After CLARITY: US Crypto Market Structure Is Now Being Written by Agencies, and Fund Boards Should Plan for It

The Senate has not delivered a US crypto market structure statute. The CFTC and the SEC are building the framework themselves, rule by rule, on a less durable legal footing. For fund boards, that changes how counterparty, venue and custody risk should be assessed.

Executive Summary

Three developments over the past four weeks define the current US position. On 15 September 2026 the Senate failed to invoke cloture on the Digital Asset Market Clarity Act (H.R. 3633), by 49 votes to 50, short of the 60 required. On 1 October the SEC proposed a custody framework for crypto assets held by registered advisers and regulated funds. On 5 October the CFTC released its first crypto market rulemaking materials, Regulation Crypto Asset Transactions (Regulation CTX) and Regulation Crypto Asset Markets (Regulation CAM).

Our assessment, which is opinion rather than established fact, has four parts:

• The direction of travel is clear, the legal foundation is not. Agency rules can be amended, withdrawn or challenged in a way that a statute cannot.
• The spot-market gap remains. The CFTC does not have authority to create a registration regime for spot digital commodity trading. Its role in spot markets is limited to fraud and manipulation.
• Insolvency treatment is unresolved. What happens to customer assets if a platform fails is still an open question, and it is the question allocators ask first.
• Boards should plan on a multi-year transition, not a single compliance date.

Background

US digital asset regulation has been shaped for most of a decade by enforcement and uncertainty about which regulator, if any, supervises which activity. The CLARITY Act was intended to settle that allocation by statute. Its failure in the Senate on 15 September 2026 means the allocation will continue to be worked out through agency action: interpretations, exemptions, staff relief and rulemaking.

That work is already well advanced. In March 2026 the SEC and the CFTC jointly issued an interpretation of how federal securities laws apply to certain crypto assets, including a token taxonomy covering digital commodities, digital collectibles, digital tools, stablecoins and digital securities (CFTC Release 9198-26, 17 March 2026). In August the SEC proposed Regulation Crypto Assets, an offering framework for certain investment contracts involving crypto assets. In September the SEC issued temporary, conditional relief for venues trading tokenised stocks. The 1 October custody proposal and the 5 October CFTC release are the latest steps in the same sequence.

What Happened This Week

The CFTC publishes its first crypto market rulemaking materials

On 5 October 2026 the CFTC announced Regulation CTX and Regulation CAM. The two are aimed at crypto transactions involving leverage, margin or financing, and at a new registration category for exchanges that handle them. Chairman Michael Selig has been the CFTC's sole commissioner for nearly a year, according to CoinDesk, so the Commission is acting without a divided vote.

There is a discrepancy in how the document has been described. CoinDesk reports "proposals". Baker Botts describes the release as an advance notice of proposed rulemaking that poses questions and contains no regulatory text, so binding requirements would need a later rulemaking. Chairman Selig's own commentary uses the language of proposing. We give more weight to the more specific legal description, and treat the release as an early-stage consultation until the Federal Register text is available. As of 7 October, Baker Botts reported that it had not yet been published in the Federal Register, so the comment deadline, set at 60 days after publication, was not fixed.

The limit the CFTC has acknowledged

The CFTC cannot mandate that crypto assets trade on CFTC-registered platforms without Congress. Chairman Selig said so directly in his 5 October commentary: "Unlike the Clarity Act, these regulations wouldn't require crypto assets to trade on CFTC-registered platforms." Registration would be an option, described by Baker Botts as a "purpose-fit option for crypto-asset exchanges". A registered venue could offer margined or financed trading to retail customers, which state-licensed exchanges cannot.

Custody and insolvency questions are open

The CFTC release asks whether existing futures commission merchant segregation rules and the Part 190 bankruptcy rules work for these transactions. It asks whether uncleared crypto transactions would be treated as commodity contracts, which would make assets held by an FCM customer property, or whether a UCC Article 8 arrangement could serve instead. Troutman Pepper Locke notes that customer-property priority for digital commodities in a Chapter 7 bankruptcy requires an act of Congress, which means customers of a failed platform may remain unsecured creditors.

Other agency steps in the period

A caution on the SEC's offering exemptions: the SEC's press release describes a $5 million startup exemption and a $75 million per twelve months exemption, while Troutman describes a $20 million first tier as well. We have not resolved that difference against the proposing release. Readers relying on those thresholds should check the SEC text.

Why Institutions Care

Allocators do not underwrite regulatory ambition. They underwrite what happens when something goes wrong. The practical effect of the CLARITY outcome is that three questions asked in operational due diligence remain without a statutory answer in the United States: who supervises the venue, how are customer assets treated if the venue fails, and how durable is the permission the manager is relying on.

Agency action does provide something real. Exemptions and interpretations narrow uncertainty and create usable pathways. But a pathway created by agency action can be narrowed or reversed, and Troutman notes that such actions can be struck down in court. Institutional investors tend to price that durability gap into their diligence even where the rules, today, are favourable.

Operational Implications

For managers, the immediate effect is on venue and counterparty selection and monitoring. A venue that registers under a future CFTC category would be a different counterparty from one that does not, and the difference should be visible in the manager's approved counterparty framework rather than discovered after the event.

• Maintain a venue register recording, for each execution venue and custody provider, its regulatory status in each relevant jurisdiction, the date that status was last verified, and the basis for relying on it.
• Map asset flows to insolvency outcomes. For each venue, document where fund assets sit, in whose name, and what the manager's legal analysis says about treatment on failure. Where that analysis is unavailable, record it as an open item.
• Separate execution from safekeeping. The open insolvency questions weigh most heavily on assets left on trading venues. Our earlier work on exchange custody and withdrawal controls sets out the controls we see allocators test.
• Build change tracking into compliance. With rules arriving in stages, a dated log of regulatory assumptions is more useful than an annual policy refresh.

Governance Implications

A board that approves a digital asset strategy approves the regulatory assumptions beneath it. When those assumptions rest on agency action rather than statute, the board should know which assumptions they are and what would cause them to change.

We suggest boards ask for a short, dated schedule of regulatory dependencies: the permission or interpretation relied upon, its source and legal form (statute, rule, interpretation, staff relief or exemption), its stated duration if any, and the fund's exposure if it falls away. Independent directors will recognise the discipline from valuation and liquidity governance; the same approach applies here.

The question for a board is no longer whether US policy is constructive. It is how much of the fund's operating model depends on permissions that were granted by agencies and could be withdrawn by them.David Lloyd, CEO, CV5 Capital

Regulatory Implications

The next dated events are known. Comments on the SEC's Regulation Crypto Assets are due on 20 October 2026. The 60-day comment periods on the SEC custody proposal and the CFTC release run from Federal Register publication, which we could not confirm for either at the time of writing. The Senate returns on 9 November, but Troutman considers the CLARITY Act effectively dead for the rest of this Congress and Baker Botts notes it would likely need reintroduction after the new Congress convenes in January 2027.

The distinction between categories matters for compliance teams. A proposal is not a rule. An advance notice is not a proposal. Staff relief is not an interpretation. An exemption has a stated term. We recommend that internal policies and investor communications describe each US development in its correct legal form. Our analysis of the SEC custody proposal applies the same discipline to the 1 October release.

Cayman Implications

Cayman funds are not directly regulated by the CFTC or the SEC merely because they exist. The relevance is indirect but real, and it arises through the manager, the counterparties and the investors. A Cayman fund whose investment manager is a US registered adviser, whose prime or execution counterparties are US-regulated, or whose investor base includes US persons, will feel US rule changes through those relationships. Whether a given structure is directly in scope is a question for US counsel.

On the Cayman side, our understanding from CIMA's published AML and CFT materials, which we did not re-check for this article, is that the AML Rule and Sanctions Rule came into effect on 18 September 2026. Fund governance bodies will be integrating those obligations at the same time as tracking US counterparty developments. The two workstreams meet in counterparty due diligence: a venue's regulatory status, its AML framework and its custody arrangements are assessed together.

For Cayman boards, the practical point is that the Mutual Funds Act framework asks for sound governance and proper oversight of service providers. How a board evidences oversight of US-facing counterparties in a shifting rule environment is a matter of governance quality, not of any single US rule. Our primer on crypto custody due diligence for fund managers covers the diligence layer.

Digital Asset Implications

The CFTC's acknowledgement that it cannot reach spot markets matters for digital asset managers whose strategies are primarily spot. For those managers, the practical protections will continue to come from contractual terms, custody structure and counterparty selection, not from a federal registration regime. For managers using leveraged or derivative exposure, the Regulation CAM concept may eventually produce a registered venue category, which would be a new input to counterparty selection.

Tokenisation is moving on a parallel track. The SEC's September relief for tokenised stock venues runs for five years and is conditional. The CFTC's September FAQs address tokenised permitted investments of customer funds. Both are signals that tokenised instruments are being accommodated within existing frameworks rather than separated from them, though we caution that staff FAQs and temporary exemptions are narrow instruments.

Risks

• Durability risk. Agency actions can be reversed or challenged. A strategy dependent on one should carry a contingency.
• Fragmentation risk. Two agencies, staged rules and an uncovered spot market create room for inconsistent treatment of similar activity.
• Insolvency risk. Assets placed on venues may be treated as unsecured claims in a failure. This is an open legal question, not a settled outcome.
• Communication risk. Describing a proposal or consultation as settled in investor materials is a disclosure risk.

Opportunities

• Diligence as differentiation. Managers who can show a dated, reasoned map of their regulatory dependencies will stand out in operational due diligence.
• Comment participation. Open comment periods are an opportunity for managers and service providers to inform the rules that will govern their activity.
• Custody optionality. If the SEC's custody proposal is adopted in anything like its current form, managers may gain additional custody options. Adoption is not assured.

Looking Ahead

The dated markers are: 20 October for Regulation Crypto Assets comments; Federal Register publication of the SEC custody proposal and the CFTC release, which will fix their 60-day deadlines; 9 November for the Senate's return; and January 2027 for the new Congress. We expect continued agency activity in the interim. That expectation is a judgement, not a forecast we can evidence.

Key Takeaways

• The CLARITY Act failed cloture 49 to 50 on 15 September 2026; US crypto market structure is being built by agencies.
• The CFTC's 5 October release is an early-stage consultation, not a final rule, and the CFTC says it cannot require trading on registered platforms without Congress.
• Spot-market registration and customer-asset priority on insolvency still require legislation, according to Troutman Pepper Locke.
• Boards should maintain a dated schedule of regulatory dependencies and a venue register.
• Cayman funds are affected through managers, counterparties and investors, not by direct application of US rules; scope is for US counsel.

Conclusion

The US is moving towards a defined crypto rulebook, but not by the route most expected. For fund boards the discipline is the same as in any period of regulatory transition: know which assumptions you rely on, know their legal form, and record how you will respond if they change.

The CV5 Capital Perspective

Commentary from David Lloyd, CEO of CV5 Capital. This section is opinion and practical judgement, not legal advice.

What fund managers should do this week

Update the venue and counterparty register with each provider's current US regulatory status and the date it was checked. Identify any strategy that depends on a US agency permission rather than a statute. If the fund has a US adviser or US-regulated counterparties, ask US counsel whether the 1 October and 5 October releases affect the structure.

What institutional investors should monitor

Whether managers can describe each US development in its correct legal form, and whether they can explain where assets sit and how they would be treated if a venue failed.

Governance actions boards should consider

Request a dated schedule of regulatory dependencies. Minute the board's review of counterparty status. Confirm that investor communications describe proposals as proposals.

Operational enhancements worth evaluating

Reduce the balances held on trading venues, formalise withdrawal procedures, and test whether the administrator can independently confirm balances held at each venue.

Compliance considerations

Align counterparty AML diligence with the Cayman AML and Sanctions Rules now in effect, and maintain a log of regulatory assumptions with review dates.

Regulatory developments to watch

The 20 October SEC comment deadline; Federal Register publication of the SEC custody proposal and the CFTC release; the Senate's return on 9 November.

Expected market developments over the coming weeks

Detailed legal commentary and the first comment letters. Our expectation, which is a judgement, is that providers will begin to position themselves for the new categories before any rule is final. Treat that positioning as marketing until it is supported by registration.

Sources

• SEC press release 2026-100, 1 October 2026 (primary)
• SEC press release 2026-76, 18 August 2026 (primary)
• CFTC, Chairman Selig statement, 5 October 2026 (primary)
• CFTC Release 9198-26, 17 March 2026 (primary)
• Baker Botts, CFTC launches crypto market structure rulemaking, October 2026 (secondary)
• Troutman Pepper Locke, In the wake of CLARITY Act's failure (secondary)
• CoinDesk, 5 October 2026 (secondary)