# What Does the CLARITY Act Mean for Your Token? *The CLARITY Act passes the U.S. House of Representatives. What does it mean?* By [Tally](https://blog.tally.xyz) · 2025-07-18 --- The **CLARITY Act** officially passed in the U.S. House of Representatives, marking a turning point for token projects, policy advocates, and decentralized governance ecosystems. The Act sets clear thresholds for decentralization, delineates oversight between the SEC and CFTC, and offers what the industry has long called for: regulatory **CLARITY**. For crypto-native builders, the CLARITY Act offers a concrete regulatory framework to launch tokens, raise capital, and progressively decentralize.  **Token Classification** ------------------------ The Clarity Act provides a clear regulatory pathway for tokens. **Initial Phase** ([Section 202](https://www.congress.gov/119/bills/hr3633/BILLS-119hr3633rh.pdf#page=57)): Tokens sold during fundraising are classified as investment contracts and remain under SEC oversight. These offerings are subject to strict conditions: * Issuers can raise up to **$75 million** within a **12-month window**  * No individual purchaser may acquire more than **10% of the total supply** at issuance * Only U.S.-based, non-shell companies in good standing are eligible * Detailed **offering disclosures** — including source code, financial statements, roadmaps, and risk factors — must be filed with the SEC in advance  **Decentralized Phase** ([Section 205](https://www.congress.gov/119/bills/hr3633/BILLS-119hr3633rh.pdf#page=351)): Once protocols meet specific decentralization criteria, tokens transition to a new legal category: “digital commodities,” regulated by the CFTC. This transition is enabled through a Certification of Decentralization, which grants a rebuttable presumption that the token is no longer a security. This split replaces the ambiguity of the Howey Test with a structured, phased compliance regime. It allows projects to fundraise and operate under SEC oversight while building toward long-term decentralization. **Defining Decentralization** ----------------------------- To qualify as a “mature blockchain,” a network must meet clear thresholds ([Section 205(b)](https://www.congress.gov/119/bills/hr3633/BILLS-119hr3633rh.pdf#page=357)): * No single entity or affiliated group controls more than **20% of the token supply or governance power** * The project operates on public, **open-source infrastructure** * **No centralized party** can unilaterally alter the ledger * The network has demonstrable, **independent user activity** Once these conditions are met, issuers can file a “Certification of Decentralization”, triggering a rebuttable presumption that their token is a commodity.  **Safe-Harbor and Reporting Requirements** ------------------------------------------ The Clarity Act creates a regulatory onramp for projects to reach maturity: * A **safe harbor** for token offerings of up to **$75M over 12 months**, with no full SEC registration required ([Section 202](https://www.congress.gov/119/bills/hr3633/BILLS-119hr3633rh.pdf#page=58)) * Issuers must publish detailed **offering disclosures** — including financial statements, development roadmaps, technical documentation, and token distribution ([Section 202](https://www.congress.gov/119/bills/hr3633/BILLS-119hr3633rh.pdf#page=65)) * Projects must file **semiannual updates** and **event-driven disclosures** until they reach decentralization ([Section 202](https://www.congress.gov/119/bills/hr3633/BILLS-119hr3633rh.pdf#page=66)) * The safe harbor period lasts up to **four years**, after which projects must certify decentralization or face additional compliance measures Importantly, insiders are subject to **12-month lockups** and **strict volume limits** on sales during the immaturity phase—further aligning incentives with long-term decentralization. **The Role of Governance** -------------------------- Governance plays an important role in the CLARITY Act. Protocols are required to demonstrate decision-making is distributed, not dictated by a single entity or entities holding the majority of voting power. On-chain indicators like **active tokenholder voting**, **transparent delegate systems**, and **open proposal processes** will support legal claims of decentralization. The Act codifies what many have already operationalized as a signal of legitimacy and formalizes it as a regulatory standard ([Section 205(b)](https://www.congress.gov/119/bills/hr3633/BILLS-119hr3633rh.pdf#page=362)). **Secondary Market Clarity** ---------------------------- The CLARITY Act clarifies **secondary market trading of tokens previously issued in a securities offering will not be treated as securities transactions**, as long as the tokens have transitioned into digital commodities ([Section 203](https://www.congress.gov/119/bills/hr3633/BILLS-119hr3633rh.pdf#page=75)) This removes a major blocker to U.S.-based exchange listings. It also authorizes **CFTC-regulated entities**, including **Digital Commodity Exchanges (DCEXs)**, to facilitate token trading legally without conflicting SEC jurisdiction ([Section 401](https://www.congress.gov/119/bills/hr3633/BILLS-119hr3633rh.pdf#page=119)) **Jurisdictional Split: SEC vs CFTC** ------------------------------------- The Act establishes **bright lines** between the SEC and CFTC: * **SEC** oversees token fundraising, initial sales, fraud enforcement, and mixed-asset platforms (e.g. ATS trading securities + commodities) ([Sections 201-204](https://www.congress.gov/119/bills/hr3633/BILLS-119hr3633rh.pdf#page=56)) * **CFTC** takes over once the token is certified as decentralized and trades as a commodity ([Section 401](https://www.congress.gov/119/bills/hr3633/BILLS-119hr3633rh.pdf#page=119)) * Joint rule-making will cover gray zones and dual-use tokens **Looking Ahead** ----------------- The CLARITY Act will catalyze a [New Golden Age of Tokens](https://x.com/tylerisfrisson/status/1945155875208896682); where transparency, decentralization, and regulatory alignment are foundational.  With regulatory clarity, builders can move faster, raise responsibly, and scale with confidence. At Tally, we’re building tools to support the full token lifecycle — from compliant token launches to real-time governance analytics and decentralization reporting. Tally is the  infrastructure behind the next generation of institutional-grade tokens. We’re building toward a world where launching a compliant, decentralized network isn’t just possible — it’s the standard. * * * Ready to launch? Reach out at [tally.xyz/contact](http://tally.xyz/contact) . Read the full CLARITY Act Bill [here](https://www.congress.gov/119/bills/hr3633/BILLS-119hr3633rh.pdf#page=1). --- *Originally published on [Tally](https://blog.tally.xyz/what-does-the-clarity-act-mean-for-your-token)*