Definition of “digital commodity”

The Senate bill defines a “digital commodity” as a fungible digital asset recorded on a cryptographically secured public distributed ledger that can be exclusively possessed and transferred peer-to-peer without necessary reliance on an intermediary. The definition contains a number of exclusions, including securities, security derivatives, tokenized commodities, permitted payment stablecoins (as defined by cross-reference to the GENIUS Act), deposits and certain credit union accounts, commodity derivatives, certain pooled investment vehicles, non-fungible tokens, and “meme” coins.

Importantly, the draft would codify a “no presumption” rule: i.e., that a digital asset is not presumed to be a security solely because it confers voting or economic rights tied to a blockchain or its governance, has the potential to appreciate or depreciate with the efforts, operations, or financial performance of the blockchain or its governance, or reflects value changes due to use of the system. This formulation seeks to avoid automatic securities characterization based on the potential for appreciation tied to network development or performance.

However, the counter-offer proposed by Democrats could potentially impact the “no presumption” rule, because it states that the bill should include an “initial, efficient, and timely regulatory review by the SEC to determine the status of a proposed digital asset” and “reasonable limitations on fundraising through exempt digital asset sales.” Therefore, the presumption that a digital asset is not a security merely because it “has the potential to appreciate or depreciate” with the efforts or performance of the blockchain or its governance could be subject to change.

CFTC exclusive jurisdiction; stablecoins

The CFTC is granted exclusive jurisdiction over spot digital commodity transactions executed on, or by, registered entities, subject to specific limitations. For “permitted payment stablecoins,” the CFTC’s jurisdiction covers only the offer, execution, solicitation, or acceptance of spot transactions conducted on registered entities as if the instrument were a digital commodity. The draft does not confer broader authority over stablecoin issuers or the instruments’ design, issuance, or ongoing operation.

Digital commodity brokers and dealers

The discussion draft creates new CFTC registration categories for “digital commodity brokers” and “digital commodity dealers” active in spot markets, while carving out incidental payment facilitation and certain banking activities.

Based on bracketed language in the discussion draft, the drafters appear to be considering whether to statutorily limit the definitions of digital commodity brokers and dealers to those who engage with retail participants, or to allow the CFTC to determine how to focus registration requirements on retail activity. Under the latter option, the discussion draft presents two approaches, which would enable the CFTC to either exclude certain classes of persons from the requirement to register, or exclude certain activities from causing an entity to qualify as a digital commodity broker or dealer.

The digital commodity broker/dealer framework features:

• A registration requirement with a de minimis exemption level to be set by the CFTC.
• Capital requirements prescribed by the CFTC and harmonization language to avoid duplicative or conflicting obligations for multi-registered firms.
• Requirements to report data regarding transactions, positions, and financial condition to the CFTC.
• Recordkeeping requirements, including a complete audit trail and requirement to retain recorded communications (email, instant messages, and telephone call recordings).
• Business conduct standards, including fair and balanced communications, pricing, anti-fraud, and marketing/endorsement rules.
• Customer asset segregation and custody requirements, including mandatory use of “qualified digital commodity custodians” for customer digital assets.

Qualified digital commodity custodian

The draft establishes a supervisory and standards-based framework for “qualified digital commodity custodians” and requires exchanges and intermediaries to hold customer digital commodities with such custodians. Key features include:

• Supervision requirement. A custodian must be subject to supervision and examination for the custody and safekeeping of digital assets by a federal banking regulator, the National Credit Union Administration, the CFTC, or the SEC; alternatively, by an appropriate state banking or trust regulator, a state credit union supervisor, or a foreign home-country authority that is subject to a comparability determination by the CFTC, the contours of which are not specified in the draft.
• Core standards. The CFTC must adopt rules for CFTC-registered custodians analogous to “core principles,” including capital sufficient for orderly wind-down, customer asset protection, books and records, audited financials, anti-money laundering and cybersecurity compliance, business continuity, complaint resolution, conflict mitigation, and separate governance for the custodial function.
• Information sharing. Custodians must share information with the CFTC upon request and periodically as required; federally regulated custodians can satisfy requests via detailed customer asset listings.
• Grandfathering and transition. State depository institutions and trust companies expressly permitted to provide digital asset custody services prior to any CFTC rulemaking are deemed subject to “adequate supervision and appropriate regulation” if minimum standards are met and they are in good standing with their state supervisor. The CFTC must provide a transition period of not less than two years for such entities to align with the eventual rule.
• Foreign custodians. Foreign providers may qualify if their home-country regulator receives a CFTC-approved comparability determination, though the draft leaves open the criteria and process for such determinations.

Exchange registration and listing

The draft creates a new “digital commodity exchange” registration requirement for trading facilities offering a spot market in at least one digital commodity, which is not limited to exchanges that permit retail trading. Exchanges would be subject to core principles reminiscent of standards applicable to swap execution facilities and designated contract markets – with adaptations for spot market custody – including (but not limited to):

• A rulebook addressing trading procedures, terms and conditions, and access criteria; impartial market access; surveillance and disciplinary programs; and emergency authority.
• “Timely” public reporting of price, volume, and other trading data; electronic capture and transmission of trade data; and an annual audited financial statement.
• Robust recordkeeping and reporting requirements, the specifics of which are left to the CFTC to determine.
• Conflicts of interest policies, including for affiliates and vertically integrated structures.
• Financial resources sufficient for one year of operating costs plus obligations to all customers; issuances of the exchange’s or affiliates’ native digital commodities cannot count toward required resources.
• A designated Chief Compliance Officer with annual certified compliance reporting. 

Key features of the listing process for digital commodities are as follows:

• Certification pathway: An exchange may list a digital commodity upon certifying it meets the Commodity Exchange Act’s (CEA) requirements and providing an analysis addressing the exchange listing standards.
• Review timelines: 30 business days (or shorter by rule) for initial certifications and modified certifications; 15 business days for commodities previously certified, subject to limited extensions where the CFTC identifies novel/complex issues, missing information, or potential inconsistencies.
• Disapproval standard: The CFTC may disapprove only if inconsistent with the CEA, with a requirement for detailed public analysis supporting disapproval.

Listing standards include a “not readily susceptible to manipulation” requirement, standardized public information disclosures regarding source code, transaction history, token economics and governance, trading volume and volatility, and other information the CFTC deems necessary and feasible. The CFTC must also prescribe simplified consumer disclosures and marketing/advertising standards.

Customer asset protection and custody

Digital commodity exchanges, brokers, and dealers must custody customer digital commodities with a qualified digital commodity custodian, maintain segregation of customer assets, and comply with prohibitions on commingling, except for limited settlement-related uses. They may invest only in high-quality liquid assets as defined by rule, and the framework provides explicit bankruptcy protections that treat these assets as “customer property” under the Bankruptcy Code for commodity brokers. The draft further clarifies that “misuse” includes employing customer digital commodities for staking or governance without the customer’s express written direction, and it bars conditioning services on a customer’s consent to such use. The CFTC is directed to establish disclosure and insolvency-treatment rules governing any permitted participation in blockchain services when expressly authorized by customers.

Portfolio margining

The CFTC and SEC must jointly issue rules within one year of enactment to facilitate portfolio margining across securities, security-based swaps, futures, options on futures, swaps, and digital commodities in securities broker-dealer accounts, security-based swap dealer accounts, FCM or cleared swap accounts, swap dealer accounts, and digital commodity accounts at entities registered in the requisite capacities. The joint rules must address margin, customer protection, segregation, and other appropriate conditions, and reflect consultation with prudential regulators.

Timeline, implementation, and resourcing

The draft requires most rulemakings within 18 months after enactment, which is also the general effective date, with activation of any provision tied to rulemaking no earlier than 120 days after publication of the final rule if that occurs later than 18 months. Agencies may adopt rules and begin registration before the effective date, but actions would not become effective ahead of the statutory date.

A bracketed “sense of Congress” provision states that, prior to implementation, the CFTC should be fully constituted – with not fewer than two commissioners nominated after consultation with the Senate Agriculture Committee’s ranking minority member – and appropriately staffed to meet the new oversight and enforcement mandates.

To fund implementation, the bill authorizes $150 million for the CFTC, available until expended, and directs the CFTC to assess and collect fees from digital commodity exchanges, brokers, dealers, and custodians to recover annual costs of registration and oversight. Those fees cannot be spent on activities unrelated to digital commodity implementation.

Office of the spot or cash market digital commodity retail advocate

The draft creates an office within the CFTC headed by a Digital Commodity Retail Advocate, focused on retail participants in spot or cash digital commodity markets. Its functions would include assisting retail participants in resolving “problems” they have with the CFTC or the National Futures Association (NFA), analyzing the impact of regulations on retail participants, recommending policy changes, and coordinating education and outreach. Annual objectives and activities reports to the House and Senate Agriculture Committees are required, with independence and confidentiality safeguards.

Issues to watch and open questions

As noted above, several policy choices are reserved for rulemaking or flagged through bracketed alternatives:

• Broker/dealer scoping for ECP activity. The choice between a general CFTC exclusion authority and a tailored ECP-focused exemption will materially affect the scope of the registration requirements applicable to digital commodity brokers and digital commodity dealers. The undefined term “ECP activities” and the level of activity that triggers registration for institutions remain to be clarified.
• Qualified custodian comparability. The draft empowers the CFTC to recognize foreign supervisory regimes via comparability determinations but does not specify standards. Market participants will want clarity on criteria, process, and ongoing information-sharing obligations.
• Interagency coordination. While the draft largely avoids SEC jurisdictional questions, it requires joint rulemaking on portfolio margining and contemplates information-sharing with other US and foreign regulators. Harmonization for dual registrants and mixed transactions will likely be a focal point for implementation.
• Listing standards and disclosures. Significant operational details – such as the extent of source code and on-chain data requirements, and the standardization of consumer disclosures – will be set by the CFTC and could vary meaningfully across digital commodity types.
• DeFi and developer-related provisions. The discussion draft includes bracketed sections reserved for further feedback on decentralized finance and treatment of noncontrolling developers/providers; these may evolve before any formal introduction.

We will continue to monitor developments as the Senate Agriculture Committee refines the discussion draft and as inter-committee dynamics inform the treatment of securities jurisdiction, DeFi, and prudential oversight of stablecoin issuers.