What CLARITY Doesn't Do
Unresolved Tax, ERISA, and CFTC-Jurisdictional Questions
The thirteen posts that precede this one in the series have walked through what CLARITY does. It establishes the trichotomy of network token, ancillary asset, and digital commodity. It builds a §4B disclosure-only regime around the ancillary-asset class. It codifies the §104 coordinated-control test and the §2(5) DGS doctrine. It draws the §301 line for DeFi trading protocols. It immunizes software development and self-custody through §§ 601, 604, and 605. It accommodates staking and airdrops through §4B(a)(5). It authorizes bank participation in digital-asset markets through §401. It extends customer-property protection to digital-asset intermediary bankruptcies through §701. It addresses stablecoin yield through §404. It draws the NFT line through §602. It establishes tokenization parity through §505. It addresses self-hosted wallets through §307 and temporary holds through §305.
The bill is, in the aggregate, the most substantial digital-asset legislation in U.S. history. It is also conspicuously silent on a long list of questions practitioners will continue to encounter. This capstone post walks through the principal gaps. The structural shape is what the bill leaves unresolved (tax, ERISA, state law, cross-border, residual CFTC jurisdiction) and what watching the post-enactment rulemaking and legislative cycles is going to require.
The architectural point is that CLARITY is a securities-and-CFTC-jurisdiction bill with banking and bankruptcy adjuncts. It is not a tax bill. It is not an ERISA reform. It is not a uniform-commercial-code amendment. It is not a comprehensive cross-border regulatory framework. Each of those is a separate downstream fight. Some are sequenced for legislative action (the Lummis-Gillibrand RFIA framework remains the natural companion legislation for the tax provisions). Others are sequenced for agency rulemaking (Treasury and IRS will continue to develop interpretive positions on §6045 reporting, the §1058 securities-lending parallel for LSTs, and the §475 mark-to-market election). Others are sequenced for state-law adoption (UCC Article 12 status varies by state, and the §505(b) sense-of-Congress endorsement does not move the needle on actual state-by-state adoption).
Tax: the Central Gap
The most consequential silence in CLARITY is on federal tax treatment. Three principal questions remain unresolved.
§1001 realization treatment of token transactions. The IRS position under Notice 2014-21 is that virtual currency is property and that exchanges of one virtual currency for another are taxable events. Rev. Rul. 2023-14, 2023-33 I.R.B. 484, applied dominion-and-control analysis to staking rewards, treating them as taxable income upon receipt at fair market value. Notice 2023-34 followed, addressing certain related questions. The remaining open issues are substantial: token wrapping (wrapping ETH into wETH), bridging across chains (bridging USDC from Ethereum to Solana), rebasing (positive and negative rebases on rebase tokens like AMPL), and chain reorganizations (when a transaction is reorganized off the canonical chain). The §1001 analysis on each of these mechanisms turns on whether the transaction constitutes an exchange of one property for materially different property under Cottage Savings Ass’n v. Commissioner, 499 U.S. 554 (1991). The IRS has not addressed most of these issues with formal guidance, and CLARITY does not direct it to. The joint SEC-CFTC interpretation effective March 23, 2026, Release Nos. 33-11412 and 34-105020, addresses wrapping at the securities-law level (a Redeemable Wrapped Token that is a receipt for a non-security crypto asset not subject to an investment contract is itself not a security and not an investment-contract subject) but expressly disclaims any effect on the federal tax laws, stating that the interpretation “concerns the Federal securities laws... [n]o interference is intended with respect to any other legal regime, including the Federal tax laws under the Internal Revenue Code.” The release’s characterization of wrapped tokens as receipts rather than separate property may, however, provide interpretive support for an IRS position that wrapping is not a §1001 realization event. That argument is for taxpayers to make and the IRS to address; the structural gap remains. Token transactions that look operationally identical from the user’s perspective (a wrap, a bridge, a rebase) may have radically different tax consequences depending on the IRS’s eventual interpretive position.
§1058 securities-lending parallel for liquid staking. Section 1058 of the Internal Revenue Code permits non-recognition treatment for securities lending arrangements that satisfy specified conditions (cash collateral, lender retains rights to substantially identical securities, no reduction in lender’s risk of loss or opportunity for gain, voting rights treatment, and similar). The structural analog for liquid staking is whether the deposit of ETH with Lido or Rocket Pool, and the receipt of stETH or rETH in return, is a §1001 exchange (taxable) or a non-recognition event (deferred). The §1058 framework was drafted for securities lending and does not extend to digital commodities. The IRS has not addressed the question directly, and CLARITY does not address it. The result is that liquid-staking transactions sit in tax uncertainty, with the most defensible position being that the LST deposit is a §1001 exchange but the resulting tax liability is small because the LST and the underlying ETH have approximately the same fair market value. The harder question is what happens on redemption (when the holder exchanges the LST for the underlying ETH and accrued rewards). The Lummis-Gillibrand RFIA contains §1058 parallel provisions for digital commodities; CLARITY does not.
§475 mark-to-market election for digital commodities. Section 475 of the Internal Revenue Code permits dealers in securities and dealers in commodities to elect mark-to-market treatment, with ordinary income or loss recognition on year-end fair market value changes. The dealer-versus-trader distinction governs eligibility. Whether a digital-asset trading firm can elect §475 treatment for its digital-commodity inventory turns on whether digital commodities are “commodities” within the meaning of §475(e). The structural answer is probably yes, given that CLARITY classifies digital commodities under CFTC jurisdiction and that the §475 commodity dealer election has historically applied to commodities under §1256 (with some statutory qualification). But the IRS has not addressed the question, and CLARITY does not direct it to. The defensible posture for digital-asset trading firms is to make the §475 election where possible and defend it on the basis that digital commodities are commodities for §475 purposes.
The tax silence is deliberate, not accidental. The drafters of CLARITY made a structural choice to leave tax treatment to the Senate Finance Committee and the House Ways and Means Committee, with the expectation that tax legislation would follow on a separate timeline. The Lummis-Gillibrand RFIA framework is the natural companion. Whether that framework moves forward in the next legislative cycle is a contested question. The structural reality is that tax treatment of digital-asset transactions remains substantially unresolved through 2026 and beyond.
ERISA Fiduciary Status
Department of Labor Compliance Assistance Release 2022-01, issued in March 2022, warned 401(k) plan fiduciaries to exercise “extreme care” before adding cryptocurrency to plan investment menus. The Release was withdrawn under the Trump administration in 2025 and is no longer operative guidance, but the substantive ERISA fiduciary question remains. A plan fiduciary who includes Bitcoin or Ethereum as a participant-directed investment option must satisfy the §404(a) duties of loyalty and prudence, which include the duty to monitor investment options and remove imprudent ones. The application of those duties to digital-asset investments is the substantive question.
CLARITY does not address ERISA fiduciary duties directly. The §401 bank-permitted-activity framework includes custodial-and-fiduciary services for digital assets (§401(g)(1)), which authorizes banks to act as fiduciaries with respect to digital assets. The structural effect is that a bank can serve as an ERISA fiduciary for a digital-asset investment option without facing a categorical ERISA-statutory bar. But the substantive fiduciary analysis (whether the investment option is prudent for the plan, whether participant-direction satisfies the §404(c) safe harbor for participant-directed plans, whether the plan’s investment-policy statement appropriately addresses digital-asset risks) is unaffected by CLARITY.
The DOL is likely to revisit its 2022 guidance in light of CLARITY’s structural commitments. The substantive direction is uncertain. The pre-2022 DOL position on alternative investments in defined-contribution plans (Information Letter 06-03-2020 on private-equity investments) was relatively permissive, with the fiduciary duty applying to the inclusion decision but not categorically barring the investment class. The post-2022 position has been more cautious. CLARITY, if enacted, will trigger the next round.
The substantive fiduciary risk for plan fiduciaries who include digital-asset investment options is the principal practical concern. A plan fiduciary who includes a Bitcoin index fund in a 401(k) menu and sees substantial participant losses faces potential §502 fiduciary-breach litigation. The defenses available to the fiduciary (procedural prudence, qualifications of the third-party investment manager, alignment with plan investment policy) are the conventional ERISA defenses. CLARITY does not change the substantive standard or the available defenses. It simply removes the categorical structural concern that digital-asset investments are impermissible per se.
State Law: UCC Article 12 and State Money-Ttransmitter Llicensing
State-law adoption of UCC Article 12 on controllable electronic records is the principal property-law question. As of mid-2026, approximately thirty states have adopted Article 12 in full or in substantial part. The §505(b) sense-of-Congress endorsement does not accelerate adoption. The remaining states (including substantial economic centers) operate under the pre-Article 12 property-law framework, which produces uncertainty about how digital assets are owned, transferred, and pledged as collateral.
The structural consequence is that the choice of state law for digital-asset transactions matters. A transaction governed by Delaware law (which has adopted Article 12) sits in a clearer property-law framework than one governed by New York law (which has not, as of mid-2026, adopted Article 12 in full). Cross-border transactions involving multiple state-law venues face additional complexity. Venue selection should follow the Article 12 adoption map, and transaction documentation should address the property-law questions explicitly.
State money-transmitter licensing for DeFi front-ends is the second principal state-law question. The FinCEN 2019 guidance and the §604 BRCA framework address federal money-transmitter status for non-controlling developers and providers. State money-transmitter laws are not preempted by §604. A state could, in theory, take a more aggressive position on state-money-transmitter status for DeFi front-end operators than FinCEN takes on federal money-transmitter status. The structural reality is that the major state money-transmitter regulators (the New York DFS, the California DFPI, the Texas Department of Banking) have generally tracked the federal position, but divergence is possible.
The §15H(g)(1) federal preemption provision in the Exchange Act amendment under §601 preempts state securities, commodities, and digital-asset laws as applied to the §15H(b) software-developer activities. The preemption does not extend to state money-transmitter laws (which are not securities, commodities, or digital-asset laws in the federal sense). The structural effect is that state money-transmitter regulation of DeFi remains a state-law question, with the FinCEN federal framework providing interpretive support but not preemptive authority.
Cross-Border Tax Treatment of Foreign-Issued Network Tokens
The cross-border tax treatment of foreign-issued network tokens is the principal cross-border tax question. A token issued by a foreign foundation (a Cayman Islands foundation, a Marshall Islands DAO LLC, a Swiss foundation), held by a U.S. person, and producing yield through fee distributions or staking rewards, raises a series of questions. Is the U.S. person’s holding a PFIC under §§ 1291-1298? Is the foundation a CFC under §§ 951-965? Is the holder’s income subpart F income or GILTI? Is the holding subject to §1297 PFIC look-through rules?
The IRS has not addressed these questions for digital-asset structures with formal guidance, and CLARITY does not address them. The structural reality is that U.S. persons holding foreign-issued network tokens face substantial tax-compliance uncertainty. The practical posture for most retail holders is that the holdings are too small to trigger PFIC or CFC analysis, but for institutional holders and high-net-worth individuals, the structural analysis is meaningful and unresolved.
The §1297 PFIC look-through rules deserve specific attention. A foreign entity is a PFIC if 75% or more of its gross income for the taxable year is passive income, or if 50% or more of its assets produce passive income. A foreign foundation issuing a token whose value is largely derived from holding the token’s underlying protocol infrastructure may not be a PFIC under a substance-based reading. But the IRS has not provided guidance on how to apply the PFIC tests to digital-asset structures, and the structural analysis is uncertain.
§864(b)(2) Safe Harbor for Foreign Ttraders in Digital Commodities
The trading-safe-harbor provisions of §864(b)(2)(A) (stocks and securities) and §864(b)(2)(B) (commodities) permit foreign persons to trade through U.S. brokers without being treated as engaged in a U.S. trade or business. The structural reality is that U.S. trading infrastructure (brokers, exchanges, custodians) is the natural counterparty for foreign trading activity, and the §864(b)(2) safe harbors permit foreign traders to use that infrastructure without triggering ECI exposure.
Whether digital commodities fit within the §864(b)(2) safe harbors is a substantive question. The §864(b)(2)(A) stocks-and-securities safe harbor applies to “stocks or securities” as defined in the section. Digital commodities are not stocks; whether they are “securities” for §864(b)(2)(A) purposes is the question. The §864(b)(2)(B) commodities safe harbor applies to “commodities of a kind customarily dealt in on an organized commodity exchange” if the transactions “are of a kind customarily consummated at such place.” Digital commodities trade on cryptocurrency exchanges that are not, in the conventional sense, “organized commodity exchange[s],” and the structural fit with §864(b)(2)(B) is uncertain.
The Treasury Regulation under §864(b)(2), Treas. Reg. § 1.864-7(d), addresses agent imputation: trading through a U.S. agent does not create a U.S. trade or business if the agent is an independent agent acting in the ordinary course of its business. The structural analysis for digital-asset trading is whether the U.S. crypto-exchange operating as the trading venue is an independent agent for §1.864-7(d) purposes.
CLARITY does not address §864(b)(2) treatment of digital commodities. The Lummis-Gillibrand RFIA framework contains specific safe-harbor extensions; CLARITY does not. Foreign traders in digital commodities have to evaluate the §864(b)(2) treatment on a fact-specific basis, with the conservative position being that the safe harbors apply by analogy and the aggressive position being that the absence of statutory clarification means the safe harbors apply by their terms.
Residual CFTC Jurisdiction
The CFTC’s authority over digital commodity intermediaries under the new Commodity Exchange Act §1a is operationally significant but structurally complex. CLARITY establishes the CFTC as the primary regulator for digital commodity activity that is not within the SEC’s §4B-and-§301 framework. The CFTC’s authority extends to digital commodity brokers, digital commodity dealers, digital commodity exchanges, and related intermediaries. The structural framework is parallel to the CFTC’s authority over commodity futures intermediaries under the existing CEA.
The substantive scope of the CFTC’s authority is, however, contested. The residual question is which digital commodity activities are within CFTC jurisdiction and which are not. Network tokens are digital commodities for CLARITY purposes, but the §4B framework applies to ancillary assets (a subset of network tokens) and operates as a SEC-regulated disclosure regime. The CFTC’s authority over network tokens that are not ancillary assets is direct. The CFTC’s authority over network tokens that are ancillary assets sits alongside the SEC’s §4B authority, with the boundary requiring inter-agency coordination.
§902 directs the SEC and CFTC to enter into a memorandum of understanding addressing the boundary issues. The MOU is the principal mechanism for resolving residual jurisdictional questions. The structural effect is that the boundary between SEC and CFTC authority over digital-asset activity is not finally resolved by CLARITY; it is delegated to inter-agency coordination through the MOU process.
§906 Effective Dates and Rulemaking Calendar
§906 establishes the effective-date framework. Most CLARITY provisions are effective on enactment, but the substantive operational requirements depend on the rulemaking timeline. §905 directs rulemaking on a broad range of topics, with deadlines varying by topic. The principal rulemakings to watch over the 12-24 months following enactment are:
The SEC rulemaking under §105(a) on the value-from-network rule for network tokens. One year deadline. The rulemaking will define when a network token is not considered to provide a disqualifying right under §4B(a)(7)(B). The stakes: the rule sets the operational scope of network-token status.
The SEC rulemaking under §4B(a)(5)(B)(iv)(II) on custodial and ancillary staking services. The rulemaking will define when custodial staking services are “exclusively administrative or ministerial in nature.” That line decides whether bank-and-exchange custodial staking products fit within the gratuitous-distribution framework.
The joint SEC-CFTC-Treasury rulemaking under §404(c)(3) on stablecoin yield. One year deadline. The rulemaking will draw the line between deposit-equivalent yield (prohibited) and activity-based rewards (permitted). Stablecoin product design lives or dies on where that line lands.
The SEC rulemaking under §301(b) on non-decentralized finance trading protocols. The rulemaking will determine which DeFi protocols are subject to Exchange Act registration and BSA obligations. The operational status of the major DeFi protocols turns on this one.
The Treasury rulemaking under §307(c) on the self-hosted wallet risk assessment. The assessment will inform any subsequent Treasury guidance and is the operational ground for future framework decisions.
The joint SEC-CFTC rulemaking under §402 on portfolio margining. The rule will address cross-margining of securities, swaps, futures, and digital commodities, with bankruptcy and SIPA treatment implications.
The Federal Reserve-OCC-FDIC rulemaking under §403 on capital requirements for netting agreements. One year deadline. The rule will address capital recognition for close-out netting of digital-commodity transactions.
The SEC rulemaking under §15H(d) on the four additional categories of DeFi-related activities (user interfaces, DGS administration, DEX participation, wallet-software distribution). The rulemaking will define the operational safe harbors for software developers and publishers.
The structural reality is that the operational landscape after enactment will be shaped by these rulemakings as much as by the statutory text. The comment-letter process is where those lines get drawn, and it will reward aggressive engagement, individually and through trade associations.
The Unanswered Architectural Question: Agency Capacity
The principal unanswered question that runs across all of the above is whether the SEC, CFTC, Treasury, and the federal banking agencies have the capacity to execute the rulemaking calendar in the deadlines CLARITY establishes. The SEC has substantial digital-asset expertise developed during the enforcement era; the question is whether that expertise can be redeployed effectively to rulemaking. The CFTC has historically been understaffed for its mandate; the substantial expansion of jurisdiction under CLARITY does not come with proportionate budget increases.
The structural risk is that the post-enactment operational framework develops more slowly than the statutory deadlines envision, with the industry operating in interpretive uncertainty until the rulemakings are finalized. The §4B(d)(3) deemed-approval mechanisms and the §305 good-faith-reliance safe harbors provide some structural protection during the interpretive interim. The §906 effective-date framework provides additional structural protection by deferring substantive operational requirements until rulemakings are complete.
The Watchlist
The watchlist is the rulemaking calendar, the cross-reference legislation (Lummis-Gillibrand RFIA for tax, state UCC Article 12 adoption for property law, EU AMLR coordination for cross-border AML), and the inter-agency coordination mechanisms (SEC-CFTC MOU, Treasury-federal-banking-agency coordination, federal-state coordination on money-transmitter and securities-blue-sky issues).
The architectural commitments are now in bill text awaiting a signature. The operational details are in flux. The next twelve to twenty-four months will determine the practical scope of those commitments. Lawyers who engage in the rulemaking process, monitor the companion calendars, and track state-law adoption will advise with more certainty than those who treat CLARITY as a finished framework. The bill is a foundation, not a building. The building is still under construction.
What kind of lawyer would I be without a disclaimer?
Everything I post here constitutes my own thoughts, should only be used for informational purposes, and does not constitute legal advice or establish a client-attorney relationship (though I am happy to discuss if there is something I can help you with). I can be reached via email at dlopezkurtz@crokefairchild.com on telegram @davidlopezkurtz on twitter @lopezkurtz and on LinkedIn here.