Securities Regulation Daily Wrap Up, VITAL BRIEFING—Four takeaways from Democratic Senators’ digital asset framework, (Sep 10, 2025)

By Mark S. Nelson, J.D.

The framework may function as a bargaining chip as the Senate looks to markup the CLARITY Act later this year.

A group of 12 Democratic Senators published a digital asset framework arranged under 7 pillars that spells out how they would divvy up oversight responsibilities of digital assets between the SEC and the CFTC. The framework bears some resemblance to the Digital Asset Market Clarity Act (H.R. 3633), which passed the House in July 2025 by a vote of 294–134 (with 78 Democratic “yes” votes), and to a GOP Senate discussion draft, but some of the framework’s provisions could serve as bargaining chip for Democratic support as the Senate’s Banking and Agriculture Committees look to markup and potentially amend the CLARITY Act later this year.

Surveying the 7 pillars. The Democratic Senate framework is divided by its authors into 7 pillars:

• Closing the Gap in the Spot Market for Non-Security Digital Assets;

• Clarifying the Legal Status of Digital Assets and Regulator Jurisdiction;

• Incorporating Digital Asset Issuers into the Regulatory Framework;

• Incorporating Digital Asset Platforms into the Regulatory Framework;

• Preventing Illicit Finance;

• Preventing Corruption and Abuse; and

• Ensuring Fair, Effective Regulation.

For simplicity of analysis, the 7 pillars can be reorganized into four main groups: (1) the CFTC and spot markets; (2) SEC regulations; (3) corruption; and (4) agency rulemakings.

The CFTC and spot markets. The first pillar, presumably chosen for its importance, would have Congress explicitly authorize the CFTC to engage in greater oversight of the digital asset spot market. This is not a new concept since for years many in the blockchain industry have argued that the SEC is not the proper regulator for many digital assets that do not fit neatly into federal securities laws and which have characteristics that make them more akin to commodities.

While the CFTC does have general antifraud authorities that it can use to police some aspects of spot or cash markets, it does not have broad regulatory authorities over spot markets. Lawmakers previously tried to advance legislation that would have given the CFTC this authority in digital markets, but that legislation’s language was criticized for potentially allowing the CFTC to expand its spot market oversight beyond digital assets and into other areas, such as swaps and derivatives markets (see, e.g., the Digital Commodities Consumer Protection Act of 2022 (S. 4760), which would have permitted the CFTC to assess and collect fees to recover the annual costs of registering digital commodity platforms, conducting oversight of digital commodity trades, and carrying out education and outreach programs).

“There is widespread consensus that some digital assets qualify as ‘commodities’ and not ‘securities,’ since they don’t meet the legal test to qualify as a ‘security,’” said the Senators. “However, since the CFTC doesn’t regulate spot commodity markets and platforms, it lacks the authority to effectively police markets for these non-security digital assets.”

As a result, the framework would focus on key gaps in the CFTC’s authorities. Specifically, the framework calls on lawmakers to, among other things:

• Grant the CFTC exclusive jurisdiction over markets for digital assets that are not securities (“digital commodities”).

• Provide the CFTC registration, regulation, and enforcement tools over platforms involved in the digital commodity market.

• Apply established core principles to digital commodity platforms, including antimanipulation, financial integrity, risk management, conflict of interest, and other standards, while creating guardrails to address new issues, such as “memecoins.”

• Adopt consumer protection rules for digital commodity platforms to strengthen CFTC tools in markets with broad retail engagement, such as marketing and advice standards.

SEC regulations. The framework’s approach to SEC regulations emphasizes three main topics: (1) building an overarching regulatory framework for digital assets; (2) maintaining SEC enforcement authorities; and (3) bringing digital platforms into the self-regulatory organization (SRO) environment.

A key priority of the framework is to integrate the various digital asset players into the existing federal securities regulatory space. The framework suggested that this may not be easy because digital assets can present issues that current securities laws do not squarely address, and any legislative clarifications must avoid unintended consequences. “Any changes to current law must avoid undermining the integrity of traditional markets and prevent regulatory arbitrage,” said the Senators. To this end, the framework proposes that lawmakers:

• Provide the SEC with resources, tools, and a mandate to incorporate digital assets that represent a security into the securities law framework, while ensuring regulators maintain flexibility as the digital asset market evolves.

• Ensure appropriate, timely, and accurate disclosures by digital asset issuers in plain language, both in initial offerings and periodically while an asset represents a security.

In an earlier section of the framework, the Senators discussed the generalized need to provide clarity to digital asset markets. In this context, the Senators noted several items regarding securities regulation, including these two:

• Require regulators to issue guidance about how key longstanding securities law precedents apply to digital asset transactions, which could include safe harbors to identify transactions that do not involve securities.

• Protect traditional markets from disruptive changes to longstanding law, and provide that legislation should not be construed to change the regulation of traditional securities.

With respect to the latter item, and although it is not entirely clear, the Senators may be referring to the possibility that all forms of securities trading more generally could move on-chain. SEC Chair Paul S. Atkins, in his “Keynote Address at the Inaugural OECD Roundtable on Global Financial Markets” delivered today, observed: “We must resist the temptation to overreact out of fear. On-chain capital markets and agentic finance are on the horizon, and the world is watching. The choice before us is simple yet profound: either America steps forward with confidence and conviction, or others will. I choose leadership, freedom, and growth—for our markets, for our economy, and for the next generation.”

The framework added that the integration of digital assets into federal securities laws must follow traditional concepts of materiality, prevent the purveyors of digital assets from gaming investor protections in exempt and other types of offerings, ensure that the SEC can enforce securities law violations in the digital asset space, and ensure that investors can bring private lawsuits for fraud.

Moreover, the framework would have lawmakers mandate that the SEC adopt regulations to bring digital asset platforms into the agency’s self-regulatory system. Rules for digital asset platforms would have to address key issues, such as “custody, pricing, execution, cybersecurity, and capital.” When new trading platforms enter the federal securities space, they often are required to join an SRO, which for those who operate like broker-dealers means joining FINRA. The framework contemplates at least the possibility of a new SRO just for digital asset market participants, although it is rare for securities participants to create new SROs and SROs’ validity may eventually be challenged on constitutional grounds in light of the Supreme Court’s recent opinions limiting administrative proceedings.

Corruption. The framework proposes a two-track approach to the issue of corruption that emphasizes the Bank Secrecy Act and legislation to limit digital asset activities of elected government officials.

First, the framework calls on lawmakers to ensure that digital asset platforms are required to register as “financial institutions” with the Financial Crimes Enforcement Network (FinCEN). Registration would further require that these platforms have policies and procedures regarding anti-money laundering/combating the financing of terrorism (AML/CFT) regulations. Digital asset platforms also would be subject to BSA and

FinCEN reporting requirements. A key part of the BSA proposal would be to prevent DeFi platforms from evading controls designed to detect illicit financial activities.

The second component of the framework’s anti-corruption goals focuses on the digital asset activities of federal government officials in the executive and legislative branches. “President Trump has turned to digital asset projects to enrich himself and his family, abusing his office for corruption with no modern precedent,” said the Senators. “His actions have also undermined confidence in the broader digital asset industry.”

To this end, the framework proposes three actions:

• Limit elected officials and their families from issuing, endorsing, or profiting from digital assets while in office.

• Codify requirements to disclose digital asset holdings on officials’ financial disclosures.

• Require promoters of a digital asset to disclose compensation or any stake in the asset.

With respect to the last item regarding promoters, Securities Act Section 17(b) provides that it is unlawful to, via interstate commerce, publish or give publicity to documents describing a security, even if the documents do not purport to offer a security for sale, without fully disclosing that the person publicizing the security received compensation and the amount of that compensation. The SEC has pursued charges against multiple individuals, including some prominent celebrities, for promoting digital assets without making the required disclosure.

Executive and legislative branch officials already make financial disclosures under the Representative Louise McIntosh Slaughter Stop Trading on Congressional Knowledge (STOCK) Act. Congress periodically brings forth new legislation to amend the STOCK Act whenever there is a public financial scandal, but this legislation has had a poor track record in recent sessions of Congress.

Agency rulemakings. Lastly, the framework calls on lawmakers to ensure that the SEC and the CFTC (and any other relevant federal agencies) have all of their commissioners confirmed and sworn in to office for any digital asset rulemakings. “President Trump has fired countless Democratic commissioners from independent regulatory agencies and shown little interest in nominating new officials,” said the Senators.

Currently, the SEC has only four of its five commissioners and the term of the agency’s lone Democratic Commissioner, Caroline A. Crenshaw, expired in 2024, which means she can only serve an additional 18 months.

Similarly, the CFTC currently has only an Acting Chairman, Caroline D. Pham. The nomination of former CFTC Commissioner Brian Quintenz, who earlier this year stepped away from his executive role at the crypto firm a16z crypto, to be the next CFTC chair has languished in the Senate after a key committee vote was postponed.

The Senate Democratic framework also calls on lawmakers to ensure that states can continue to play an important enforcement role in the digital asset space while also urging lawmakers to protect the Consumer Financial Protection Bureau’s related authorities. The concern here is that Congress or federal agencies could preempt state regulations (Congress, for example, tried unsuccessfully to preempt state artificial intelligence regulations earlier this year). To this end, the framework mentions the importance of states’ antifraud enforcement authorities twice, once regarding the general need to clarify the status of digital assets and again regarding the SEC.

Looking ahead. The Senate likely holds the key to passage of the CLARITY Act and, at present, there are at least three different frameworks to amend the House-passed bill, two Democratic and one Republican. Senator Elizabeth Warren (D-Mass), who has published her own framework, issued a statement following release of the latest Democratic Senate framework that was critical of Republicans for not working more closely with Democrats.

Because of Republicans’ narrow Senate majority and the need to overcome a 60-vote cloture vote, Democratic backing of the CLARITY Act may be determinative of its outcome. By comparison, the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act passed the House with support from 102 Democrats and then passed the Senate with the support of 18 Democrats. The CLARITY Act passed the House with significant bipartisan support, but with the support of only 78 Democrats.

It is expected that the Senate Banking Committee and the Senate Agriculture Committee will seek to markup the CLARITY Act before the end of 2025, possibly within the next month.

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