The Senate didn’t kill the crypto bill — it just gave us a chance to save it

The Senate on Tuesday fell short of the 60 votes needed to advance the latest version of the CLARITY Act. The bill now returns to negotiations rather than moving forward on the Senate floor. That is a delay, not a defeat, and it hands the Senate something it did not have last week: time to get the text right. One major issue still remains unresolved. As written, the act does not provide a transition rule for digital asset transactions that have already taken place under the existing legal framework. Congress now has the time to fix that using a framework it has already enacted once before: the LIBOR Act.Landmark financial legislation often changes substantially before final passage, and the version of CLARITY that ultimately becomes law has not yet been written. That next draft may be the Senate’s best opportunity to address the legal uncertainty surrounding past digital asset transactions before the new framework takes effect.The CLARITY Act provides much of what the digital asset industry has been seeking for a long time, such as a clear definition of digital commodities, a jurisdictional line between the Securities and Exchange Commission and the Commodity Futures Trading Commission, and registration categories that reflect how tokens are currently traded. But the framework is entirely forward-looking. The bill sets the new rules of the road for the future of the digital assets ecosystem, but leaves unresolved what happens to transactions that occurred before those rules existed. This reality would expose major companies and market participants to private lawsuits using the regulatory framework that Congress is now in the process of replacing. Congress has faced a similar roadblock before. The Adjustable Interest Rate Act, enacted in 2022 as Division U of that year’s Consolidated Appropriations Act, paired a statutory transition process for legacy contracts with an express liability safe harbor in Section 105. That safe harbor protected parties who followed the statute’s transition rules from being sued over the switch itself. Fraud claims and other misconduct claims stayed fully intact. The bill passed with bipartisan support, ending years of regulator warnings about “tough legacy” contracts.The Stanford Securities Class Action Clearinghouse reports 103 federally filed crypto-related securities class action lawsuits, many of which claim that the sale of tokens on U.S.-based exchanges constituted the sale of an unregistered security. Coinbase and Kraken continue to be named defendants in private lawsuits based on the same theory, even though the SEC has abandoned its own registration-based lawsuits against the exchanges as part of its broader retreat from enforcement-based regulation. That gap is ultimately what the CLARITY Act leaves standing unless Congress closes it. Clean slate language would have a similar effect on legacy digital asset transactions as Section 105 had on legacy LIBOR contracts. Both are forward-looking laws that provide clarity on the treatment of prior events, and neither affects issuers’ liability for their own offerings nor agencies’ authority to enforce compliance with securities laws. The primary difference is that clean slate language addresses private litigation. This type of litigation is based on registration requirements related to secondary token trading. Clean slate language would eliminate these lawsuits for all token trades that occurred before the CLARITY Act’s effective date. Some may call this a clean slate for bad actors, but that’s not the case. Clean slate language will apply only to registration-based claims related to secondary-market purchases through publicly traded exchanges. The clean slate language will not affect fraud, manipulation, or deceit claims, nor will it affect issuers’ responsibility for their own offerings. The clean slate language will not change the SEC’s and CFTC’s authority to enforce either. The intent of the clean slate language is to stop private plaintiffs from filing lawsuits years after an amended law has taken effect. More than one-fifth of the U.S. adult population currently owns a digital asset. However, for years, many have participated in digital asset markets without the same level of regulatory clarity available in financial markets worldwide. The primary roadblocks are that there are no regulations regarding custody, and there is no clear distinction between security and commodity. This uncertainty has pushed much of the crypto market out of the country and into foreign markets. As a result, U.S. citizens who use these types of exchanges or platforms have fewer rights and remedies available to them if something goes wrong. Only 12% of the top 10 centralized exchanges by market share are U.S.-based, while the U.S. captured just 2% to 5% of CEX volume growth between 2024 and 2025. This geographical shift isn’t limited to exchange volume. Over 80% of cryptocurrency developers now live outside the U.S., showing how much of the crypto industry’s development happens internationally. So far, Senators working on the CLARITY Act have concentrated on the bill’s more controversial aspects (ethics restrictions, stablecoin rewards, illicit finance protections). Each of these areas has constituencies pushing for their priorities. The treatment of legacy transactions has received far less attention, even though exchanges and other market participants can remain exposed to private registration claims based on the very legal questions Congress is now trying to settle.PASS THE CLARITY ACT, OR PREPARE FOR THE NEXT SAM BANKMAN-FRIEDCongress has handled difficult legal transitions before. The LIBOR Act did not merely prescribe a rule for the future. It also addressed the legal consequences of moving from one framework to another while preserving liability outside its defined safe harbor.CLARITY should apply the same principle. This week’s vote created another opportunity to get that transition right. If Congress wants to provide genuine legal clarity, the next draft should answer not only what the rules will be tomorrow, but what those new rules mean for transactions that occurred before Congress finally wrote them.Adrian Wall is managing director at the Digital Sovereignty Alliance, a nonprofit organization focused on advancing responsible policy, research, and education around blockchain, digital assets, Web3, and AI. He is an educator, author, and public speaker with expertise in emerging technologies, financial innovation, and digital asset policy. Previously, Wall was a founding partner at 7LS LPF, a Web3-focused multistrategy fund. He graduated from Harvard College and holds the Harvard Kennedy School of Government Public Leadership Credential.