The Clarity Act Analysis

A deep dive into the Clarity Act of 2025 (H.R. 4763)’s impact on token regulation, decentralization, and how blockchain projects can navigate the shift from securities to digital commodities.

The Clarity Act of 2025 is poised to become one of the most transformative crypto regulatory frameworks ever proposed in the United States. For the first time, Congress has created a formal legal path for blockchain tokens to shed their “security” label and emerge as fully tradable digital commodities. This evolution directly challenges the existing framework shaped by SEC v. Howey and SEC v. Ripple Labs—two cases that have defined token classification for nearly a decade.

This two-part analysis explores how token issuers can benefit from the Act’s newly codified safe harbors, legal definitions, and exemptions, while aligning with financial oversight structures like those enforced by the CFTC and FinCEN. We also consider what the legislation means for developers, exchanges, and DeFi protocols navigating today’s fragmented regulatory minefield.

The analysis below is divided into two parts:

Part I focuses on how the Clarity Act will affect token issuance and market access.

Part II provides a detailed, section-by-section explanation of Titles I to IV of the Act. (Title V is omitted as it does not impose substantive legal requirements.)

Part I Token Issuance

The Clarity Act recasts “token issuance” in U.S. law by (i) carving a new statutory asset class—the investment‑contract asset—so that a token sold to raise capital can ultimately trade as a digital commodity rather than a security; (ii) creating an issuer‑friendly safe‑harbor in new §4(a)(8) of the Securities Act that lets teams raise up to $75 million over 12 months with tailored disclosures; (iii) spelling out when secondary‑market trades of those tokens fall outside the federal securities laws; (iv) prescribing a “mature‑blockchain” certification under new Exchange Act §42 that turns on decentralization, governance and ownership thresholds; and (v) shielding non‑controlling developers from money‑transmitter status while still plugging issuers and intermediaries into Bank‑Secrecy‑Act anti money laundering rules. Together these provisions give token projects a roadmap from genesis block to public trading without relying on decades‑old doctrines such as Howey.

A new category: “investment‑contract asset”

• Section 201 amends the Securities Act to provide that when an “investment contract” involves a digital asset, the asset itself is treated separately from the contract and called an “investment‑contract asset.” If the asset later satisfies Commodity Exchange Act definitions, it is regulated as a digital commodity rather than as a security.

Effects:

• Under SEC v. W. J. Howey, the token sold in a fundraising round has often been deemed a security because the contract meets the Howey test. By disaggregating the asset, Congress allows the token to “molt” out of securities status once network‑utility and decentralization milestones are met, reflecting academic and SEC commentary on token morphing.

Safe‑harbor for primary issuances – new §4(a)(8)

• Title II §202 adds §4(a)(8) to the Securities Act, exempting “primary transactions in digital commodities” if:
• the issuer is a U.S. entity,
• aggregate sales ≤ $75 million in any 12‑month period,
• a public information statement is filed electronically with the SEC, and
• resale restrictions apply for 12 months unless the asset becomes a digital commodity.
• Issuers therefore gain a pathway similar to Regulation A but tailored to tokens, avoiding the private‑placement limitations of Rule 506(c) under Reg D. Disclosure content (business plan, tokenomics, code audits) will be set by joint SEC/CFTC rules within 270 days.

Secondary‑market clarity

• Section 203 removes secondary trades of investment‑contract assets from the 1933/34 Acts once the asset is a digital commodity and the network is “functional,” provided affiliated persons have less than 20 % voting power and no unilateral control. This tackles the post‑issuance uncertainty that has dogged exchanges since SEC v. Ripple Labs.

From start‑up to “mature blockchain”

• A token ecosystem may file a mature‑blockchain certification with the SEC once its network meets strict, objective criteria in new Exchange Act §42—open‑source code, decentralized governance, ≤ 20 % insider voting power, and no privileged permissions. After certification the token is conclusively a digital commodity and future sales are outside the securities laws, though anti‑fraud jurisdiction is preserved for both agencies.

Restrictions on insiders and affiliates

• During the first year after an exempt §4(a)(8) offer, digital‑commodity affiliated persons (≥ 5 % holders, founders, directors) must sell only:
• on registered digital‑commodity exchanges,
• within volume caps (the greater of 1 % of circulating supply or average daily volume), and
• with Form DC‑144 public notice.
• These resale limits echo Rule 144, deterring immediate dumping while still enabling liquidity.

“End‑user distributions” are not sales

• Airdrops, mining, staking and similar “broad and equitable” token distributions that exchange only nominal value are expressly carved out of the definition of a sale. Projects may therefore bootstrap networks without Securities‑Act registration so long as they honor the rule‑based criteria—a statutory answer to earlier SEC “no‑action” uncertainty.

Money‑transmitter and anti money laundering implications

• Section 109 provides that non‑controlling blockchain developers and infrastructure providers are not deemed money transmitters merely for publishing code, running nodes, or offering self‑custody software. Conversely, the Act amends 31 U.S.C. §5312 so that newly‑registered digital‑commodity brokers, dealers and exchanges are financial institutions under the Bank Secrecy Act, keeping FinCEN KYC/anti money laundering oversight in place.

Part II Section by Section Explanation

Title I

Title I of the Digital Asset Market Clarity Act of 2025 (the “Clarity Act”) rewrites the definitional bedrock of U.S. securities‑ and commodities‑law as applied to crypto‑assets. It (1) amends each of the three cornerstone statutes—the Securities Act of 1933, the Securities Exchange Act of 1934, and the Commodity Exchange Act (“CEA”)—to add detailed crypto‑specific terminology; (2) creates cross‑references so the same terms have identical meanings across regimes; (3) directs the SEC and CFTC to complete joint rulemakings (including a novel right to self‑custody); (4) offers an expedited, provisional registration path for spot‑market intermediaries; and (5) installs key savings clauses, Bank‑Secrecy‑Act coverage, and carve‑outs for non‑controlling software developers. Together, these provisions aim to harmonize the Howey‑based securities analysis SEC v. Howey (1946) with the CEA’s commodity framework while preserving anti‑money‑laundering safeguards set out in the BSA and recent FinCEN guidance. Below is a section‑by‑section analysis.

101 – Amendments to the Securities Act of 1933

Key new terms

• “Blockchain.” A technology for a distributed, cryptographically‑linked ledger whose source code is publicly available.
• “Digital asset.” Any cryptographically recorded representation of value.
• “Digital commodity.” Cross‑referenced to the new CEA definition.
• “Digital‑commodity issuer / affiliated person / related person.” Multi‑tiered categories that will later determine disclosure duties and trading restrictions.
• “Decentralized governance system.” A rules‑based mechanism that is not deemed a single “person” unless participants act in concert.

Effects

• These granular definitions replace the open‑textured Howey test for many tokens. A token that fits the digital commodity rubric is presumptively not a security, curtailing the reach of cases such as SEC v. Ripple Labs (S.D.N.Y. 2023) and SEC v. Telegram (S.D.N.Y. 2020), which relied on Howey.

 102 – Amendments to the Exchange Act of 1934

• Adds a statutory definition of the “Bank Secrecy Act” (“BSA”) to the Exchange Act—incorporating § 21 FDIA (12 U.S.C. § 1829b), 12 U.S.C. § 1951 et seq., and 31 U.S.C. ch. 53 subch. II —to ensure broker‑dealers handling digital commodities remain subject to anti money laundering rules.
• Imports all new § 101 terms by cross‑reference, preventing definitional drift between the two securities statutes.

103 – Amendments to the Commodity Exchange Act

• A “digital commodity” is a digital asset intrinsically linked to a blockchain system the value of which is derived from that system’s use. The section lists functional indicia—value transfer, staking rewards, governance rights, fee burning, etc. —and a long exclusion list that removes securities, derivatives, bank deposits, pooled‑investment interests, and NFTs that have standalone utility. This mirrors Howey’s “economic reality” inquiry but codifies bright‑line boundaries.

104 omitted because it is not substantive law

105 – Mandated Joint Rulemakings & Right to Self‑Custody

• Requires the SEC and CFTC to jointly refine every crypto term, to define “unilateral authority,” and to draft rules for “mixed digital‑asset transactions.” 
• Establishes an affirmative right for U.S. individuals to hold self‑custody wallets and conduct peer‑to‑peer transactions—subject only to existing sanctions and BSA enforcement—effectively overruling earlier FinCEN interpretations that viewed some software providers as money transmitters.

 106 – Expedited Registration & Provisional Status

• Intermediaries operating spot‑markets (exchanges, brokers, dealers) must file a short‑form application within 90 days of the CFTC creating the process and will enjoy provisional authority until 270 days after the CFTC’s final rules take effect. The framework is flagged in the table of contents and fleshed out in the statutory text (omitted here for brevity), giving firms immediate legal clarity while rules are drafted.

107 – Savings Clauses

• The Act explicitly preserves the SEC’s jurisdiction over security‑tokens, security‑based swaps, and the CFTC’s jurisdiction over futures, options, and swaps. Thus, Howey, Reves, and other precedents remain good law for instruments outside the Act’s new definitions.

 108 – CEA “Administrative Requirements”

• Section 4c CEA is amended so that the CFTC’s long‑standing anti‑manipulation and position‑limit authorities over futures/options now extend to contracts of sale of a digital commodity.

109 – Protection for Non‑controlling Developers

• A software developer that lacks the legal right or unilateral ability to move users’ assets is not a “money transmitter” solely because it wrote or maintained code. This codifies holdings implicit in FinCEN’s CVC Guidance and recent consent orders, while preserving broader anti money laundering liability for controlling actors.

110 – Direct BSA Amendments

• By amending 31 U.S.C. § 5312 (c)(1)(A) (definitions of “financial agency”), the Act allows Treasury to bring digital‑commodity intermediaries within the same registration and reporting perimeter as traditional money‑services businesses.

111 and § 112 omitted because they are not substantive law

Title II

Title II of the CLARITY Act rewrites federal securities law for blockchain tokens. It (i) surgically carves a new category—“investment‑contract assets”—out of the definition of a security, (ii) creates a bespoke § 4(a)(8) exemption that lets issuers raise up to $50 million while they build toward a “mature blockchain system,” (iii) declares most secondary‑market token trades outside the securities regime, (iv) imposes tailored holding‑period, volume and disclosure guard‑rails on insiders, (v) establishes an SEC certification program for “mature” chains that satisfies functional‑decentralization criteria, and (vi) sunsets the entire framework 360 days after enactment unless the agencies finish their rules. Collectively those provisions narrow the reach of the Howey and Reves doctrines, shift day‑to‑day spot‑market oversight toward the CFTC, and expressly pre‑empt state blue‑sky laws for qualifying digital commodities.

Section 201 — Treatment of Investment‑Contract Assets

• Section 201 amends the definition of “security” in the Securities Act, Exchange Act, Investment Company Act and Advisers Act to state that “‘investment contract’ does not include an investment‑contract asset.” It then defines that new term as a “digital commodity” that can be exclusively possessed peer‑to‑peer on‑chain and that is sold (or intended to be sold) pursuant to an investment contract. Thus, while the investment contract itself remains a security under SEC v. Howey (328 U.S. 293 (1946)), the underlying token is statutorily carved out once it exhibits commodity‑like transferability.

Effects

• Howey and its progeny treat the asset and the contract as inseparable; Section 201 severs them, echoing scholars’ “contract–asset” bifurcation theory. Tokens that meet the new definition will instead be regulated as “digital commodities” under the Commodity Exchange Act, unless another exclusion (e.g., a stable‑coin or note analyzed under Reves v. Ernst & Young, 494 U.S. 56 (1990)) applies. This exemption narrows Exchange Act § 12(g) registration triggers and Investment Company Act coverage for issuers whose only “securities” are the investment contracts, not the tokens themselves.

Section 202 — Exempted Primary Transactions

• Section 202 inserts a new transactional safe harbor—§ 4(a)(8)—for “the offer or sale of an investment contract involving units of a digital commodity” by its issuer, provided that:

1. The relevant chain is already, or is intended within four years to become, certified as a “mature blockchain system” under Exchange Act § 42.
2. Aggregate proceeds in any 12‑month period are capped at $50 million (indexed).
3. No purchaser may exceed a 10 % ownership ceiling post‑sale.

• Because § 4(a) exemptions lie within 15 U.S.C. § 77d, the new clause co‑exists with Reg D, Reg CF and Reg A + while pre‑empting state registration under amended § 18(b)(5).
• Issuers relying on § 4(a)(8) must file semi‑annual token‑specific reports akin to the Reg CF Form C and are subject to anti‑fraud liability under Exchange Act § 10(b) as modified by Section 204 (below).

Section 203 — Secondary‑Market Treatment

• Section 203 provides that a resale of a digital commodity that “originally involved” an investment contract is not itself a securities transaction under any federal or state statute. It further declares that “end‑user distributions” (e.g., staking rewards, airdrops) are never sales of securities. These bright‑line rules answer post‑Howey uncertainty over whether decentralized‑exchange trades or validator rewards require Securities Act compliance.

Section 204 — Insider Sales and Market‑Integrity Rules

• Section 204 makes it unlawful for “digital‑commodity affiliated” or “related” persons (founders, 5 % holders, key employees) to dump tokens they received from the issuer unless they comply with bespoke restrictions:
• Twelve‑month seasoning before any sale and an additional 90‑day lock‑up after each sale window.
• Volume cap: insiders may sell no more than 5–10 % of outstanding supply in any rolling 12‑month period (percentage to be set by SEC rule).
• Public disclosures paralleling Form 144 and §§ 13(d)/(g) beneficial‑ownership reports.
• Violations render the insider an issuer for liability purposes, preserving investor remedies.

Section 205 — Mature Blockchain System Certification

• Section 205 directs the SEC to stand up a voluntary certification program. To qualify, a chain must show, inter alia, that (i) no single “blockchain control person” has unilateral authority to alter consensus or token economics, (ii) source code is open‑source, (iii) token supply is predictable, and (iv) at least two independent developers maintain the protocol.
• Certification creates a rebuttable presumption that the associated token is a “digital commodity” and unlocks the full § 4(a)(8) safe harbor and insider‑sale relief. The Commission retains authority to revoke certification for fraud or material omissions and must promulgate delisting procedures jointly with the CFTC within 180 days, dovetailing with Title I § 105(d).

Section 206 — Effective Date

• All Title II provisions become operative 360 days after enactment, or 60 days after final implementing rules—whichever is later (Sec. 206; text follows Section 205 in the Act).

Title III

Title III of the Clarity Act builds a parallel Securities‑Exchange‑Act framework for intermediaries that deal primarily in digital commodities (e.g., native blockchain tokens) and permitted payment stablecoins, while coordinating with the Commodity Futures Trading Commission (CFTC) and the banking regulators. In broad strokes, the title (i) classifies the assets and the entities that handle them, (ii) extends familiar anti‑fraud and record‑keeping duties to digital‑asset markets, (iii) creates mechanisms for dual SEC/CFTC supervision, (iv) pre‑empts certain state laws to promote uniform national markets, and (v) tempers the regime with carefully tailored exemptions for decentralized finance (“DeFi”), banking custodians, and self‑custody. The provisions will take effect 360 days after enactment (or 60 days after implementing rules, if later).

Section 301 – Treatment of Digital Commodities and Permitted Payment Stablecoins

• Section 301 amends the Exchange Act to make clear that brokers, dealers, and alternative trading systems (“ATSs”) may handle and custody “digital commodities” and “permitted payment stablecoins” without converting those products into “securities.” In effect, the statute carves out a new asset class that can trade on SEC‑registered platforms while remaining outside the classical definition of a “security” in § 2(a)(1) of the Securities Act of 1933. The section instructs the Commission to update Exchange Act § 6 to list these instruments explicitly, thereby eliminating any argument that every blockchain token is presumptively a “security.” The provision lays the statutory foundation for every subsequent section in the title (table reference).

Effects

• Registered broker‑dealers may make markets in digital commodities without triggering the capital, segregation, and customer‑protection rules written for securities—unless another section (e.g., § 310) says otherwise.
• The SEC retains the power to re‑characterize a token as a security if it meets Howey‑type criteria, but the burden now lies with the agency.

Section 302 – Anti‑Fraud Authority over Digital‑Commodity Transactions

• Section 302 grafts the anti‑manipulation language of Exchange Act § 10(b) and Rule 10b‑5 onto digital‑commodity dealings, giving the SEC express statutory jurisdiction to police fraud or manipulation in any broker‑or‑dealer transaction in a digital commodity or payment stablecoin. The amendment closes any loophole that might have arisen from the asset‑classification carve‑out in § 301. It parallels the longstanding antifraud authority in 15 U.S.C. § 78j.

Section 303 – Eligibility of Alternative Trading Systems

• Section 303 adjusts Regulation ATS by ensuring that an ATS meeting the digital‑commodity definition remains eligible for the lighter ATS regime instead of being forced to register as a full national securities exchange. It instructs the SEC to harmonize Rule 300 of Regulation ATS so that platforms facilitating spot trading in digital commodities can rely on the same exemption that equity ATSs enjoy.

Section 304 – Rulemaking for Dual‑Registered Entities

• Recognizing that many crypto platforms already hold CFTC registrations, § 304 directs the SEC to write joint rules with the CFTC to eliminate duplicative or conflicting requirements for firms that must register both as broker‑dealers/ATSs and as digital‑commodity brokers, dealers, or exchanges. Topics include capital, record‑keeping, segregation, and chief‑compliance‑officer reports. The goal is regulatory substituted compliance rather than double compliance.

Section 305 – Modernization of Record‑Keeping Requirements

• Section 305 orders the SEC to modernize Exchange Act record‑keeping rules—particularly Rule 17a‑4—to accommodate blockchain‑native ledgers and immutably timestamped records. The Commission must permit electronic storage “in a manner that ensures immutability and ready accessibility,” codifying no‑action positions that now appear only in interpretive releases under 17 C.F.R. § 240.17a‑4.

Section 306 – Exemptive Authority

• Borrowing from Securities Act § 28, § 306 lets the SEC exempt persons, classes, or transactions from any provision of Title III by order as well as by rule, giving the agency the flexibility to respond to technological change.

Section 307 – Additional Registrations with the CFTC

• Section 307 acknowledges that a single intermediary can wear two hats. It permits (and sometimes requires) SEC‑registered firms to obtain corresponding CFTC registrations—digital‑commodity broker, dealer, or exchange—when they handle spot digital commodities that fall under the CFTC’s fraud‑and‑manipulation jurisdiction. The provision codifies parallel oversight, similar to the dual registration regime for security‑based‑swap dealers under Dodd‑Frank.

Section 308 – Exempting Digital Commodities from State Securities Laws

• Section 308 amends Securities Act § 18(b) to deem digital‑commodity offerings “covered securities,” pre‑empting state Blue‑Sky registration and merit‑review requirements and limiting states to notice‑filing and antifraud policing. The model tracks the 1996 National Securities Markets Improvement Act pre‑emption now codified at 15 U.S.C. § 77r.

Section 309 – Exclusion for Decentralized Finance Activities

• To avoid sweeping DeFi developers into broker‑dealer status, § 309 expressly excludes “decentralized‑finance messaging systems” and “decentralized‑finance trading protocols” so long as no person takes custody of customer assets. The exclusion mirrors the self‑hosted‑wallet safe harbor enacted earlier in § 105(c).

Section 310 – Treatment of Custody Activities by Banking Institutions

• Section 310 bars federal and state banking supervisors from forcing banks, credit unions, or broker‑dealers to carry digital commodities on balance‑sheet as liabilities or to hold duplicative capital against custodial assets. It formalizes the stance OCC took in Interpretive Letters 1170–1174, allowing national banks to custody crypto while treating it as an off‑balance‑sheet safekeeping service.

Section 311 – Broker and Dealer Disclosures Regarding Treatment of Assets

• Within 270 days, the SEC must adopt standardized insolvency‑disclosure language explaining how digital commodities and stablecoins would be treated under Title II of Dodd‑Frank, SIPA, or the Bankruptcy Code. The rule responds to gaps in SIPA’s definition of “security” and to uncertainty about the priority of crypto claims in broker failures.

Section 312 – Digital‑Commodity Activities that Are “Financial in Nature”

• This section amends Bank Holding Company Act § 4(k)(4) so that dealing in digital commodities is a “financial‑in‑nature” activity permissible for financial holding companies. It also clarifies that national and state banks may use blockchain rails to deliver any activity they could already perform, subject to the usual safety‑and‑soundness rules.

Section 313 – Effective Date; Administration

• Unless otherwise specified, Title III (and its amendments) take effect 360 days after the enactment, or 60 days after final rules, whichever is later.

Section 314 – Educational Material Requirements

• The SEC, in consultation with the CFTC, must ensure that every registered intermediary publishes plain‑language educational materials covering blockchain basics, market risks, and fraud red‑flags. The mandate echoes FINRA’s “investor‑education” approach and the Commission’s existing Crypto Assets and Cyber resource center.

Section 315 – Discretionary Surplus Fund

• Finally, § 315 reduces the Federal Reserve’s surplus fund by $15 million and applies the savings to SEC implementation costs. The offset mirrors similar funding provisions elsewhere in the bill.

Title IV

Title IV of the Clarity Act rewrites the Commodity Exchange Act (“CEA”) to create a first‑ever cash‑ or spot‑market regime for “digital commodities.” It vests the Commodity Futures Trading Commission (“CFTC”) with primary jurisdiction over the registration, prudential regulation, customer‑protection, and supervisory framework for exchanges, brokers, dealers, and other intermediaries that handle crypto‑assets outside the derivatives context. The Title does this through fifteen discrete sections (§401 – §415), each of which dovetails with existing provisions of the CEA and its implementing regulations (17 C.F.R.) while carving out clear boundaries vis‑à‑vis the Securities and Exchange Commission (“SEC”) and state law. Taken together, Title IV would give market participants a registration path, uniform custody and segregation rules, and bespoke exemptions for decentralized‑finance (“DeFi”) infrastructure, while also funding the CFTC to police the new marketplace.

401 – Commission jurisdiction over digital‑commodity transactions

• Section 401 inserts a new savings‑clause into CEA §2(a)(1) confirming CFTC jurisdiction over spot digital‑commodity transactions, without displacing the agency’s existing authority over futures, swaps and options. The clause mirrors earlier jurisdictional savings in 7 U.S.C. §2(a)(1) for futures and swaps, thereby forestalling pre‑emption fights with state commercial law and with SEC securities jurisdiction. Courts have already recognized CFTC antifraud power in crypto spot markets (e.g., CFTC v. McDonnell, 287 F. Supp. 3d 213 (E.D.N.Y. 2018)) Justia; §401 codifies that view and expands it.

Interaction with existing CEA provisions

• §2(c)(2) foreign‑currency provisions remain untouched, so retail leveraged crypto trades will still fall under “retail commodity transaction” rules.
• The savings clause expressly preserves SEC authority over “mixed digital‑asset transactions” (defined elsewhere in the Act), avoiding overlap with securities regulation

402 – Qualified‑custodian requirement for FCMs

• Section 402 amends CEA §4d to require every futures commission merchant (“FCM”) that handles digital commodities to use a “qualified digital‑asset custodian.” The language parallels existing segregation provisions in 7 U.S.C. §6d and CFTC Rule 1.20 (customer funds), but updates them to address the private‑key risks unique to crypto. By tying the definition of “qualified custodian” to forthcoming CFTC rules, Congress gives the Commission latitude to leverage existing custodial frameworks under 17 C.F.R. §1.20‑§1.25.

403 – Trading‑certification and approval

• Section 403 adds a listing and self‑certification regime, modeled on CEA §5c (7 U.S.C. §7a‑2), for digital‑commodity products traded on registered cash exchanges. A venue may self‑certify a product upon 30‑days’ notice; the CFTC can stay the certification for up to 90 days for public‑interest review. This mechanism should speed up market innovation without sacrificing the CFTC’s gate‑keeping role.

404 – Registration of digital‑commodity exchanges

• Section 404 creates new CEA §5i, obligating any trading facility that “offers or seeks to offer” a spot market in at least one digital commodity to register as a Digital Commodity Exchange (“DCE”). Key requirements include:
• Core Principles mirroring those for Designated Contract Markets (DCMs) in CEA §5, covering market integrity, trade surveillance, and financial resources.
• Member‑rules ensuring that exchanges only match trades for intermediaries duly registered under §406.
• Dual registration relief: a national securities exchange or ATS may hold a parallel DCE registration, minimizing duplicative compliance.

405 – Qualified digital‑asset custodians

• Section 405 directs the CFTC to promulgate standards for custodians that hold customer crypto for FCMs, brokers, dealers, and exchanges. Congress borrows concepts from SEC Custody Rule 17 C.F.R. §275.206(4)-2 and OCC Interpretive Letters on crypto custody; the rulemaking must address capitalization, control of private keys, insurance, and proof‑of‑reserves.

406 – Registration and regulation of digital‑commodity brokers and dealers

• Section 406 adds new CEA §4u, creating two novel intermediary classes:
• Digital Commodity Broker (DCB) – solicits or accepts customer orders and takes possession or control of customer funds.
• Digital Commodity Dealer (DCD) – regularly makes a market or stands ready to buy/sell for its own account.
• Both must meet net‑capital, record‑keeping, anti money laundering/KYC, and segregation standards adapted from existing broker‑dealer rules under 17 C.F.R. Pt 1 and SEC Rules 15c3‑1 & 15c3‑3.

407 – Registration of associated persons

• Mirroring CEA §4k (7 U.S.C. §6k), §407 requires registration of Associated Persons (“APs”) of DCBs and DCDs, and makes them subject to statutory disqualification and proficiency testing—closing the “bad actor” loophole for crypto intermediaries.

408 – Commodity‑pool operators (CPOs) and commodity‑trading advisers (CTAs)

• Section 408 extends CPO/CTA registration triggers in CEA §§4m–4n (7 U.S.C. §§6m–6n) to pooled vehicles trading digital commodities. Exemptive relief for small pools remains available (Rule 4.13), but managers must now calculate assets under management inclusive of crypto.

409 – DeFi exclusion

• New CEA §4v categorically excludes miners, validators, node operators, wallet developers, and DeFi messaging‑protocol maintainers from registration—provided they do not custody customer assets or intermediate trades. The exception preserves CFTC antifraud and anti‑manipulation enforcement power and thereby reconciles open‑source activity with investor protection.

410 – Resources for implementation and enforcement

• To fund oversight, §410 authorizes the CFTC to levy registration and annual fees on provisionally registered entities, crediting them as discretionary offsetting collections to the agency’s budget. It also grants expedited hiring authority for crypto‑specialist staff.

411 – Control‑person trading limits

• New CEA §4w bars a “blockchain control person” from selling a digital commodity tied to a mature blockchain system unless advance notice is filed with the CFTC. Analogous to SEC Rule 144, the provision targets large insiders whose sales could distort thin spot markets.

412 – Other tradable assets

• Section 412 requires the CFTC to study and, if appropriate, extend the Title IV framework to other tradable digital assets that do not fall within the Act’s “digital commodity” definition—e.g., tokenized real‑world assets.

413 – Conflict‑of‑interest rulemaking

• Within 360 days, the CFTC must adopt rules to identify, mitigate, and resolve COIs among vertically integrated crypto firms (e.g., exchange‑broker‑custodian stacks). Expect restrictions on proprietary trading and information‑barriers akin to CEA Core Principle 12.

414 – Effective date

• Title IV and its amendments take effect 270 days after enactment, unless a provision requires rulemaking, in which case the later of (i) 270 days or (ii) 60 days after final rules will control.

415 omitted because it is not substantive rule